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    Why Women and Millennials Are Essential to the Future of Financial Advice

    Why Women and Millennials Are Essential to the Future of Financial Advice

    If you’re a financial advisor, you already know that women and millennials are two markets that are increasing in both financial power and independence. Yet, for myriad reasons, many advisors have not tapped into or placed enough focus on these emerging demographics.

    Based on new research, firms may want to think again. For one, American women currently control more than $10 trillion in U.S. household financial assets, an amount that will triple over the next decade. In the case of millennials, it’s estimated that $30 trillion in wealth will shift generations over the next 30 years, as baby boomers grow older and the next generation comes into their inheritances. The COVID-19 pandemic has also created opportunities for advisors to deliver more value to women and millennial prospects, as the need for tech-fueled service and specialized expertise rises.

    Despite the overwhelming evidence showing why advisors should focus their business development efforts on these two markets, many firms aren’t adapting their services fast enough. In fact, many financial advisors are still primarily focused on their more traditional client base of current or soon-to-be-retirees — leaving women and millennial prospects uninspired by their client experience.

    Where Is the Disconnect?

    There are a few underlying reasons why some advisors aren’t capturing these emerging markets. To start, the financial services industry is, to put it simply, traditional. The industry has been working in the same way, using the same processes, for a long time. Participating in digital transformation or revising service offerings can be a challenge, especially when advisors have hefty client loads. Many firms do not have the time and resources to invest in significant organizational changes.  

    Beyond lack of resources, there are also some common misconceptions about these two demographics that seem to hold advisors back. 

    Take the women investor demographic, for example: According to 2019 data from New York Life Investments, though an estimated 70% of women with investable assets above $250,000 work with an advisor, 38% are less than completely satisfied with the professionals they’ve chosen. Rather alarmingly, a majority of widows leave their financial advisors upon the death of their husbands. What about the women that advisory firms already serve? One of the most common complaints women have about their financial advisors is that they don’t listen to their needs.

    Despite some progress over the past decade, the financial services industry is still primarily male-dominated, especially at the senior level. A Deloitte study found that in 2019, the proportion of women in leadership roles within financial services firms was 21.9% and is projected to grow to 31% by 2030. But that’s still far from balanced.

    This is a problem. As we’ve discussed in previous articles, women investors need to see themselves — their challenges, their life experiences — in the services they receive from their financial advisor. If those perspectives aren’t reflected at the highest level of your firm, where key strategic decisions are being made, then female prospects will look elsewhere for a firm with a robust, female-friendly presence and brand.

    Though it will take broad systemic and societal changes to reverse gendered ways of thinking, firms need to recognize the facts: Women are earning more than ever before, and it’s only natural that with higher levels of savings, most of them would want to find viable investment avenues. Additionally, women play a very involved role in managing their assets alongside their partners and are the primary financial leader or breadwinner in their household. Translation: Women are making the vast majority of the financial decisions for their families, and if firms fail to tailor their services to the demographic, they’ll miss a major, strategic growth opportunity.

    Unpacking the Millennial Demographic

    As is the case with women, millennials (now considered adults under age 40) are also growing their total private wealth. But many advisors have failed to see the massive potential in this demographic. Why?

    To start, many firms aren’t equipped to carry millennials through all of the phases of their accumulation journey. Many firms don’t have an accessible entry-point for prospects who are just starting to build wealth, due to high asset minimums and fees. Millennials might not have the money to immediately attract financial advisors, but that’s going to change over the years as the economy shifts and settles. Some advisory firms have overcome this barrier by introducing goals- or planning-based services that grow with prospects as their assets under management (AUM) grow, but this is still a nascent development.

    Another reason why some firms have struggled acquiring this demographic is that they aren’t tailoring their services to meet millennials where they are most comfortable, from a service perspective. As the generation that grew up with technology, many millennials gravitate toward digital investing platforms and apps to manage their financial lives. But contrary to popular belief, a large portion of millennials are also craving a hybrid-advisory relationship that combines personal interaction with a convenient, flexible, tech-driven experience. In today’s day and age, it’s possible — and necessary — for advisors to deliver both.

    Is the Pandemic Breaking Down Demographic Barriers?

    Possibly. There is no questioning the hardship and devastation the COVID-19 pandemic has brought to the lives of people all around the world — but there has been a silver lining. Industries that were slow to transform have been forced to adapt, from engaging in remote work to relying on technology to communicate. Financial advisors have been required to adapt as well — and they’re also at an advantage.

    Due to the pandemic, more people are seeking both basic and sophisticated financial advice. Every generation — including millennials — is re-evaluating their financial picture and prioritizing tasks they may have previously overlooked, including estate planning and long-term care planning. Many financial advisors are also adopting a hybrid advisory model and offering their services online, virtually, or via applications that clients can download on their mobile devices — all features that appeal to the millennial demographic.

    Women, on the other hand, have been disproportionately affected by the pandemic because many of them are on the front lines. According to the National Women’s Health Network, most women work in the industries hit hardest by COVID-19 — they make up more than two-thirds of the healthcare workforce, more than two-thirds of social workers (78%), more than half of essential retail employees (53%), and more than one-third (34%) of delivery and warehouse employees.

    From retirement planning to planning for major transitions, women need high-quality, personalized financial expertise now more than ever before. The question is, will your firm be equipped to help?

    Just like the advice you give your clients, it’s critical to diversify your clientele in order to grow your practice into the future — especially as the COVID-19 pandemic changes the landscape, and as a larger portion of generational and economic wealth changes hands over the next decade.

    If you’ve waited to tap into these emerging markets, now is the time to make your move. At Beyond AUM, we specialize in helping advisors like you strategize and develop expertise in niche markets to better capitalize on opportunities and grow their business. If you’d like to learn more about how we can help your firm, contact us today.