Women are the New Power Investors. Here’s How Savvy Advisors Can Engage Them

Keitha Kinne, CFA

CHIEF OPERATING OFFICER | AMG FUNDS

New realities are challenging old perceptions of women as investors—and advisors should take note.

Women have been referred to as the “CFO of the household,” but they are increasingly becoming CEOs as well, in and out of the home. That translates into more women being in charge of their own—and their families’—investment accounts, and more opportunity for those who understand them. 

Study after study, such as a 2021 Fidelity survey,1 shows that women, generally speaking, want to be more engaged in their investment decisions and planning for the future. The desire is there and, increasingly, so are the dollars. Women already control 31% of the nation’s private wealth, and that share is expected to grow significantly during the historic wealth transfer that is expected to approach the size of the U.S. GDP2 by the end of the decade. What do advisors need to know about these new power investors?

The Confidence Gap is Narrowing

Though some women may not be as confident about their investing prowess as men, they aren’t shrinking violets either. Over the past two years, the number of women who said they were confident in their ability to manage their finances went up across all age groups, according to a new study by U.S. Bank.3 And that confidence may be justified, as there is growing evidence that women may do a better job of investing over the long haul.

As that Fidelity survey of 2,400 people found, women outperformed their male counterparts on average by 40 basis points over the last decade—in part because they trade less than men, a pattern Vanguard also found among its 401(k) customers. For advisors, the point is clear: Don’t make assumptions based on gender about whether your clients are confident and capable investors.

The Pandemic Was a Tipping Point

At first, it seems counterintuitive. After all, nearly two million women dropped out of the workforce during the COVID-19 pandemic, and the economy became increasingly volatile. But rather than retreat, more women have taken control of their financial futures, with half of women reporting they have become more interested in investing since the pandemic began. And, surprisingly, almost as many say they now have more to invest. According to Nationwide Retirement Institute,4 that increased engagement in investing has translated into a jump in the number of women with over $100,000 in investible assets who say they feel optimistic about their financial outlook.

Millennial Women are Emerging as a Force

The youngest millennials turn 26 in 2022, and this is a generation brimming with confidence and eager to enter the world of investing. The Fidelity study found that half to three-quarters of younger women have more money to invest and are more interested in investing generally and outside of retirement—while U.S. Bank reports that nearly two-thirds plan to invest pandemic savings as opposed to spending them. 

Allyson McDonald, CEO of Boston Common Asset Management, finds that younger female investors often put more of a premium on sustainability and equity. “Millennials expect more from companies and the products and services they offer in the marketplace,” McDonald says, while noting that women are increasingly focused on investing in companies whose offerings provide solutions to environmental and social challenges. Whether it’s investing in ESG or working with providers with strong workplace equity and diversity ratings, advisors who adapt and seek out funds and firms aligned with these values will have the advantage with this growing market segment.

Women Seek Advisors Who Understand Them and Listen

It’s no secret women have often felt overlooked by male advisors, but that doesn’t mean women don’t want financial advice. Certainly, “mansplaining” and financial jargon continue to be a turnoff to women investors. Ultimately it comes back to advisors doing what they are best at; helping clients align their investments with their life goals. For women, that may mean taking time to understand those goals, one-on-one. Engage them in a conversation about their career trajectory and ambitions. Don’t make assumptions about their home life. Above all, advisors should listen. The more women investors feel heard and understood, the more inclined they are to build a long-term relationship with an advisor.

With more women ready to take steps over the next year to make their money grow, there’s a big opportunity for advisors who are willing to help guide them.

1 https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf

https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management

3 https://www.usbank.com/dam/images/about-us-bank/company-blog/Women_in_Wealth_PDF.pdf

4 https://nationwidefinancial.com/media/pdf/NFM-21742AO.pdf

Past performance is not a guarantee of future results. 

Investing involves risk including possible loss of principal.

This does not constitute investment advice or an investment recommendation.

Any securities discussed herein do not represent the entire portfolio and in aggregate may represent only a small percentage of a portfolio’s holdings, or, may not be held in an account’s portfolio at all. It should not be assumed that any of the securities transactions discussed were or will prove to be profitable, or that the investment recommendations we make in the future will be profitable or will equal the investment performance of any security discussed herein.

WRITTEN BY

Kinne, Keitha Blog Author Headshot

Keitha Kinne, CFA

CHIEF OPERATING OFFICER | AMG FUNDS

PUBLISHED: March 31st, 2022
3 Min Read

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