July 20, 2022
Women already control around one third of global wealth, and their share is rising fast. They are expected to be the big beneficiaries of the Great Wealth Transfer, in which baby boomers pass their assets on to the next generations. They are also making more money themselves, thanks to social changes such as increased representation in the workforce, including top management positions, and higher levels of education.
In 2010, for example, just 14 of 89 women on the Forbes billionaires list were self-made; in 2022, it was 101 out of 327. Even COVID-19 did not dim women’s growing financial confidence. In 2021 research conducted by Fidelity Investments, 50 percent of women in the US said they were more interested in investing since the start of the pandemic.
And the 2021 UBS Investor Pulse survey found that 68 percent of women had started talking more about finances within their families.
A bespoke approach is best
In response to this accelerating trend, many articles and research pieces have appeared targeting the specific investment needs of women. But while investing is important, it is only one aspect of family wealth. And at Kaiser Partner Wealth Advisors, segregating clients according to their attributes, including gender, runs counter to our bespoke approach.
In our view, a successful wealth management plan is both holistic and highly personalised. That means it ensures global mobility and encompasses the full spectrum of a family’s assets, from lifestyle and real estate to venture capital and philanthropy. It also means it serves the unique needs of the wealth owner and their family, and reflects their shared values.
We are not disputing women face specific financial challenges. We simply believe that every client is different and deserves a custom-made plan. For example, BCG names five challenges that affect the financial life journey of women: the gender pay gap, maternity leave, flexible conditions, a longer life expectancy and a tendency for lower risk tolerance. But recent research shows that huge differences exist.
Geography: in Asia, around 41 percent of female wealth is self-made compared with just four percent in Europe.
Age: approx. 72 percent of millennials are the main decision makers for financial planning in their households, compared with less than circa 50 percent of baby boomers.
Culture: around 60 percent of women in China see themselves as investors, compared with just nine percent in Japan.
What’s more, where women do have vulnerabilities, the solution is the same as it would be for any client: a strong wealth plan that covers all contingencies. Take their longer life expectancy, for example. At various points in women’s lives, they will deal with business partners, need to protect their children’s interests, inherit spousal wealth or support ageing parents. A tailored, holistic plan would address all these factors.
A reliable sparring partner
One clear distinction we see is in women’s need for a particular kind of wealth advisor. Research shows that only around 35 percent of female clients talk to their financial advisor quarterly or more about retirement planning or to see if their goals are on track. And approx. 67 percent of female investors globally feel their wealth manager or private banker misunderstands their goals or cannot empathise with their lifestyle.
We believe women need a reliable sparring partner who invests the time to understand their needs and situation. An advisor who puts them in the driving seat and encourages them to take ownership of their wealth plan. And an advisor who constantly monitors whether the plan needs adjusting to reflect any changes in family- or business-related circumstances. Whoever the wealth owner, though, the key is to start the dialogue early. The sooner a family sits down together, the more time they have to build a long-lasting plan that prepares for all contingencies and works in everyone’s interests.
A plan for all seasons
So, what might this plan look like? First, it protects the wealth owner and their family from contingencies and negative implications legal or otherwise, while making sure they maintain some flexibility in global mobility terms. It diversifies their risks, so their income is protected in the event of a major geopolitical occurrence. And it protects them against all other contingencies, including divorce, death and unscrupulous business partners.
Our role as advisors is to ask the right questions, understand their needs and guide them through the planning process
From a business perspective, a strong wealth plan ensures continuity and a smooth transition to the next generation and beyond. It also protects the business from internal and external risks and builds a strong corporate governance system that includes – and provides for – the most trusted people in the family’s inner circle.
Finally, the plan protects the wealth itself, so it’s preserved for future generations and passes down smoothly. It also defines who has access to the wealth, and for what (to try out a new business venture, for example). And it constantly flexes to reflect the evolving needs of all parties.
Strong governance must underpin the plan, particularly those aspects relating to the family. This can help to avoid inheritance disputes, and the risk of younger generations squandering their wealth because they do not appreciate the responsibilities it brings.
Three strategic steps
Effective and sustainable wealth planning is more about understanding internal and external risks, allocating roles within the family and creating security mechanisms than it is about considering wealth from a single perspective. Having said that, a good-quality plan will address any issues female wealth owners face, such as a lack of financial independence or information about family assets.
The challenge can be getting the family to have an open dialogue about wealth in the first place. Few families regularly discuss their financial situation, its potential risks and challenges and how to mitigate them. By giving everyone a voice and the chance to contribute, especially the younger generations, wealth owners can help the whole family buy into the final plan.
Although, the planning process is always tailored to the specific needs, there are three key aspects that we focus on when advising wealth owners and their families:
1) Defining the family’s values and long-term aims. Wealth is almost always a family matter and therefore, should primarily be seen through the lens of relationships and family values. We always ask families which shared values they would like the plan to reflect, as these can keep the family united and thriving for generations.
We also ask them to think about what they want the plan to achieve for themselves and their family, during their lifetime and beyond (recent history has demonstrated that short-term plans, set up for very narrow tax purposes, backfire eventually). And we remind them that their plan will have the power to affect family members negatively as well as positively. So, whatever its purpose, relationships must be at the forefront.
2) Keeping the plan dynamic. Once we understand the objectives of the plan, we use our Dynamic Asset Model to conduct a comprehensive inventory of the family’s assets. We divide them into categories – business-linked, lifestyle, financial, real, direct investments and sharing and impact – to show how they interact. And we help to strategically allocate those assets in line with the plan.
Next, we stress-test the model by asking ‘what if-questions’: what happens if the business fails tomorrow? Would the other assets be able to sustain all the varying financial needs and priorities of the family, or help set up a new business? And we flex it if circumstances change or challenges arise.
3) Getting support from the right people. At Kaiser Partner Wealth Advisors, we put the wealth owner in the driving seat. Our role as advisors is to ask the right questions, understand their needs and guide them through the planning process.
As their wealth grows, though, no single advisor is able to handle everything a wealth owner needs. Our solution is to create a Wealth Table – a bespoke team of advisors, experts from different areas and disciplines, and family members to provide a comprehensive view. Together, we can focus on the long term while avoiding the blindness that can come from being too close to an issue or person. Our clients appreciate the synergy and the quality of advice it brings.
A relationship built on trust
Of course, we can only achieve all this if wealth owners put their trust in us to deliver. We earn that trust over time by knowing our clients well, by creating custom-made solutions and applying a holistic approach. That means understanding the planning horizon, long-term purpose and needs of the family, while addressing the specific vulnerabilities of the wealth owner – irrespective of gender. Ultimately, what we provide is highly personalised support. And that does not involve defining a person according to a limited number of attributes.