Women currently control a third of global wealth, steadily becoming a formidable economic force. Research conducted by Boston Consulting Group (BCG) shows that between 2016 and 2019, women amassed wealth at a compound annual growth rate (CAGR) of 6.1%, which will rise to 7.2% over the next four years. At present, $5 trillion is being added to the global wealth pool annually by women – faster than previous years. This is predicted to expand further as future growth accelerates. BCG’s analysis also shows that wealth generation varies from region to region. The largest share of wealth is held by North American women at 37% in relation to the total regional wealth pool. This is followed by women in New Zealand, Australia, and the Pacific Islands who hold 33%, Asia with 32% and Western Europe with 31%.
Nearly 15% of Ultra-High Net-Worth Individuals around the world are currently women, which is a record-high share. Karen Frank, CEO of Barclays Private Bank and Overseas Services says, “Women have more financial power than ever before, with more than 60% of the UK’s wealth expected to be in their hands by 2025”. As their wealth continues to rise, so does their influence. They’re beginning to take charge in areas where men have traditionally dominated and been the main focus. According to Credit Suisse’s 2018 Global Wealth Report, North America and Europe have the highest proportions of female billionaires. Major countries include Germany, which holds the largest female share among its billionaires (26%), followed by Sweden (25%) and Switzerland (23.8%).
The growth of global female wealth and income is the result of various economic, social and technological advancements. Firstly, more women are joining the workforce or embracing entrepreneurship (which has given them access to earning power and flexibility). In 2018, 21% of UK equity-raising start-ups were founded by women, up 10% since 2011. This means that they’re now able to earn a substantial share of their own wealth. Additionally, falling birthrates and digitisation have meant that more women are staying in the workforce. The last decade has seen them ascend corporate businesses and occupy the most financially rewarding positions. Deloitte’s 2019 Women In The Boardroom report showed that 16.9% of board seats worldwide were held by women, up 1.9% since 2017. The income pay gap also continues to close – although it is by no means equal yet. Millennial women taking control of their wealth plays a significant role in this global trend. A survey conducted by BCG shows that financial literacy among younger women is greater compared to older women. This has created confidence when building up and maintaining wealth. It is also partly due to them obtaining university-level education at a higher rate than the generations before them. The pursuit of further education has raised women’s future earning potential both within developing and advanced markets. Other determining factors in the rising number of wealthy women include evolving cultural ideals, new trends in the global distribution of wealth and more wealth transfers between generations. The economic toll of the crisis certainly can’t be ignored and it’s important to acknowledge that this impacts future projections. However, the advancements previously made by women will continue as the crisis abates.
When it comes to investing their wealth, women are open to risk. However, their decision-making style tends to be more considered and averse to uncertainty. They require data that clearly specifies the trade-offs and how an investment relates to them, as opposed to the market itself. Prioritising facts over gut-instincts has proven to be rewarding. Spreading risk and distributing investments across a broad range of companies has also made women successful investors. Other attributing factors include being less likely to sell when the market dips, instead favouring long-term investments; as well as trading less frequently which results in lower fees. Cultural differences have a major influence on the investment behaviour of women. For instance, in Asia, women tend to take the lead in managing the financial affairs of their households, regardless of whether the wealth is inherited or earned. While men focus on generating wealth, it is up to the women to manage it by putting it back into the bank and earning a return. This is also prevalent in North American households. Conversely, across Europe and the Atlantic, financial planning is a joint effort.
Despite this increase in power, it seems that wealth managers continue offering insufficient services to their female clients. They continue to uphold generalisations about women’s role as financial decision-makers and their interest in managing their affairs. Banks should pivot their approach by recognising that this demographic doesn’t merely offer a marketing opportunity but rather a business opportunity. They can benefit from identifying women’s investment priorities and how these go beyond conventional assumptions, even though they differ from men’s.