What women’s growing wealth means for banks
While I’ve witnessed myriad innovations in the financial services industry throughout my career, there is one area where banking has been slower to evolve: investing in women.
Up until the last few decades, the financial world imposed nearly impenetrable barriers that prevented women from reaching the highest levels of an organization. This was the case both in terms of hiring women and offering products. But these days, equality has become a widely touted priority for businesses and positive gains have been occurring within the industry and the regulatory community. In 2014, Janet Yellen became the first woman to chair the Federal Reserve, for instance. While not banking specific, the number of women on the boards of Fortune 500 companies has grown to 20%, up from 15.7% in 2010.
While I’m optimistic we’re moving in the right direction, we still have work ahead, both in the services we offer and whom we hire — not only because prioritizing equity is the right thing to do, but because the business stakes are equally compelling.
Nearly 60% of the women in this country participate in the labor force. Furthermore, more women than men are enrolled in graduate school, and women are earning more advanced degrees than men. These trends, highlighted in a study by the Council of Graduate Schools, signal that more women with advanced degrees are entering the workforce. Studies also show that women control more than half of the personal wealth in America, own nearly one-third of the nation’s private businesses, and are the sole or primary breadwinners in 40% of U.S. households.
When I consider saving and planning for the future, I think about my two daughters, who are both in their 20s. They have opportunities that weren’t available to their grandmothers. As a proud father, I hope they will be high achievers throughout their careers. I hope they embrace opportunities to save and invest for the future. As a professional banker, I hope the financial services industry is where they and their friends turn for advice.
But this outcome can only happen if the financial services industry invests more in women.
My daughters — like most of their contemporaries — deeply care about what companies do for communities. Indeed, a study by Omnicon Group’s Cone Communications revealed that 70% of millennials say they want to spend their dollars with companies that support the causes they favor.
As millennials increasingly invest and save as they age, they will seek banks that actively work against inequality. Financial institutions should have the same expectations as the age demographic — banks can’t succeed unless the communities they serve succeed alongside them. But in reality, there is more work to be done to prove that point.
See the most recent Most Powerful Women rankings:
Although women continue to increase their share of private wealth, only a small percentage of financial institutions are reaching out to this growing market. Meanwhile, fewer than one-third of financial advisers are women. We, as banks, must help change those statistics as they have led to a gap in the market.
Research shows women tend to be better investors than men, earning more annually on their investments. Women also tend to save more and take fewer financial risks than men, which can yield a distinct advantage in retirement planning. But according to figures from the U.S. Department of Labor, women traditionally have not begun saving as early as men. Fewer than half the women in this country contribute to 401(k) plans, for instance. Companies should engage more with women about their retirement options in part because females typically live longer than males and make up nearly half of this nation’s workforce.
While some banks are responding to women’s wealth management needs to help fill this gap, we must dedicate more energy and resources to reach this important market. We can and should do better. Furthermore, promoting equity outside the company should be mirrored by parity within. Not only must we market our services to women, we must create engaging workplaces that are supportive of female employees. In so doing, we will help attract and retain the most talented bankers.
By becoming a more equitable institution, customers benefit, employees are empowered and banks get better. By investing in women, we create a culture that rewards us all.
This post is part of an ongoing series examining diversity issues in the banking industry. See previous posts by Maria Vullo, Malin Malmström, and Eric Arthrell, and visit American Banker’s Women in Banking page.