When wealth advisors talk about the core ingredients of wealth planning, the conversation is often loaded with investing terms, such as alpha, risk and factors, but all too often there's no mention of passions, values and relationships. However, the key to adding value as an advisor is to understand how a client’s lifestyle and personal goals play into their financial plan, beyond just generating returns.
The conversation around a client’s personal and financial priorities may not look the same today as it did even a few years ago. Data shows dual-income households are increasing, making up two-thirds nationwide and more than 55% among the affluent demographic (households with income of at least $150,000). These evolving roles at home and in the workplace may directly impact a client’s perception of their wealth and priorities.
To explore the impact of this trend, FlexShares commissioned a study to learn about gender nuances in the money perspectives of this new generation of high-net-worth (HNW) primary breadwinners (individuals who contributed at least half of their household's annual income). Responses came from more than 460 men and women nationwide across nine targeted U.S. markets. Each participant met a list of criteria, such as household income over $200,000, assets of at least $1 million liquid (not including 401k or primary residence, lowered to $250,000 for ages 35-39).
The survey revealed that HNW women are defying many historical stereotypes as they take on the role of primary breadwinners. However, they’re not the only ones adapting to new gender norms in a dual-income world. Their male counterparts may also be shattering gender assumptions, a feat that might impact their expectations around the wealth management process too.
The Holy Grail of Work-Life Balance
In a contrast to common expectations, executive men reported taking on a relatively large share of responsibilities in the home. Male respondents told us they managed over half of their families' child-rearing responsibilities (49% men vs. 44.6% women). Men also said they took on the same majority portion of responsibility for elder or adult dependent care (50% men vs. 41% women). We believe these changes are an outcome of the growing prevalence of dual income households among affluent investors. They reflect the realities of keeping a household running when both partners work.
As a result of these shifting responsibilities, while men reported feeling comparatively more positive about their role as primary breadwinners than women (54% vs. 32%), men indicated less comfort with the modern day juggle of work and life. About a third of men vs about 20% of women said they feel guilty when they are working and not at home and when at home and not working.
The point is not whether HNW men actually change more diapers or pack more school lunches than their partners, but how they feel about it, instead. Delivering a unique client experience requires understanding the perceptions and emotions that factor into a client's role as primary breadwinner, which are equally as important as the realities of their lifestyle.
For instance, men revealed a greater inclination than women to outsource duties at home from caregiving, to household management and financial duties. These findings may lend support to how men truly feel about the magnitude of their personal obligations. With this in mind, advisors should note the outsourcing costs that can impact a client's present and future financial picture.
Risk Profile and Portfolio Goals
Also contrary to pervasive gender stereotypes, we learned that male HNW primary income earners were twice as likely to see themselves as conservative investors than their female counterparts — 31% of men versus 14% of women told us they preferred the lowest level of risk when seeking investment returns. Similar to what we’re used to hearing, men were more likely to identify as aggressive investors (11%) than women (7%). However, when you add in those who identified as moderately aggressive it was nearly a dead heat between the genders – 27% of men vs. 26% of women who were willing to balance potential risk with higher potential returns.
We also uncovered other nuances when it comes to the impact of gender on finances. Both genders appear to be planners, but among top current financial priorities, 70% of men listed “providing for future generations" while 69% of women indicated “being prepared for the worst." This data suggests that these men may be equally, if not more, enticed by sustainable investing opportunities and resources for eldercare and college prep.
Adapting to Opportunity
Based on the results of the survey, we encourage advisors to consider how clients perceive their experience as high earning primary breadwinners, rather than relying on traditional stereotypes.
Take time to discover how clients' changing personal obligations, time constraints and stress factors might affect their attitudes towards money. Ask about work demands (hours, travel requirements, etc.). Note how clients' household duties are managed. And above all, when clients talk about “the worst-case scenario" and “the future" dig into what that really means to them and offer options to address these major preoccupations.
Keep in mind that times are changing and regardless of gender, every investor has specific needs and perceptions. The time you invest in discovering what makes them unique, may just help advance your engagement from being transactional to a long-lasting valued relationship.
David Partain is Head of Marketing at FlexShares Exchange Traded Funds.