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New wealth management strategies key for women and millennials

The findings of a new report have highlighted something we've known for some time at Affinity Capital – wealth management firms must tailor their strategies to best serve the next generation of investors.

Boston Consulting Group's (BCG) 2016 Global Wealth study, 'Navigating the New Client Landscape', revealed that women and millennials are two emerging demographics that will require firms to overhaul existing processes.

The research found that global private wealth climbed 5.2 per cent last year to reach US$168 trillion (£117 trillion). Women now hold approximately 30 per cent of this total, and their share is expected to grow 7 per cent annually.

Catering to female clients

Female wealth levels have jumped because they are achieving increasing success within executive and entrepreneurial spaces. Inheritances and legal settlements have also contributed to women's rising prosperity.

Despite this, BCG found only 14 per cent of wealth managers had conducted marketing campaigns geared towards attracting new female investors. Just 2 per cent said they considered women a client segment for which they had specifically adapted their services.

An EY report published earlier this year discovered that only 25 per cent of women rebalance their portfolios to maintain optimal asset allocation, compared with 49 per cent of men.

According to the company, financial advisers should target women investors in several ways:

  • Produce tailored content aimed specifically at women
  • Form affinity groups that educate and empower female investors
  • Hire more female financial advisers – currently 75 per cent are male
  • Coach male advisers to better engage with women

Getting to grips with millennials

Millennials have become the largest living generation, and they are now entering their prime years of wealth accumulation. BCG's report said female millennials are a particularly affluent target group for wealth managers.

These results are no surprise to us; in fact, prior to the study's publication, we provided insights into how wealth managers can best take advantage of generational trends among millennials.

Contrary to popular opinion, people in this generation are not spendthrifts. Instead, the volatility of financial markets and the global recession have made Generation Y disciplined with their wealth.

A UBS study revealed that 13 per cent of millennials considered themselves 'conservative' when describing their risk tolerance. Only the Silent Generation – called the Swing generation in the report – had a higher aversion to risk, with 15 per cent.

Millennials hold the majority of their wealth in cash (52 per cent), whereas the average amount of cash in portfolios across other generations was 23 per cent. Clearly, Generation Y is sceptical of high-risk investments, and only 17 per cent said they were actively trying to outperform financial markets.

Appealing to new investors

The BCG report describes women and millennials as 'non-traditional' clients, although the growing size and importance of these demographics mean they'll soon become key groups for wealth managers – if they're not already.

However, using traditional investment approaches is unlikely to achieve the best results. Organisations must adapt the ways in which these clients are handled in order to attract and retain new business.

The good news is that research shows women and millennials often seek financial advice when making investment decisions. For example, despite having a reputation as tech-savvy and independent, 91 per cent of people in Generation Y ask for guidance when investing their money.

Meanwhile, women are exceptionally loyal to their wealth managers, even though they take longer to select the right firm than men. EY claimed that once females have made their choice, however, they are far less likely to switch.

Understanding the nuances in providing services to different demographics is a factor we consider extremely important at Affinity Capital, and it appears the latest research supports our stance.

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