Contributed by Barclays Wealth and Economist Intelligence Unit
Contributed by Barclays Wealth and Economist Intelligence Unit
The broader significance of wealthy individuals should not be underestimated. As leaders, innovators, facilitators and pioneers, the wealthy often represent the most dynamic sections of society, while as investors they tend to be the most prescient, passionate and incisive individuals you can meet.
The Barclays Wealth Insights reports, developed in partnership with the Economist Intelligence Unit, provide a comprehensive picture of what it means to be wealthy in the 21st century.
Based on global research with over 600 mass affluent, high net worth and ultra-high net worth individuals and the views of a panel of wealth experts, drawn from academia, industry and financial circles, each Insight report paints a picture of the private world of this influential group, by analysing their shifting demographic profile, priorities and preferences.
And by uncovering the complex social and psychological dynamics – including gender, family and social interactions – that define the behaviour and outlook of the wealthy, our reports provide a compelling snapshot of the deeper trends that shape the future of society at large.
Bulletin Board is very pleased to provide an extract from the second in a series of The Barclays Wealth Insights reports. For more information or for a copy of the entire report, please email: [email protected].
Affluence of Women is Increasing
From luxury goods manufacturers to private banks, the commercial world is starting to sit up and take notice of women’s growing spending power, and is now redoubling its efforts to tap into this money-spinning market.
The commercial world is starting to sit up and take notice of women’s growing spending power, and is now redoubling its efforts to tap into this money spinning market
A recent study from Datamonitor, an independent research company, finds that the gap between the wealth held by male and female millionaires is narrowing. In 1998, the average male millionaire in the UK was worth £2.71m (US$5.42m), while the average female millionaire owned just £1.28m (US$2.56m). By 2006, women had caught up considerably, with the average female millionaire worth £1.97m (US$3.94m) compared with £2.96m (US$5.92m) for men.
This increase in female wealth has not been limited to developed economies. In 2006, the female paper tycoon Zhang Yin was listed by the Hurun Report as the wealthiest person in China, with an estimated US$3.4bn. Even in Saudi Arabia, a country in which women can neither vote nor drive a car, women are making their presence felt in the higher reaches of business. In 2005, Nahed Taher became the first Saudi woman to head a large investment bank when she founded the Gulf One Investment Bank in Bahrain.
More generally, it is clear that women around the world are becoming an economic force with which to be reckoned. Since the 1950s, the proportion of the female workforce in Sweden, the UK and the US has risen from one-third to two-thirds. In South-east Asia, a region that has in recent years enjoyed impressive economic growth, women hold two-thirds of jobs in the export industry. Perhaps most strikingly of all, a recent report in The Economist suggested that, over the past decade, the increased employment of women in developed countries has contributed much more to global growth than China.
The combined wealth of Britain’s 100 richest women in 2007 is £33.27bn
The flip side of wealth creation is spending, and women’s spending habits are being watched more closely than ever by companies that are keen to tap into this rich vein of opportunity. With some studies suggesting that as much as 80 per cent of all purchasing decisions are made by women, the importance of developing products and services that meet their needs, combined with clear and effective marketing, cannot be overstated. This has been recognised for a number of years by luxury brands, and even by the traditional male bastions of cars and gadgets. Other industries, such as financial services, have been slower to catch onto this trend, but as women increasingly flex their muscles in the global economy, this is a trend that can only accelerate across the entire business world.
Drivers and Goals of Wealth
The traditional sources of wealth for women have been inheritance from their parents or deceased husbands, or financial gain from the divorce of a wealthy husband. While these methods of achieving wealth status are still evident, a recent global survey conducted by the Economist Intelligence Unit on behalf of Barclays Wealth of 600 affluent, high net worth and ultra high net worth individuals indicates that this perception is becoming outdated.
The vast majority of those surveyed – both men and women – have earned their money through their job or the ownership of a business, although in both cases, the proportions are slightly higher among men. Less than one-fifth of women, and just over one-sixth of men, have generated significant wealth from an inheritance. Meanwhile, marriage is a significant source of wealth for around one-quarter of women, compared with just one in 10 men. Looking in greater detail at the research, one finds notable differences between the regions. For example, the proportion of women who say that marriage is a significant source of wealth is highest in the Middle East and Africa, at 30 per cent, and is lowest in North America, at 19 per cent.
