Wealth advisers focus on women of the ‘sandwich generation’

With the Great Wealth Transfer expected to put tens of trillions of dollars in female hands, investment firms must learn how to improve their offer for women and meet demand for goals-based advice.

As a result of ageing demographics, increasing numbers of individuals, especially women, are finding themselves torn between supporting elderly parents and their own children, while also managing financial goals. Many of these women in the so-called ‘sandwich generation’, who are approaching their own retirement, are inheriting significant wealth.

According to UBS, of the entire $83.5tn to be transferred within the next 20 to 25 years globally, more than 10 per cent ($9tn), is likely to be transferred to women, at an average age of 59, before they pass it on to next generations.

“As people are living longer, there is a growing breed of individuals facing this issue of ‘how do I take care of myself?’, both personally and financially, while also taking care of elderly parents, and then our children as well,” says Lisa Roberts, head of US markets at Wilmington Trust.

The caregiver role tends to fall on women, she says, herself having faced this challenge firsthand. While it is important to lean on family and friends for support, women should consider using financial advisers as an independent third-party to facilitate “tough conversations”.

It is critical for adult offspring to understand their parents’ financial picture, their family goals and what they are planning to do with their money, how much they anticipate leaving for charity or for children, how they plan to make investments last throughout their years and accommodate spending needs, including long-term care.

“Healthcare and health insurance is one of the costliest aspects of when you get older, and even for those that can afford private care, it is a significant portion of the overall wealth they'll be spending,” says Ms Roberts. If their parents’ money is not sufficient, it is important to plan how much they or other family members can personally contribute, so that it becomes a family plan.

Discussing these topics at an earlier age, when everyone is “of sound mind and body”, is crucial, she adds. “It's so important to have those honest and open conversations when your parents aren't at this escalating point where they need a caregiver, or dementia is sitting in.”

Insurance needs must be covered in advance, including health, life and long-term care insurance. Moreover, higher education costs are increasing at a faster rate than inflation, and clients should look at tax-advantageous strategies to save for educational expenses, such as ‘529 plans’ in the US.

It is important for advisers do “some probing”, if women clients are hesitant to share the challenges they are facing. “This is a growing issue we all need to look at. We have a responsibility to our clients to have knowledge on the topic,” she says, adding advisers may need to refer clients to outside expertise.

Clients should meet parents’ financial advisers, but “if they look right through you, and speak directly to someone else in the room, there might be someone better for you to find,” she says candidly.

Market confidence

Career interruptions due to unpaid family care responsibilities make wealth planning even more crucial for women, who tend to face additional financial challenges. With the gender pay gap still a global issue, women earn less, do not invest enough during their lives, having generally a lower risk profile, and live longer.

“It is really important to start saving and invest early, especially for women,” says Ms Roberts.

In the male-dominated financial services industry, as women are building their wealth, financial education, making sure women are comfortable and confident in investing in the market for their future, and having a diversified portfolio is paramount, says Ms Roberts.

Women now control 32 per cent of the world’s wealth, according to Boston Consulting Group. This will rise at a compound annual growth rate of 5.7 per cent to $97tn by the end of this year.

Feminisation of wealth

Being able to meet women’s needs is increasingly important for sustainability of the wealth management sector. According to industry research, seven out of 10 women fire their advisers within a year of their husbands passing away.

Sallie Krawcheck, CEO and founder of Ellevest, and former head of Bank of America’s global wealth and investment management division, wrote recently in the FT: “Women often report feeling overlooked in the relationship and thus disconnected from the family financial adviser.”

Only about half of women know where to go with a financial windfall compared with 72 per cent of men, according to a survey from Ellevest earlier in 2024. Women often move the money into a bank, which is safe but no longer building on the wealth they inherited.

“If that is combined with less robust markets, the industry could find itself no longer posting the growth that seemed to be an immutable feature of the business,” believes Ms Krawcheck.

Women have historically faced barriers to access the financial services industry. When they reach out to wealth managers, 65 per cent of Gen Z women, and close to 50 per cent of millennial women say they want to work with a female financial adviser. But they all perceive the wealth management sector as alienating. Exactly zero per cent of women think the financial services industry was built with them in mind, according to a 2023 Ellevest survey.

