The real wealth transfer
Despite their growing wealth and financial confidence, advisers across the UK still have a notable gender gap when it comes to their clients. According to our 2024 Women in Retirement Report, around half (49%) of women state that financial independence is much more important than it was to previous generations. And estimates suggest that women will hold the majority of UK wealth by 2025, with around two thirds of the £30bn held by baby boomers expected to transfer solely to women by 2030.
Advisers need to take stock of their offering, and ensure that they are properly positioned to add value to this growing cohort of potential clients. Those that fail to do so risk being left behind.
The investment gap
Despite this looming transfer very clearly on the horizon, the financial services sector continues to let down current and potential female clients all too regularly.
The gender pensions gap, which continues to exist, currently stands at around £100k. This means that the average woman is on track to only receive £12,000 per year of total income in today’s money during retirement, after paying for income tax and any expected housing expenses, compared to £17,000 for the average man. Crucially our recent Women in Retirement report found that this will take at least 20 years to close unless decisive action is taken1.
Boring Money has revealed that the gender investment gap is widening, rising by £54bn to £567bn between January 2023 and January 2024. This is due to more men between the ages of 25 and 44 putting their money to work for the first time compared with women in the same age bracket. Just one in five (19%) of women aged 25 to 44 were investors in January 2024, up 1 percentage point from the previous year.
Meanwhile, the proportion of British men of the same age who had invested rose from 28 per cent to 34 per cent. Notably, young women also tend to be more risk-averse and less confident about investing than their male counterparts5.
There is some good news. Pension participation rates due to Automatic Enrolment have more than doubled for eligible female employees since the policy was introduced in 2012. This means that an extra 4.6 million women now save into a pension1.
But what is effortlessly clear is that tangible changes need to be made to ensure that future generations of women are able to approach their later life planning with confidence and not be left financially adrift. Advisers must seize their role in that.2
The advice gap
When we turn our attention to the level of engagement with advisers, just 38% of women have received financial advice compared to almost half of men. Yet 45% of women are open to receiving financial advice. And while 9% less women have income protection compared to men and 7% less women have critical illness cover compared to men, 62% say they would feel more financially resilient with a product that pays out if they had a serious illness2.
Advisers should be pushing on an open door.
Part of improving engagement with current and potential female clients is about ensuring that advisers themselves are available, approachable, and knowledgeable.
There is a notable pipeline challenge when it comes to advisers - data provided by the Financial Conduct Authority to FT Adviser revealed that as of February 2024 there were just 174 advisers authorised to provide retail investment advice under the age of 253.
The gender imbalance of advisers could be a factor too. Just 16% of financial advisers are female. It’s not necessarily that women want or expect a female financial adviser. But what it does mean is that advisers need training and support to ensure they are talking to women in the way that is meaningful to them and speaks to the varying financial needs of women.
A modern offering
Closing the advice gap is key to properly addressing the challenges around engagement and confidence. And that is going to continue to require a substantial effort by all those across the industry. But it is certainly achievable.
One element of this is how we talk about planning with women either thinking about or already on their financial advice journey. Too often overlooked is the ‘bigger picture’ or ‘collective’. Their concerns are typically not just themselves and how to secure their own longer term future. So mirroring those priorities and highlighting those steps and products that offer benefits to the wider family can be invaluable.
One notable example of this is the emergence of the ‘family protection’ opportunities.
For example, Family Income Benefit (FIB) is a form of term assurance cover which pays a regular, tax-free income from the time of the claim to the end of the plan term. It is an easy way for a client to provide their family with an income rather than a lump sum if they die.
Not only can it cover costs associated with long-term care, income of the household breadwinner, income rather than lump sum helping maintain payment of household bills, but the policy can also be index-linked to ensure the buying/ spending power over time is also protected.
A more sustainable future
The rewards for successfully engaging with this cohort are significant.
Firstly, it will help ensure that women are more financially secure. It is estimated that if investment providers were able to engage more meaningfully with women, the results could generate a further £12.4bn for millennial women and £24.4bn from Gen X women.
But it benefits advisers too. A Fidelity report in 2020 found that when women are happy with the advice they received, they are very likely to pass on that recommendation. Around three quarters (72%) of women would recommend professional financial advice to a loved one, while recommendations from friends (24%) and family (23%) were the most popular ways that women had chosen their financial adviser4.
Getting it right pays dividends.
1Source: 2024 Women in Retirement Report
2Source: LV Wealth & Wellbeing research - 'Women in protection' https://www.lvadviser.com/knowledge-centre/article-library/women-in-protection
3Source: https://www.ftadviser.com/your-industry/2024/03/12/worry-for-profession-as-young-adviser-numbers-plummet/
4Source: 'Unlocking power the power of advice' 2020 report
5Source: https://www.ft.com/content/120ba6b9-b8f5-4000-a618-07c6f8f7d845