Preparing for a new financial era: Women and wealth

Christine Kashkari: By 2050, women are expected to control most U.S. financial assets. That shift matters for financial professionals and individual investors alike. In this episode, we'll discuss the critical pivot that providers, advisors, and plan sponsors need to make to better serve women and how families can have more productive conversations about wealth transfer across generations.

Welcome to Season 2 of Better Vantage by Vanguard, a podcast series hosted by custom content from WSJ and Vanguard. I'm your host, Christine Kashkari, Editorial Director at WSJ Custom Programming. And I'd like to introduce my co-host in this series and our resident expert, Joe Davis, global chief economist at Vanguard.

Joe Davis: Christine, great to be here.

Christine: Great to see you again, Joe, even though you're outnumbered today.

Joe: Let's go.

Christine: Joining today to discuss how the financial concerns of women will reshape advisor practices and the behavior of families when it comes to investing is Fiona Greig, global head of Investor Research and Policy at Vanguard and Janel Jackson, head of the Bank and institutional for Financial Advisor Services at Vanguard.

Janelle, Fiona, welcome.

Fiona Greig: Great to be here.

Janel Jackson: Thanks for having us.

Joe: Well, I'm really excited today, Christina. We're talking about just a historic wealth transfer in this country, over $120 trillion, five times U.S. GDP. So what I'm excited about is, Fiona, some cutting-edge research in terms of the analytics. And Janel, you work with advisors in the top advisor practices around the world. So, I look at this from two sides. So, if you're in the audience, there's the woman investor and the family side, there's also the advisor side. That's why I'm looking for it. So, two sides, and then perhaps two dimensions, because maybe there's even some insights as a male, as a husband, and a father I could take away from too. So again, that's why I'm really excited about today's episode.

Christine: Fiona, you are with us in Season 1, where we were focused on the concept of mass retirement of baby boomers, which acts as a catalyst for what we're talking about today, which is the historic wealth transfer and who the majority of those assets are going to: women. So, can you talk about why this is important and what are the implications for that?

Fiona: Absolutely. Well, Joe, you hit it. $120 trillion worth of wealth—some of wealth that is going to transfer. It's going to transfer. Why? Because we have this baby boomer generation that is retiring. More people turned 65 last year than ever before. And when that happens, if you think about a married couple, the woman has a 70% chance of outliving her husband. And if she does, she's going to live 10 years longer, a full decade. So that means she's actually in the hot seat twice. So, wealth transfers typically in two phases, first from spouse to spouse, so from that man to his wife. Then second, from mother to child, adult children, typically.

Now, why this is so important, not just for families but for the industry at large, is that there's a shocking statistic that 70% of widows change their financial advisor.* They weren't somehow in the conversation. I could not unhear that statistic when I first heard it. So, it tells us very clearly as an industry that the status quo needs to change. It needs to change for women, and women are now in the protagonist seat for the family's financial story. That's why it matters.

Christine: Janel, are women ready for this? Can you talk about some of those issues that women uniquely face when they're building and preserving wealth?

Janel: As a woman answering the question, I want to say, "Heck yeah, we're ready!" But I do feel like there are a lot of opportunities for women to take on a greater role in managing their portfolios. And if you think back to why we're all here and why we're having this conversation... So, women's saving rates tend to be lower than men.

Fiona's done a lot of great research on this. That's due to things like changing careers, relocating due to a spouse's career, the role that they play, and maybe taking a step back from their careers due to caregiving needs.

And we're seeing a lot of opportunities for advisors to play a bigger role in leaning in and helping women as they're thinking through opportunities to save and invest, given some of these issues that have just prevailed. Markets have changed around women a lot. We're seeing more women have more opportunities—that gap narrowing. So this next generation of investors have a lot of opportunity, and advisors should be there to meet them where they are.

Christine: Fiona, your research shows that most women don't consider themselves investors, despite data suggesting that they are actually excellent retirement investors. How do they think about themselves?

Fiona: We ran a big survey of Vanguard clients, Vanguard customers, and we asked them a very simple question: Do you see yourself as an investor?

So about three in 10 men don't see themselves as an investor, and more than half of women don't see themselves as an investor.

Now this was a surprise. Why? Because these are all investors. They either have a 401(k) account or they have a retail brokerage account. They are a client of Vanguard. They have money in the stock market. They are investors.

Now, we asked them the next question. "OK, so what financial identity does resonate with you?"

And the top identity was saver. Men and women alike, everybody sees themselves first and foremost as a saver, which is awesome. That's the thing that powers our wealth.

And yet, the other hand of this story is that actually women make phenomenal investors. Yes, Janel's right, of course, there's a gender wage gap there, stops and starts in people's career. But when you control for income, when you control for those gender gaps in income, we actually see that women are more likely to participate in the 401(k) plan in their retirement savings. They save a higher share of their income, and they are more disciplined investors. They are less likely to trade. They are more likely to save in that target date fund and stay the course. So, with Vanguard, our principles of investing, they are the ideal disciplined saver and investor. So there's a lot of strength to build upon in terms of women being ready for the moment. We have to save before we can invest. So they see themselves as savers.

