Widows – The Forgotten Investors

Recently, the Financial Times wrote a story about widows, calling them the “neglected heirs.” The article went on to describe the situation facing the UK’s aging women and the wealth managers that serve them.

The attention the FT gave to female baby boomer investors should come as no surprise to wealth managers, who should have been aware for some time now that widows are often neglected by financial advisors, who tend to develop relationships with the male spouse and then their children , who are seen as the natural next generation of investors.

As an industry, wealth managers have failed baby boomer women by setting up an environment that often does not respond to their needs or concerns, and instead creates a male-dominated environment. The effects of this are clear. McKinsey found that in the US 70% of widows change financial advisors within the first year of inheriting, and the number is undoubtedly similar in other countries.

As the FT pointed out, women often outlive their husbands. In the US, women outlive men on average by five years, and women tend to marry partners about two years older than them. And while they may underestimate their own abilities and funds, these women hold vast wealth. McKinsey estimates that baby boomers control about 70% of U.S. affluent household investable assets. Some two-thirds of that are held by joint households, where a woman is not actively involved in financial decisions.

Wealth managers need to pay special attention to this service gap in the industry, not only to better serve their existing clients, but to bring in new investors that may be looking for a relationship their previous advisor failed to provide. Relationships are everything in wealth management, so a conscious effort and strategy to further relationships with female clients will make a world of a difference.

It can start simply, being sure to include female spouses in conversations and encouraging them to make active decisions alongside their husbands. Don’t keep the investment chat to the golf course. Think about more inclusive activities and meetings.

And be sure to listen. Women clients need to be given the space to share their thoughts and opinions comfortably, without being patronized. Their approaches to finance may be different than their husbands, so they should be given the opportunity to approach investing in their own ways, perhaps rebalancing philanthropic efforts or the distribution of wealth among the extended family.

And conversations with women clients should be encouraging, while meeting them on their level. New inheritors may require more hand holding and frequent meetings at first. Conversations may need to include a risk assessment and discussion of expectations.

Wealth management firms should also think about their hiring practices and how that will support efforts to retain female clients. Only about 20% of financial advisors are female, but many women investors are more comfortable speaking with a female advisor.

The changes needed in the wealth management industry to cater to older women is great, but so is the opportunity. By McKinsey’s estimates, just retaining baby boomer women as clients could result in one-third higher revenue potential for wealth management firms.

That seems like a segment worth investing in.