The population of women investors is rising, with millionaires making up a large and growing market segment. High-net-worth (HNW) women tend to have different needs and expectations than their male counterparts but aren’t getting the level of service they want. This opens up an opportunity for you: By better understanding their specific needs, you can be more successful at reaching these HNW investors and earning their loyalty.
What Do HNW Women Think of Advisors?
In general, most millionaire women recognize the need for planning. In two double-blind studies of more than 1,000 investors in 2019 and 2020, Fidelity explored HNW investors’ attitudes, behaviors, and preferences as they relate to investing, wealth management, and advice. The number who work with a financial advisor is on the rise, and they are slightly more likely to partner with an advisor than millionaire men and nonmillionaire women. Still, there are some generational differences.
Older millionaire women. Making up 74 percent of women millionaires, according to Fidelity Investor Insights Studies, investors in the boomer or older generation usually rely on professional and personal referrals. They are primarily concerned with an advisor’s reputation, expertise, and personal characteristics. Once they find an advisor they like, they tend to stay: 50 percent of those surveyed have worked with their advisor for more than 10 years; of those, almost half have had the same advisor for more than 20 years.
Still, older millionaire women report lower levels of service than their male counterparts. It’s perhaps not surprising, then, that they don’t actively promote their advisors to others.
Younger millionaire women. These investors are more likely to use online sources than referrals to find an advisor. They are less concerned with a firm’s reputation, focusing instead on product and service offerings.
Younger millionaire women are also more likely to change advisors, work with multiple advisors, and promote their advisor to others—even though they also report low levels of service.
How to Win Over HNW Women
Based on its study, Fidelity mentions some simple behavioral changes to address the shortfall between what women want and what they’re getting:
Thank them for choosing you as their advisor. Let these clients know you appreciate their business and recognize that they have many financial planning options.
Ask whether you’re meeting their financial needs. Every meeting should end with a simple question: “Did we satisfy your goals today?” Doing so will ensure that these clients have ample opportunity to articulate any outstanding needs.
Strive to improve their experience. While this may sound simple, it’s clearly not the experience many women have with their advisors. Truly indispensable service will set you apart from your peers.
In addition to behavioral changes, consider these practical recommendations:
Get active online. Make sure you regularly engage with prospects and clients on social media. Remember, younger female millionaires prefer to find their advisors online.
Deliver relevant content. It’s not enough to be active on social. You must also post relevant planning content that demonstrates your skill and knowledge level, as well as product-related content to showcase what’s available on your platform.
Create a client advisory board. There may be no better way to get real-time feedback from your target demographic than by including them on your client advisory board.
Segment your book of business. As the Fidelity study shows, different types of clients prefer different approaches. Segmenting your business allows you to identify your client types and develop processes unique to each.
Connect through multiple outlets. Many advisors find their ideal clients by holding seminars on topics important to their target audience. But you could also branch out by volunteering, becoming a board member of groups that are important to you, approaching local businesses about working with their employees, and hosting social events.
Create an incentive program to drive referrals. Do your satisfied clients talk about you to their peers? They may be more inclined to do so if given an incentive.
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Knowing What She Wants
Once you’ve successfully landed your millionaire client, how do you meet her specific planning needs? As with any client, understanding her goals, developing a sound investment strategy, and evaluating a retirement income plan are important. More so than your lower-net-worth clients, however, HNW clients have complex tax and estate planning needs.
Based on U.S. Census data, the rate of married women has steadily declined over the past few decades while the rate of women choosing to never marry has sharply increased. In addition, the percentage of divorced women has risen over time, and the percentage of widowed women has remained fairly steady.
Bottom line? Chances are you will have a single woman client searching for guidance. Let’s look at key planning considerations for single women and HNW clients in general:
Review beneficiary designations for divorced or widowed clients. This step is especially needed when the client’s spouse was named as a beneficiary. In recent years, at least 26 states have adopted “revocation on divorce” statutes that automatically revoke beneficiary designations naming a spouse in the event of a divorce. These statutes apply even if a state adopts the statute after a beneficiary designation is made, as confirmed by the Supreme Court in Sveen v. Melin.
