Empowered Transitions: Women Navigating Wealth Acquisition

Written by Jen Eathorne

There are a broad range of life events, big and small, that impact our financial and emotional wellbeing. Quite like the investment markets, things that change the direction of travel in our lives can be unpredictable and often unplanned for. By 2025, 60% of the wealth in the UK will be in the hands of women[1], through the generation of wealth, with more women in the workforce and business owners than ever before, but also for some women this will be through the death of a loved one or following a divorce.

Going through a time as turbulent as the death of a spouse or breakdown of a marriage are two of the most emotionally taxing events in life and seeking financial advice is not  likely to be high on the list of things to do.  Especially in relationships where women have not taken the lead on their finances, the transition to managing their own wealth can be intimidating.  Although more women are investing now than ever before, now at 67% in 2021 up from 44% in 2018[2], there is still a large cohort of women who have not previously had to navigate the wealth management landscape.  Coupled with the fact that women are more likely to outlive their male peers, this transition of wealth will affect more and more of us in the years to come.

So, what can women do now and in future to protect themselves against situations that nobody likes to keep at the forefront of their minds?

Develop your financial education

Taking a seat at the table early on with your family’s wealth management is key.  Having the opportunity to fully understand your family assets and finances, as well as the plans and structures in place will help to give you confidence during a time when the ground feels as if it is shifting beneath you.  Having the knowledge of your assets and your current balance sheet removes one element of uncertainty during transitionary periods.

A study by Fidelity Investments (2021) found[3] that whilst women feel confident in balancing the day-to-day finances for their household (75%), they are far less confident in; selecting investments to meet their goals (19%), in investing for their short and medium term goals (29%) or planning for their financial needs in retirement (31%).  It is often said that knowledge is power, and in this case confidence; by taking the time to self-educate, become more involved in your finances or employ the services of a professional, if you have not done so already, can provide a feeling of security during turbulent times.

Employ professional expertise

Research has shown that only 3% of couples turn to a financial adviser during divorce[4], leaving themselves to navigate the process without the specialist insight.  This advice can have particular importance to women who see their income fall by 33% following divorce compared to just 18% for men in the UK[5].  Which holds true with studies from the other side of the Atlantic, where women experienced a 45% decline in their standard of living following a “grey divorce” compared to just 21% for men[6].

As part of the dissolution of a marriage a divorce lawyer is an obvious need, with many leaving the dust to settle before looking for professional management of their wealth.  However, this can be a costly decision, leveraging the expertise of a financial adviser during the process can help to highlight key areas of consideration in settlement proceedings.

During this vulnerable time for couples the focus tends to be drawn to the family home with less thought taken into retirement accounts.  A survey by Which?[7] found that 7 out of 10 couples did not include pensions in their financial settlements.  Retirement savings are a key source of income in later life for many, with women’s retirement assets continuing to lag men.  In the US, research into 401(k)s found that women’s account balances were 65% less than men, with a number of factors contributing to the gap[8].  Therefore, reaching an agreement on the splitting of retirement assets is even more important for women, who should consider the knock on effects of forfeiting rights to the tax-deferred benefit of a liquid asset in favour of the illiquid asset which cannot necessarily be relied on as a source of income when needed in later life.

Where the transition into managing wealth is through the loss of a loved one, if your family is already engaged with a financial adviser, as we note earlier, it is essential to be part of the conversation and decision making in your family’s wealth.  In doing so, you can ensure that plans have been put in place for that terrible “what if?” scenario, for both partners, and you will be guided by a professional who is keeping their ear to the ground with legislation that could affect your family’s financial wellbeing in future.

In both the UK and the US probate can be a lengthy process, increasing equally in time and cost depending on the complexity of the estate that is being settled. This uncertainty of the process and the timeline involved can no doubt exacerbate an already daunting situation.  By starting the conversation early with an adviser you can safeguard yourself and understand any financial hurdles you might be up against.

Once estates have been settled, women find themselves left to explore their new financial freedom and part of this will mean making large financial decisions for themselves and their family.  If your family does not currently have a financial adviser, or one you feel you connect with, you may want to meet with a number of professionals to see who is best suited to your needs.

Approximately a third of women with wealth say they would only work with an investment professional they trusted, 10% more than their male counterparts, and over half of women putting a high level of importance to personality match[9].  This evidences that finding the right financial support for women is essential.  The key piece of the puzzle, as with any relationship, is finding an adviser who you can trust and is able to walk with you in understanding your needs, goals, and how to meet them.

Define your life goals

This will be an area of life that will have no doubt been flipped upside down during this transitionary time, as we know the best laid plans can often go awry.  Although unsettling at first, defining your new normal and new goals can be an empowering experience.  Women tend to be more concerned about meeting their financial life goals than men.  In the US, a study found that in a range of categories from healthcare needs to tax reduction, and lifestyle maintenance[10], women were focused on achieving a number of goals which also align with their values.  Men on the other hand place more emphasis on pure performance, basing their investment decisions on track records and yields[11].

Taking the time for self-reflection and shaping your goals with your trusted adviser is essential and provides you clarity of your new direction of travel.  Although an area that might be hard to think of at first, taking the time early on to take the steps in the right direction will give you peace of mind that you have a plan in place for the long term.

Finding an adviser that understands the importance of taking the time to learn your values and your goals, and guiding you through that journey, is just as important as connecting with their personality. 

Build out your support network

Building out your support network and speaking with others who have experienced similar transitions to you, learning from their past results and pitfalls, can help to alleviate the fear of the unknown.  You might have a friend or family member who is more versed in the financial world that can support you and provide recommendations of advisers who can help.  In particular, McKinsey found that women, more so than men, are more inclined to only work with investment professionals who were recommended by someone that they knew and trusted[12].  To feel greater confidence in your onward journey using your networks for guidance can be extremely beneficial.  We are seeing more and more community networks aimed at supporting women on their financial path, offering a space for them to both learn and become more empowered.

The stories of women who acquire wealth through divorce or spousal death are testaments to their strength and resilience.  These women navigate intricate financial landscapes, especially those with complex cross border requirements, while dealing with the emotional impact of significant life changes.  As societal norms evolve and women continue to assert their financial independence, their journeys serve as inspirations for others and offer as a support network to those starting on their financial journey.

References

[1] https://www.schroders.com/en-gb/uk/intermediary/insights/are-women-key-to-your-future-business/
[2] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf
[3] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf 
[4] https://www.legalandgeneral.com/adviser/retirement/adviser-academy/insight-and-articles/divorce-in-later-life/finding-financial-fairness-supporting-women-in-later-life-divorce/#:~:text=Only%203%25%20of%20people%20seek,couple%20find%20financial%20fairness6
[5] https://www.legalandgeneral.com/adviser/retirement/adviser-academy/insight-and-articles/divorce-in-later-life/finding-financial-fairness-supporting-women-in-later-life-divorce/#:~:text=Only%203%25%20of%20people%20seek,couple%20find%20financial%20fairness6
[6] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8599059/ 
[7] https://www.which.co.uk/news/article/seven-in-10-divorcing-couples-dont-share-pensions-aDHbd4A9tStW 
[8] https://www.troweprice.com/content/dam/iinvestor/resources/insights/pdfs/closing-the-gender-retirement-savings-gap.pdf
[9] https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management 
[10] https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management 
[11] https://www.bcg.com/publications/2020/managing-next-decade-women-wealth 
[12] https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management 

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