And the other thing we asked them was: When did you first learn about investing? Where did you first learn about investing? And it was really surprising. So actually, everybody named the workplace as their top place that they had first learned about investing. So, employers think about that. You're in a really important seat in terms of building that financial identity.

Janel: And when I think back to starting my career, my employer sponsored plan was where I really got exposure to the element of compounding. I remember stocks being so inexpensive at one point during the global financial crisis. I could go get lunch or I can invest in the markets. And so at that opportunity, it helped me see and understand the power of compound growth. So now, all of my decisions are: Am I saving, am I spending, am I investing?

Fiona: Now we see that women have about $0.80 on the dollar for every dollar that men have in their individual retirement account. When we look at boomers, then women have about $0.60 for every dollar that men have in their IRA account.

So why is this?

Well, it's a lot of what Janel spoke about: gender wage gap stops and starts in people's careers. But it also goes to show that maybe there's an opportunity to help people save more consistently. And we see a lot of opportunity every single time somebody switches jobs, we see saving slowdowns. We see people move money out of the 401(k) plan and into an IRA, and it lands in cash, and it stays sitting in cash.

We looked at: When did people open that IRA? We saw that women got a later start to the tune of two years. They were 32, typically, when they started that account versus 30 for men. We looked at how consistently do they contribute over years, and women missed a couple more years than men in terms of contributing to that IRA over time. So all of these things add up, bit by bit by bit, into these gaps that are much wider over time, but they start on even footing.

So there is a lot of opportunity in terms of how advisors can help people, and how family members can lean in and say, "Hey, just because you're taking a break in your career, if the family can sustain it doesn't mean you have to take us a break in saving for retirement."

Christine: What can women do earlier than when they start their career, in terms of how can their families support them?

Fiona: Some of the research we're uncovering in terms of just how influential early conversations and experiences are. So we asked people: What were your early financial conversations about? And people who said that it was about things like compounding or investing, they were decades later much more likely to say that they identified as an investor, that they felt financially confident. So, too, people who had early investing experiences.

So, grandpa gave me $200, opened an account, and put it in Vanguard total stock. That would have been incredibly influential for that child to have received an investment early on and watch it compound over time.

So, I actually opened an account for my daughter, and we invested $200 early in the year, and of course, immediately went down. But now it's about it's $230. And she's like, "Oh, over the course of just 12 months, Mom, nice work." And I'm like, "It wasn't me, it was the market."

Joe: You interact a lot with advisors, right? You must see those that are excelling. And if they're excelling, what exactly are they doing, so that I can be on the lookout for that. And then others can learn from that. Anything come to mind?

Janel: What we're seeing advisors do differently today is really think about humanity as a differentiator. I think in the past, we talked a lot about asset allocation and portfolio construction.

Joe: Alpha, beta…

Janel: All of those great terms. What we're seeing now is the advisors who are leaning more into the family and more into planning are the ones who are driving the most success in 2026.

A couple of weeks ago, I was having this conversation with my parents, as we were talking through their estate plan, and they referenced their financial advisor a few times, who I don't know. And I have my own financial advisor. So we've got to bring the family together. Otherwise, advisors are going to lose business. I think you've talked a little bit about some stats around that.

Fiona: The 70% stat that widows change their advisor, but I'm sure daughters and sons may also pan out that way.* I was sharing some of this financial identity research with a financial advisor and he said, "Fiona, for so long I have thought of myself as sort of a mechanic. I'm a mechanic of a car. I'm delivering alpha. I'm making the engine go smoother and faster."

Joe: It's a portfolio.

Fiona: Exactly, a portfolio. And perhaps rather I should be thinking myself as a travel agent, as: Where do you want to go? Who's in the car? Where do you want to stop along the way? This is about a financial journey, not what's under the hood. And in some ways that's the stuff that should be left to the advisor and to the asset managers, but may not be the most important conversation and may not be the way to build that emotional, trust-based relationship that you're talking about.

Janel: And the whole family, the kids don't want to know about what's happening with the engine. They want to know where we're going. And are we there yet?

Fiona: Are we there yet? Exactly!

Joe: Any lessons from the research, Fiona, and your engagements, Janel, "Hey, what I personally could be doing better?"

Fiona: Obviously, just bringing the women in your life into this conversation. Make sure they know where all the keys are to all of these accounts. Just basic hygiene. And I say that, Joe, not because I'm sure this is table stakes in your family given what you do, but I also say it just because, as we age, we experience cognitive impairment. Our minds start to go. One of the first places we see that show up in people's lives is in their financial life. We're seeing it in the data in three ways. People with a little bit of cognitive impairment, they can miss debt payments. They are more likely to miss required minimum distributions. They are more susceptible to financial fraud, to scams.

Obviously, we're all thinking about wealth transfer and passing that wealth with wisdom, but we also want to protect the family wealth. And so that would be kind of table stakes—make sure that long before that moment comes that people know how to navigate.

