Shes Young And Potentially Rich. Is She A Prospect?
Young American women could inherit hundreds of billions of dollars in the coming decades, and those women are forming their impressions about financial services advisors and companies today.
Is there any way for wealth advisors and the companies they represent to follow the example of the mass marketers and reach young women of means now, before bad decisions about trusts, insurance, retirement planning and other financial matters give them more than their fair share of gray hair?
Financial services experts interviewed for this article say the savviest wealth advisors already are trying to build relationships with the daughters and granddaughters of existing clients.
Breaking through existing rings of advisors is much tougher, but the experts interviewed say go-getters can increase their chances of success by knowing their stuff, getting close to potential prospects and understanding that managing wealth is about more than money.
“Women feel theyre supposed to keep their emotions and money separate,” says Alexandra Lebenthal, president of Lebenthal & Company, New York, a unit of Advest Inc., Hartford, that sells municipal bonds to individual investors. “This is about peoples feelings and family.”
Lebenthal knows about the subject from firsthand experience: Lebenthal & Company was founded by her grandparents, Louis and Sayra Lebenthal, and she began working for the firm when she was 4, by putting reinforcers on client records that would be stored in 3-ring binders.
Barbara Stanny, the author of “Prince Charming Isnt Coming: How Women Get Smart About Money,” is living proof that many young women from affluent families may need more advice than their loved ones realize.
Stanny, who now runs personal finance education programs for financial services companies and their clients, is the daughter of the late Richard Bloch, the “R” in H&R Block Inc., Kansas City, Mo. Bloch managed his daughters money, and he told her not to worry about money because her husband would manage it. Then she married a man who gambled much of her money away. “I got tax bills for over $1 million,” Stanny says. “Thats when I knew I had to get smart.”
Affluent families may be more likely today to educate their daughters about money, but many young women are almost as confused as women in previous generations were, Stanny says.
Sizing up the young female wealth market is difficult because conducting surveys of young women and girls from affluent families is difficult, but researchers hired by a unit of Allstate Corp., Northbrook, Ill., found that 16% of young, “Generation X” women, or about 4 million U.S. women born between 1965 and 1978, expect to inherit more than $100,000. If those GenX women are correct, they could inherit more than $450 billion. Women born after 1978 could inherit at least $900 billion.
That estimate could be far lower than the actual total: More than 338,000 U.S. households had a net worth of at least $10 million in 2001, according to a 2004 draft paper by Edward Wolff, a New York University economist.
Many “trust fund babies” already have access to some trust income.
So far, young women who have inherited or might inherit large sums of money have gotten little attention from financial services marketers. Their mothers and grandmothers still have large, unmet planning needs, and the typical advisor may not know many wealthy young women.
At most practices, the typical young female client is a successful professional in her 30s or a woman who has received a substantial divorce settlement, according to Susan Stewart, president of Charter Financial Group Inc., Washington.
In addition, its hard to know how much wealth families really will transfer, says Deena Katz, a baby boomer who is president of Evensky & Katz Wealth Management, Coral Gables, Fla.
“Our parents had a lot more money,” Katz says. “Were going to have less money to pass to the next generation.” Many boomers who could afford to leave more than $10 million to their daughters would rather give a higher percentage of their assets to charity, Katz says.
But Stephen Rothschild, president of Rothschild & Sale, St. Louis, and first vice president of the Million Dollar Round Table, Park Ridge, Ill., says most of his wealthy clients would like to leave at least $5 million to each of their children, and a survey report from the Spectrem Group, Chicago, shows that heads of about 75% of U.S. households with at least $1 million in investable assets want to transfer most of their assets to their children.
Are young affluent women different from comparable men?
Although each individual is unique, Spectrem research confirms that women still tend to feel more confused about their finances, are more conservative about investments and depend more heavily on advisors than comparable men. Younger women and girls also face concerns about what might happen if they marry men who are dishonest or bad with money, experts say.
In the real world, most of the firms marketing to young women already advise their families. In the wealth planning market, “its important to view the whole family as an opportunity,” says Stacy Braun, senior vice president of marketing at AXA Financial Inc., New York.
“We borrow the prestige of having done business with the parents,” says Rothschild, the St. Louis advisor.