How to empower women inheritors to invest

Of the $124tn expected to change hands over the next two decades, a significant share will go to women. But new research reveals that many female wealth holders often hesitate to invest their inheritance. And those that do, frequently depend on informal financial guidance. This highlights a deficiency in personalised financial advice, leaving many women without the tools to make their wealth work for them.

Lavanya Chari, Head of Wealth and Premier Solutions at HSBC, notes that women are set to become the prime beneficiaries of the ongoing “Great Wealth Transfer”. This trend is driven by the increasing number of women inheriting and managing family wealth, as well as their longer life expectancy compared to their spouses. “Women now control about 33% of the world's wealth”, says Chari. “As an industry, I don't think we've done enough to take into account women's financial goals and behaviours.”

Women are missing out 

Research from Capital Group shows that, when it comes to managing their inheritance, women exhibit comparative caution. In a global survey of high-net-worth individuals (HNWI, with at least $1mn in net worth and inheritances ranging from $100,000 to $50mn), women on average put 14.3% of their inheritance into savings, compared with 11.1% for men. 

Women also invest significantly less than men – 26.4% versus 36.2% – which represents missed opportunities. “When women invest for the long term, they actually do extremely well,” Chari says. “But because many haven’t done it before, they’re less confident about getting started.”

That lack of confidence can lead to regret: 40% of women say they wish they had invested more of their inheritance, compared with 30% of men.

Women look to informal financial advice

The study also finds that women are twice as likely to seek investment guidance from informal sources than professional advisers. This reflects a historical bias in the financial advisory industry towards catering to male clients. 

Facing a lack of engagement, many women are turning to social media platforms that offer supportive, community-driven spaces for learning and sharing. They also follow “finfluencers”, who often focus on topics that women feel are more directly relevant to them, such as purpose-driven investing, financial independence and budgeting.

But as their financial needs become more complex, women may naturally transition to seeking professional advice, says Alexandra Haggard, Head of Asset Class Services at Capital Group. She notes that women tend to take a more holistic approach to investing, often focusing on the purpose behind their investments and how those choices align with their life goals. Research also indicates that women prioritise investments with positive social and environmental impact and are more likely to engage in philanthropy. “Research shows that women require a more personalised approach,” Haggard explains. “Advisers need to be attuned to their long-term horizons and needs.”

AI can help advisers personalize their offering for women

AI is expected to revolutionise financial advisory by tailoring investment recommendations to individual preferences and risk tolerances. AI can also automate routine tasks, freeing up advisers to focus on face-to-face interactions and attending to the specific needs of their clients. Women are becoming alert to the possibilities that AI offers: 68% believe AI and other technologies will make advice better by driving deeper personalisation and easier access, compared with 59% of men.

Of course, advisers seeking to harness these AI-based tools will need to tackle the issues that come with them, including ensuring data privacy and avoiding "hallucinations" - false or misleading AI outputs - in order to maintain client trust. There's going to be a lot of safeguards around making sure the customised data conforms with country-specific law, regulations and privacy. Financial institutions with strong regulatory expertise and accountability structures will be better positioned to navigate these challenges.

Building the confidence of women investors

Financial education will also be vital to instilling confidence in women investors. Advisers can deliver targeted financial coaching for women, giving them a platform of investing fundamentals, for instance through personalised investing timelines and outcome-based simulations.

As the Great Wealth Transfer unfolds, the wealth management industry is subject to ongoing generational and cultural shifts, and the growing influence of women in wealth. Advisers need to make sure they are ready to take women investors where they want to go. “At Capital Group, we’re partnering with wealth managers to deliver thought leadership, events and education to help their female clients to invest confidently and achieve long-term wealth,” says Haggard.

“The onus is on the industry to adapt and innovate to serve the evolving needs of their clients during this period of immense change,” Chari concludes.