Janel: Just thinking about women feeling like they're not in this alone. And that's the call to action for advisors. So, how are advisors prepared to meet women where they are? And again, the most successful advisors are taking on the family. They're not just talking to the patriarch who may be the head of the household. They're talking to the whole family. And maybe they're bringing more women into their practice as advisors. Maybe they're working with more women as partners, be it CPAS or accounting firms that they're working with, estate planning lawyers. So how do you make women feel more welcome and more supported, and then continue through the same process that you would with a man and talk through their portfolio and talk through their plan, but make them feel like they are part of your practice?

I love the point that you made about the role of an advisor and where women are being primary decision-makers for the household. And we're going to see that more and more. And sometimes that's by choice. Sometimes that's due to divorce. Unfortunately, sometimes it's due to widowhood. But if an advisor waits for any of those one scenarios before they develop that relationship with the family, it will be too late.

Joe: I just thought there was taboo. You don't talk about finances, right? So family, right. But I think seriously, that's what I'm hearing: earlier, more often. But they're uncomfortable at times.

Fiona: Uncomfortable and emotional.

Joe: The data says we have to get there.

Fiona: Yeah, I remember a long walk I went on with my dad, and he was talking to me about all the big things in my life, but also his plans for his wealth. And I was in tears by the end of the conversation because actually this is a conversation about his death, and I just wanted to be with Dad. There are many reasons why we don't have these conversations, because they are tough. They're tough.

Chrisine: Is the way that you communicate to a woman versus a man that needs to be different as well.

Janel: I wouldn't say it's the way that you communicate, but I think that having a deep relationship where there's lots of emotional trust tends to result in better outcomes. So, it can't just be business, business, business. This is an emotional experience like you just shared. And if you're going to have somebody that you can pick up the phone and call to have that conversation, it has to be somebody that you're comfortable being vulnerable with. Without that type of relationship, maybe it's okay for to just be business, business, business sometimes with men, but with women, it's more than that. How do you help them see that you're there to help? How can you be comforting in a time of need for a conversation that might evoke emotions that you may not be comfortable with, but you're going to have to meet them where they are.

Christine: So, we were talking earlier, as you were mentioning that women are terrific retirement investors. And that's partly because I think they're more stable and more consistent in their approach.

Joe: As she’s looking at me!

[Laughter.]

Christine: But on the other hand, what kind of coaching do you think women need to… some people might say it's too risk-averse and to have the power of compounding you have to overcome some of that.

Janel: I think this is where the role of a model portfolio or an advisor being focused a little bit more on the asset allocation side of things comes into play, and it's helping them see the long-term benefit. I think we're getting a little bit away from the risk-aversion being a woman's thing. I think it's just less of this like response to volatility and more seeing strategically the benefits of being invested over longer periods of time. But, I do think there are still, probably in this market for sure, opportunities to put more cash to work.

Fiona: Yes, yes, that's a really good point Janel. One thing we see across men and men both, but women in particular, is cash drag. Especially in individual retirement accounts, which is a long-term investing account, a lot of times people put money in or roll money into that account, and they don't realize that they have to take a second step and invest it. And they can choose something—a model portfolio like a target date fund or something pretty basic—but does the trick. So once they do that they're on great footing, and they make for great traders. Why? Because they actually stay the course. When we look at our most volatile trading days, women more than men stay the course. So, they're very disciplined.

Joe: Boom.

Fiona: But, cash drag is a problem. Realizing that opening the account or funding the account does not mean that you're invested. And so to all you listeners out there, I would say, "Go check out your IRA and see if you have cash in your IRA," because I did.

Joe: So again, takeaways, one maybe two max. So, whether it's for the advisor, the end investor: Big takeaway.

Fiona: Build your own financial confidence. Insert yourself into the conversation. If you don't know the basics, there are no dumb questions. Do you know how much your family's paying in rent? Do you know who's the beneficiary of this account? Do you know how to get access to that account? Know all the details, whatever it takes to build your own financial confidence, that's your right.

Janel: Talking to women is knowing that you don't have to go at this alone. But for advisors, you have to be able to meet women where they are. So, bringing in humanity is a differentiator. Establish that emotional trust and move beyond just asset allocation and portfolio construction to behavioral coaching, wealth management, tax planning, and estate planning.

Christine: For me, this has been really enlightening. I think my main take away is: Have those conversations. Uncomfortable as they may be, have them early. That's my takeaway.

Thank you so much, Fiona and Janel, for being with us today.

And please join us again for our next episode of Better Vantage by Vanguard.

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Notes:

*Source: DuQuesnay, Blair, "Women Shall Inherit the Power of the Purse," Financial Advisor, June 3, 2019. 

All investing is subject to risk, including possible loss of principal. Target-date investments are subject to the risks of their underlying funds. The year in the investment’s name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The investment will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A target-date investment is not guaranteed at any time, including on or after the target date. 

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