WOMEN are beginning to control a substantial portion of global wealth, yet they remain an underserved segment of the wealth management industry.

However, this is changing. Wealth management and financial planning advisory firms have woken up to the power that women investors wield.

Boston Consulting Group’s Global Wealth 2016 report, which was based on a survey of 130 women wealth managers, says women held an estimated 30% of global private wealth last year and expects the number to grow strongly in the next five years.

“In 2015, women held an estimated 30% of global private wealth, with the share slightly higher in developed markets. Their wealth, which is expected to grow 7% annually (above the global average of 5.9%) in the next five years, is increasingly self-generated — although much of it originates from inheritances and legal settlements,” says the report.

Mariam Jaafar, partner and managing director of Boston Consulting Group in Singapore, says the key drivers of the surge in women’s private wealth are greater gender equality and the growth of total wealth in their respective regions due to economic development.

Mariam, a co-author of the report, says Malaysia is expected to see the same trend going forward. “I don’t have specific data for Malaysia [on women’s private wealth growth], but I expect the trend to be the same [in line with the global trend]. That is because more women are better educated. They enter the workforce and assume executive positions.”

According to several research reports, an important growth driver of women’s wealth is the fact that more of them have become entrepreneurs and are today owners of very profitable companies.

Areca Capital Sdn Bhd CEO Danny Wong (picture) says the number of professional women is growing in Malaysia and they often assume executive roles in companies. Those who quit their jobs to take care of their families, he adds, often take charge of the household finances. As decision makers, these women are financially savvy and they invest in themselves and their children for the long term.

“There is a growing demand for financial advice, especially as the cost of living increases, as they want to know how to better plan their finances to preserve their wealth,” says Wong.

An underserved segment

Despite their growing wealth, women investors are underserved, says Mariam. Banks and wealth managers around the world tend to overlook this segment. She says only 14% of the wealth managers surveyed had conducted some form of marketing (such as seminars, events or forums) aimed directly at current or prospective female clients in the past year. Only 2% said they considered women to be a separate client segment and had adapted their service model accordingly, such as having trained and dedicated relationship managers (RMs) for their female clients.

Some banks and wealth managers fail to understand the needs of female investors and do not adopt the right approach when dealing with them. Mariam says they should learn how women investors tick instead of just looking at their net worth and providing services and financial products accordingly. 

“[Women] rely a lot more on their friends and family, as well as their peers, when choosing a bank. For example, only 10% of women listed their RMs as the top source of investment advice. This compares with 30% who listen to family and friends as their primary source of advice,” she adds.

“Women are also more relationship-driven and seek trusted relationships. More than 50% of women want their RMs to know them on a personal level. 

“At the same time, digital is not the primary driver of choice. But it does impact satisfaction levels. A high degree of digitalisation can enhance the quality of information transfer and help build relationships and tailor messages.”

Female investors tend to have more conservative investment goals and objectives than men, says Mariam. Stable returns, instead of higher returns, are a major factor for them when choosing a bank. Hence, financial institutions need to enhance their understanding of what women investors want and build a relationship with them. 

“They should invest in training RMs to cultivate better and more productive connections with their female clients, invest in marketing campaigns that are tailored to women’s needs and discuss the challenges women face. They should also increase referrals among friends and peers of female investors to attract them, as well as invest in new digital channels that can help build relationships and provide an understanding of what women want,” she says.

A focus on high-net-worth women

Going forward, asset management firms are expected to focus more on high-net-worth women investors as the wealth of the middle class is being squeezed by the rising cost of living, says Areca’s Wong. The growth of retail funds’ assets under management (AUM) last year partly reflects this, he adds. 

Wong estimates that the total AUM of both retail and wholesale funds grew just 0.3% to about RM670 billion as at May. Most of the growth came from wholesale funds, which are aimed at emerging affluent and high-net-worth investors. Retail funds, which target the middle-income group with a monthly salary of RM5,000 and below, have hardly seen any AUM growth. 

“Retail funds have grown a bit, mainly due to the Employees Provident Fund scheme that allows its members to invest a part of their saving in unit trusts. But the growth [of retail funds] is expected to be slow this year,” he says.

Lee Heng Guie, executive director of Socio-Economic Research Centre Sdn Bhd (a think-tank of the Associated Chinese Chambers of Commerce and Industry of Malaysia), says the wealth of the middle class has been squeezed in the past two years by the rising cost of living, including higher education and medical fees.

“Yes, wages have increased 5% to 5.5% based on a survey done by the Malaysian Employers Federation. Wage growth is higher than the Consumer Price Index, of about 2% per year. But this does not take into account the rising education and medical fees,” he points out.

Lee says the implementation of the Goods and Services Tax last year and the cuts in subsidies (including public transport, cooking oil and electricity) announced by the government in Budget 2016 are expected to increase the financial burden of the middle class. 

“The government’s policy is currently focused on helping the bottom 40% (with a household income of less than RM3,000), and the middle class has not benefited much. I would say that going forward, the wealth of the middle class will be squeezed further,” he adds.