Goldman Sachs Asset Management: Retention, Accumulation, Expansion: Three Ways Women Are Key Clients

By 2020, women are expected to command more than £58 trillion in wealth globally¹, and financial advisers who lack a strategy to serve women effectively are likely to fall behind. Female clients can improve the AUM and revenue outlook for a financial adviser’s business and firms must work hard to harness the power and potential of this crucial client group. 

Retaining a woman’s business when she inherits money managed on behalf of existing clients can have a significant impact on the bottom line. We set out to quantify this impact using our proprietary financial advisor business outlook engine. We calculated that retaining just one more of every 5 heirs when clients pass away results in a 5% revenue boost for a typical UK adviser. Note that this 5% revenue boost from retention comes with less effort and lower customer acquisition cost relative to attracting and onboarding new clients. 

For a £100m practice earning a 1% fee on AUM today, this 5% revenue boost benefit grew annually in pound terms, up to £37,000 per year of additional revenue by year 10. Some may question whether such a small-looking improvement is worth pursuing? We all know that a 1% portfolio return difference compounds tremendously over time, so let us consider an example from the world of sport. Novak Djokovic worked to improve his percent of points won from 49% to 55%. This 6 percentage point improvement made the difference between being a merely good player and the world champion he is today. 

The broader picture here is that £21.3 trillion is expected to move into women’s hands over the next 40 years through inheritances alone². Remember that incremental changes in how you work with women may make all the difference in terms of capital accumulation. While the top of the sales funnel often gets more attention, advisers often underestimate the degree to which the assets slipping out the other end undermine their efforts to grow their businesses.

Inheritances aside, over the last decade, female earnings across the globe have increased by 82%.³ In developed countries, female labor force participation has increased by 8 percentage points since 1990, while male participation has sagged by 1.5 percentage points.⁴ Further, women control 70-80% of global consumer spending, either directly or through their influence.⁵ 

Thirty years ago, the prevailing way of interacting with a couple may well have been asking the husband to “take this document home for your wife to sign”. Effective advisers have since strived to involve women much more substantially. This is one reason why we developed GSAM (Goldman Sachs Asset Management) EMPOWER, a framework aimed at helping financial advisers address the specific needs of women investors.

Using Monte Carlo simulation techniques, we studied how the passage of one year impacts an adviser’s book of business – distributions are paid out to retired clients, fees are taken, and some clients die, among other impacts. We observed that the 70 to 80 year-old client segment was particularly accretive to the adviser’s current revenue because those clients often have accumulated large asset bases, and at least one of the spouses is likely to survive to remain a client the following year. Often, the spouse that survives is the woman.  

Many advisers have shared with us their frustration that there does not seem to be a clear correlation between the number of happy clients they cultivate and the referrals they receive. We believe the way out of this quandary is with relationship-based marketing – when a client advocates for his or her advisor. Based on our experience working with financial advisers globally, our Business Strategy team assembled this distribution of clients’ propensity to make referrals.

 

 

As natural networkers, women tend to be skewed more to the right-hand side of this distribution. According to a recent report by Kantar, women are twice as likely to refer their financial adviser as men are.⁶ We encourage advisers to analyse their book of clients to find key “advocate” personalities. Describe your ideal client to these women and let them help unlock your expansion with referrals. 

With successful careers, inheritances, and consumption patterns helping to drive female assets to all-time highs, financial advisers must take stock of their current service offering. To borrow a phrase from tennis, failing to serve women effectively would be an unforced error for financial advisers. 

Footnotes:
1. The Economist, March 2018

2. Center for Talent Innovation, May 2015

3. World Economic Forum, 2018

4. World Bank, 2019

5. Bloomberg, January 2018

6. Kantar report “Winning Over Women” on UK financial services organizations