Plan for remarriage. A single HNW woman with children from a prior marriage may consider incorporating a qualified terminable interest property (QTIP) trust into her estate plan. Commonly used in second marriages, a QTIP trust gives surviving spouses access to income from the trust assets (and the right to live in any real property held by the trust) during their lifetime, but a surviving spouse may not sell, transfer, or bequeath the assets. Instead, at the surviving spouse’s death, the assets would pass to any children.
Plan for portability. Ensure that your widowed clients are working with an attorney to manage the probate process and that they file an estate tax return in a timely manner to claim portability of any of their deceased spouse’s unused exemption amount. This is particularly important right now, given that we don’t know what will ultimately happen to the estate tax exemption.
Let’s take a look at an example to see how this might play out.
Your client, Tammy, just lost her husband, Jeff. Tammy and Jeff had $13 million in total assets, $8 million of which were in Jeff’s name. Because the estate tax exemption is currently $11.7 million, no federal estate tax would be owed at Jeff’s death, and Tammy now owns the full $13 million in assets. The estate tax exemption is set to revert to the pre-Tax Cuts and Jobs Act level in 2026, which should be somewhere between $6 million and $7 million.
If Tammy passes away in 2026 with that $13 million net worth, and the exemption is $6 million, her estate will pay taxes on $7 million.
If, instead, she elects portability on the $3.7 million of Jeff’s unused exemption, her exemption would total $9.7 million, and her estate would only owe taxes on $3.3 million.
For your planning purposes, be sure to ask widowed clients whether they elected portability at their spouse’s death and, if so, how much of their deceased spouse’s exemption was unused.
Understand the ART of planning. The number of women using assisted reproductive technology (ART) to conceive a child is on the rise, and planning is crucial. A properly drafted estate plan can account for just about any parenting scenario—especially to name a guardian for that child in the event your client passes away while the child is still a minor.
States generally treat legally adopted children and children born through ART using the parents’ own genetic material in the same way that naturally conceived children are treated. There can be some variance, however, when a sperm donor is used. Without proper estate planning, a known sperm donor could make a parental claim to a child if the mother passes away.
So, for clients considering freezing their eggs or embryos, make sure that they understand, with the help of an attorney, what will happen to that genetic material if they pass away or, for your married clients, what happens to that material in the event of divorce.
Brush up on social security rules. Statistically, women outlive men. And because the rate of divorced women is rising, having a strong understanding of spousal, survivor, and divorced spouse social security benefit rules is a must.
It is especially important to understand the implications of remarriage on those benefits. Surviving spouses who remarry before age 60 may lose access to their deceased spouse’s benefit, and ex-spouses who remarry at any age will lose access to spousal benefits.
Familiarize yourself with the alphabet soup of trusts. Because of the complex tax and estate planning needs of HNW clients, it’s important to familiarize yourself with trust planning strategies, including:
Irrevocable life insurance trusts
Spousal lifetime access trusts
Intentionally defective grantor trusts
Qualified personal residence trusts
Grantor retained annuity trusts
Charitable lead and charitable remainder trusts
Earning the Loyalty of HNW Women Clients
HNW women’s needs are diverse, whether they are single, divorced, widowed, childless, or planning to divide their inheritance among multiple children and grandchildren. By understanding the planning needs of this growing population, and adjusting your marketing efforts accordingly, you can improve your ability to find HNW women clients who would be a good fit for your practice. Then, once you understand each client and her unique needs and expectations, you’ll be ready to develop a strong relationship from the start.
Unless otherwise noted, all Fidelity information is from the 2020 Fidelity Investor Insights Study. The Investor Insights Study was conducted during the period October 15 through October 24, 2020. It surveyed a total of 1,181 investors, including 560 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding employer-sponsored retirement assets and primary residence), age, and income levels.
The 2019 Fidelity Investor Insights Study: The Investor Insights Study was conducted during the period August 6 through August 26, 2019. It surveyed a total of 2,026 investors, including 1,102 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding employer-sponsored retirement assets and primary residence), age, and income levels.
Commonwealth Financial Network® does not provide legal or tax advice. Please consult Commonwealth’s (or your firm’s) compliance policies on any sales or marketing ideas prior to using them with clients.