Growing Women’s Wealth

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Despite financial challenges brought on by the COVID-19 pandemic, women in the U.S. are opening new brokerage accounts and investing in greater numbers than ever before, according to data from Fidelity Investments, with millennials and younger generations of women fueling much of the recent growth. 

A rising share of women who manage accounts with a partner also report taking on an increasingly active role in joint finances, with surveys further suggesting that when women are more engaged in making financial decisions, they are more likely to incorporate environmental, social, and governance (ESG) factors into their strategies.

And with significant room for growth, this segment of investors is still expected to expand over the next decade, a recent study by McKinsey found, potentially offering opportunities for wealth managers to develop new and stronger relationships with a key source of clients and assets.

KEY TAKEAWAYS

  • Women in the U.S. are opening new brokerage accounts in greater numbers than ever before, with millennials and younger investors leading the way, according to Fidelity.
  • Surveys show millenial and younger women investors were significantly more likely to invest in ESG investment products. 
  • By some estimates, there would be more than $3.22 trillion of additional capital to invest globally, and over $1.87 trillion in sustainable investing, if women invested at the same rate as men.

Women Investors on the Rise

2021 research from Fidelity found that the number of women in the U.S. who say they are more interested in investing has risen by 50% since the start of the pandemic, with millenial and younger women contributing significantly to the shift. 

Fidelity’s recent 2022 Money Moves Study found that half of those surveyed under the age of 36 had either started investing in the past six months or planned to in the next six months. A Fidelity analysis of retirement plans also found that IRA accounts opened by millennial women investors rose over 26% in the first quarter of 2022 from a year earlier.

And while a report from UBS found that roughly half of women who manage investments with a partner defer investment decisions to their partners, the number of women who say they lead financial decisions continues to increase at 26%, up from 21% in 2018.

Elevating ESG Investing Interest

As women invest more, they’re also becoming more involved in sustainable investing.

Women with over $250,000 in investable assets surveyed by UBS this spring were twice as likely as men to say it’s important to them that companies they invest in incorporate ESG factors into their policies and procedures.

Women who reported leading investment decisions were also significantly more likely to report investing in ESG products than those who didn’t. Two-thirds of women leading investment decisions said they hold ESG investments, with 54% investing in venture capital companies focused on a specific issue they support. That compared to just 40% and 31% of women who are not leading financial decisions, respectively.

UBS noted that the emergence of the COVID-19 pandemic likely influenced some of these changes. “More than 82 percent of women say the events of the last two years made them reassess what’s important, and that catalyst will drive more meaningful change for causes they champion and for society overall,” said UBS Global Wealth Management Vice Chair Paula Polito in a release.

The shift was most salient among younger generations of investors. A report by the Bank of New York Mellon noted that at least seven in 10 women surveyed under the age of 30 prefer to invest in companies that support their personal values, compared with just over half or 53% of women over 50.

“Looking at the research, it’s clear that increasing women’s participation in investment is critical for their personal prosperity and to help shape a more equitable future for all. Doing so will also potentially help increase the allocation of capital for the benefit of society and the environment,” said BNY Mellon Investment Management CEO Hanneke Smits.

The Biggest Potential Wealth Transfer in History

The Bank of New York Mellon estimates that if women were to invest at the same rate as men, there would be more than $3.22 trillion of additional capital to invest globally, with over $1.87 trillion flowing into sustainable investing.

However, the report noted that many asset managers continue to primarily target men as their client audience. Almost nine out of 10 or 86% of those surveyed say that their default target customer for investment products is a man.

“As women, we all have different hurdles to overcome to meet our individual financial goals. Some of these are influenced by demographics and personal circumstances but some are a result of how the investment industry has traditionally engaged with women,” BNY Mellon’s chief client experience officer, Anne-Marie McConnon, explained. 

A 2022 report by McKinsey projects that by 2030, women in the U.S. could also control much of the baby boomer generation’s $30 trillion in investable assets — a potential wealth transfer greater in magnitude than the annual gross domestic product (GDP) of the United States.

By some estimates, the largest wealth transfer in modern history could already be underway. At the end of 2021, the Federal Reserve estimated that individuals aged 70 and greater had a total accumulated wealth of $37.79 trillion.