The future of wealth management is female, so why isn't the present?

The wealth management sector is experiencing remarkable expansion, particularly in the United States; in 2023, client assets under management were expected to hit $58 trillion, according to Statista. But the wealth management industry has yet to overcome a very basic but pertinent challenge to future growth — the gender gap.

Wealth management remains a highly male-dominated space. At the beginning of 2023, only 12.5% of fund managers, for instance, in the U.S. were women, according to Morningstar. Astonishingly, this number has hardly budged since 2013. Furthermore, by the end of last year, only about 26% of the funds in the country were managed by a team that had one or more women as a member.

This imbalance, which reflects the underrepresentation of women in the wider wealth management industry, is especially striking given a Goldman Sachs study that found in 2020 that funds led by female or mixed teams performed better for the first time than funds led entirely by men.

READ MORE:  The rise of women in financial planning: How it's going

So, what is the reason behind this continued lack of change in this situation? Historically, traditional gender roles have associated finance and investment management with "masculinity." The notion that investing is a man's job continues to prevent women from entering this sector, even though the numbers tell a different story. 

According to a recent Fidelity study, female investors do better than their male counterparts, earning 0.4 percentage points more on average. Research has also found that women are more efficient long-term investors, focusing on the "buy and hold" approach. Contrary to stereotype, women are less susceptible to making rash, emotional decisions regarding the stock market than are their male counterparts.

Past time for action

While we should not have to explain it over and over again, women bring valuable perspectives to wealth management, contributing to the overall success and effectiveness of firms. By 2030, women will control two-thirds of U.S. wealth for the first time in history, according to McKinsey — clear evidence that the world needs more female wealth managers. 

Yet presently, female financial advisors account for less than a quarter of our industry of wealth management. So, with statistics continually pointing to the obvious — that women are better investors and have the capacity to become excellent asset and wealth managers — what is keeping them from getting into the business and then rising to the top? 

Well, for starters, young women professionals in the wealth management sector don't have enough role models to look up to. When women are unable to find female co-workers and supervisors, they find it harder to confidently self-advocate, particularly since there probably isn't anyone inside the boardroom who has their backs. For instance, most women don't receive the same level of development opportunities from the companies that hire them. Subtle forms of discrimination like lack of support, and more overt forms like pay inequality, can, even unintentionally, create a hostile or unwelcoming environment for women in finance.

We are past the phase of having conversations about the changes in workplace culture.The problem is dire and deep-rooted, and wealth management companies need to take active steps like allocating larger capital to women-led companies and allowing more women managers to handle high net worth families, individuals and foundations. 

Take, for example, BlackRock and its tangible diversity target and goal to make U.S. boardrooms at least 30% diverse with women and members of other underrepresented groups. We need more such actions that will proactively include more women in the asset and personal wealth management spaces and improve representation across the industry.

Add to these arguments the growing interest in socially responsible investing. Environmental, social and corporate governance funds captured $51.1 billion of net new money from investors in 2020, according to Cerulli, with much of that influx coming from women investors. So it's not just the profits; women can bring about genuine and sustainable positive changes in the wealth management sector.

Diversification is a core concept in the world of investing and wealth management. Upholding this spirit of the trade, encouraging more women to pursue careers in wealth management, providing equal opportunities for advancement and fostering an inclusive culture are vital steps toward achieving gender equality in the industry. Ultimately, it's essential for creating a more robust and sturdy wealth management framework.