In fact, the industry is still not doing enough to accommodate women clients. Eighty-six per cent of asset managers in the US admit their default customer is a man. Only 7 per cent of UK wealth managers currently have a dedicated strategy in place to retain, attract and advise women, according to a white paper from the World Economic Forum.

Beyond the sector profitability, if the financial services sector got this right, the “feminisation of wealth” could have significant positive impact on the community, driving a “meaningful society moderation”, believes Ms Krawcheck. Women invest more in the family and society, are more philanthropic, want to go further to combat the climate crisis and even vote for more moderate political candidates than men.

Family finances

“The huge transfer of wealth to women creates a different dynamic in terms of the need for inclusion in wealth planning discussions in families,” believes Shannon Saccocia, chief investment officer at NB Private Wealth, with $74bn in client assets. In the US, financial decision making in families with age 65-plus members still tend to be made by a male figure, she reports.

“Incorporating women into the dialogue is paramount because their needs and approach to wealth is different,” explains Ms Saccocia. Men tend to be worried about the longevity of assets for themselves and their female counterparts. But they are often led by a “paternalistic view”, wanting to make sure their wives are taken care of, and worrying less about women being “meaningfully engaged in decision making about assets”.

Women, on the other hand, have broader concerns. They are generally not so worried about themselves, but more about the ecosystem around them, be that their children, grandchildren, their ageing parents and community.

“Advisers need to understand that when women inherit wealth, even with the best estate and succession planning, they are thrust into a myriad of emotionally charged decisions, which they need to make in a very short period of time,” she says. “Advisers need to provide both a firm hand, but also a listening ear in terms of really understanding their most immediate concerns.”

Financial education is important but should be about engaging them “in a dynamic and active dialogue”.

“Women may come into an adviser relationship less financially educated, but are very quick to take advantage of resources and come into meetings having looked through reports and articles we have sent them, ready to be engaged,” she says.

Long-term goals

When it comes to investments, women are perceived to be more conservative and risk averse. But “the tradeoff of risk and trade off of not taking risk” needs to be better explained to them, suggests Ms Saccocia. If they want their assets to outlive them, they need to have some component of growth.

“Advisers are doing a disservice for women by focusing on longevity of those assets for them, thinking they are allowing them to sleep better at night.” The message should be they could take a little bit more risk, still delivering their desired outcome, but potentially continuing to support their family after they have gone. “That’s a very attractive proposition to most women,” she says.

If advisers are able get over that “initial hump” in terms of understanding their client, their needs, and answering their objections, they will be rewarded over the longer term.

The likely result of discussions would be a portfolio “with a bit more risk and geared towards long term goals and outcomes”.

Advisers would have a client “able to digest some of the movement in the market”, because they have taken time to commit to a long-term plan, through a “very diligent and thoughtful process”. Finally, spending time to overcome their clients’ objections pays off, because women tend to stay with their adviser and see them as a trusted partner.

“Women expect a different type of service and frankly, because of the wealth transfer, they can now demand a different level of service,” adds Ms Saccocia.

Looking forward, having more women financial advisers who can relate directly to clients and understand their lived experiences will certainly help. Being a woman CIO helps engage women clients, she says. “I see women, particularly those in family relationships, feeling like they have a greater voice at the table. I see them open up.”

Some wealth managers appear to be gradually rising to the challenge. At UBS, the number of female clients has grown by 5 per cent between 2020 and 2023 and women now represent 45 per cent of the bank’s wealth management clients. “This is a change which may well continue, as we see these transfers of wealth shifting ownership in the future,” says Paul Donovan, chief economist at UBS Global Wealth Management. “From a wealth management perspective, who is owning the wealth and how it is growing is very important,” he says, as that affects the advisory service required.

“The majority of women are unsatisfied with the financial relationships they have,” states Marianna Mamou, head of advice beyond investing at UBS Global Wealth Management’s chief investment office. “Women value advice that helps them meet specific goals, rather than just having investment conversations about the benchmark and what are the top 10 trading ideas.”