Women: An increasingly powerful global financial force

They are set to control 75% of household spending worldwide. But are financial services companies taking notice?

With women at the helm of two of the world’s largest economies, and potentially another stepping into the shoes of the US President, it’s clear that gender equality is making dramatic leaps when it comes to political leadership. But the perception has always been that real financial power lies in the background with the “old boys’ club”.  Yet new research released by the US Chartered Financial Analyst (CFA) Institute suggests otherwise, with women cited as becoming ever-more-prominent creators of wealth. In short, they are the market financial companies should be targeting, perceived to be the new king-makers.

The report indicates that women currently control 27% of the world’s total wealth. While some of this is through their inheritance of the management of their spouse’s wealth, a considerable portion can also be credited to self-created wealth. Women currently own a third of businesses in the world, with nearly half of these coming from developing markets. Consequently,  this is a demographic that is now being prioritised by financial institutions, not only for the personal income they are generating, but because they are prime candidates for retirement investments and other services. 

Women need more retirement savings than men

The research reveals that currently this group of high-net worth women will retire with only two-thirds of the assets compared to those of men. But with a life expectancy of six to eight years longer than men, these women ideally should be investing more, sooner. Wealth managers and advisers should be reacting to this opportunity shift. In the USA, only 15% of this female market say they are being well served by financial advisers, highlighting the poor service they are currently being offered.

In control of household spending

There are other reasons why this market should not be ignored. The CFA research estimates that by 2028 women will control 75% of discretionary household spending worldwide, and in the next five years their global income will rise from $13trn to $18trn (which is more than the GDPs of China and India combined).

Furthermore, they stand to inherit 70% of money passed down over the next two generations. While the income gap certainly still exists, the Institute predicts that as women age and grow in their careers, the overall gap between women and men will continue to shrink. By 2028 in the USA, the average woman is projected to earn more than the average man. They already hold 52% of managerial and professional jobs compared to only 26% in 1980, and in some of the major cities younger women (aged 20 to 29 years) are already out-earning their male colleagues.

Given such growth potential, it’s only right that the global financial services industry -- traditionally dominated by males -- has finally experienced a wake-up call when it comes to prioritising women investors and started to provide better education and services tailored to meet their needs. Although they have been slow off the blocks, it’s a welcome development in a world where women are becoming an increasingly powerful financial force.