Dr Rebecca Harding, Senior Fellow in the Foundation for Entrepreneurial Management at the London Business School, and Director of Global Entrepreneurship Monitor (Gem UK), corroborates this general shift in sources of female wealth. “A lot of the female wealth is still coming from divorce,” she says, “but younger women are becoming more independent and going through the career profile more swiftly.”
As women generate more of their own wealth from income and investments, an unfortunate side effect is that we may see divorce levels increasing. Recent research by Randall Kesselring, Professor of Economics at Arkansas University, in which the finances of more than 100,000 women were examined, found that, with every US$20,000 that a woman’s wealth increased relative to the family’s overall income, the chances of marital break-up rose by one per cent.
As well as climbing the corporate ladder with greater ease, women are also becoming increasingly common in the world of entrepreneurship. Holly Sargent, Senior Associate Dean for Advancement and Senior Director for University Women’s Studies at Harvard University, points out that when women do start a business, it often does not have the sole purpose of generating wealth. More often than not, there will be a social element to their entrepreneurship, which is often as important, if not more so, as their need and willingness to create wealth Dr Harding agrees, and notes that women at home who have time and resources behind them are likely to go into the labour market by being entrepreneurial. “Their businesses are more likely to be family orientated, less commercial, and more socially, or ‘gap in the market’ based,” she explains. “A lot of innovative products are created around female-orientated gaps in the market.”
Women and personal finance
Many experts contend that women are far less likely to take risks with their money, whether in their personal finance or business affairs. This perception is borne out by the research, which finds that, in the past three years, more men than women have invested in vehicles that are generally considered to be at the riskier end of the financial spectrum, such as hedge funds, private equity, structured products and derivatives. Men are also more likely to have invested in stocks and shares.
Amy Nauiokas, Managing Director and Head of Brokerage, Barclays Wealth, says that this analysis fits with the typical female customer profile. “Our female investors tend to be between 45 and 65, and they tend to have a more cautious approach to risk,” she says.
[Research] shows that property is an important investment vehicle for many women around the world. In North America and Europe, property was second only to stocks and shares as the preferred investment over the past three years, and it also scored highly for women in Asia and the Middle East. Large increases in property values since the 1990s have encouraged many women to channel their funds into bricks and mortar, and have also been significant in terms of wealth creation. Income from property rental or the sale of property is cited as an important source of wealth for 20 per cent of women in our survey, and 31 per cent say that they plan to invest in property over the next three years.
The survey suggests that women in North America have a propensity to be most sophisticated in terms of the breadth of their investments. The continent has the highest proportion of women that invest in stocks and shares, bonds, property and personal pensions. Women in the Middle East, however, are more likely to invest in commodities, such as gold, and hedge funds, than those in any other region. European women, meanwhile, are most likely to invest in alternative assets, such as antiques and art. Furthermore, when asked how they would choose to spend a cash windfall, 25 per cent of women cited investment or personal purchase of property if they were to receive $2m.
However, women tend to place less importance than men on their income from investments, and from property rental and property sales. “I keep coming back to the fact that women tend to have purpose-driven investing,” says Ms Nauiokas. “They will alter their approach as they reach their goal and will often act to protect what it is they have built up. Male investors tend to look for income and growth.”
Women and a Wealth of Opportunity
Women’s wealth and economic influence around the world is on the increase. What’s more, this report reveals a clear shift from the traditional view of women’s prosperity deriving from inheritance and marriage. It points out that more women are increasingly making their money through entrepreneurship and business.
Despite this progress in socioeconomic standing, our findings show that women are still more cautious and display less confidence towards taking risks with their money, whether in personal finance or business matters. This is evident in their investment behaviour. Their focus tends to be more purpose driven – seeking to protect their assets – while men display greater confidence, professing a deeper
knowledge of personal finance matters.
The challenge for financial institutions is to take notice of these differences and recognise that a one size fits all approach to how they communicate with their clients doesn’t work.
Over the past 10 years the opportunity for women to increase, invest and enjoy their wealth has grown significantly. With predictions that the ‘female wealth explosion’ is set to expand further during the next decade, organisations targeting wealthy women are encouraged to respond to the innovation from the
financial industry in its endeavours to connect with this powerful market segment.
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