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A ‘Secular’ Bull Market for Women and Wealth, Say BofA-Merrill Economists

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A new report from Bank of America-Merrill Lynch economists  Ethan Harris (left) and Neil Dutta suggest that a ‘long on women’ investing approach will benefit companies that cater to women, and that women themselves will not only continue to drive consumer spending, but that they will have more to spend.

The Dec. 20 report finds that women’s earnings will recover quicker than men’s coming out of the economic crisis, partly because the labor market recession affected women less than it did men. “Men and women went into the recession with unemployment rates at roughly the same level,” the report notes, but now “the unemployment rate for women is almost two full percentage points below men.”

Women are experiencing other economic benefits, despite what the report calls the “gender wage gap,” including a higher rate of college graduation—three women graduate from college for every two men and have earned 50% of the bachelor’s degrees awarded over the last decade. When combined with an “ongoing shift away from a manufacturing-based economy to a knowledge-based one,” and that women account for the majority of the labor force in nine of the 10 occupations that the Bureau of Labor Statistics predicts will add the most jobs over the next eight years, prospects for women’s continuing economic growth are bright, the report says.

The gender wage gap, the authors report, is also narrowing. Over the past five years, Dutta (left) and Harris write in an economic commentary titled ‘Who Wears the Pants?’, real median income for women “has risen roughly 1% at an annualized rate. For men, it has contracted 1.5% at an annual rate.”

The report admits that women already control the majority of household

spending, but Dutta and Harris argue that “their increasing earnings potential means stronger purchasing power relative to men.”  

Investing, and Advisor, Implications

Dutta and Harris suggest that one way for investors to take advantage of these demographic changes—“women are better educated, more likely to live on their own, have better job opportunities, and will enjoy a stronger earnings potential relative to men”—trends they also expect to continue, is to screen for companies that cater specifically to women in consumer discretionary stocks.

While advisors were not mentioned in the report, other research and reporting in the consumer media and in AdvisorOne and Investment Advisor magazine, among other places, suggest that those financial planners and investment advisors who are particularly attuned to the needs of women as clients are more successful.

An example of that approach appeared in the August 2010 issue of Investment Advisor. The cover story, called “Majority Report” and written by IA columnist Olivia Mellan (left), explored a new venture called Direction$, the brainchild, Mellan wrote then, “of three experienced, visionary financial planners—Eleanor Blayney, Peg Downey, and Elizabeth Jetton—who want to help advisors make their offices feel safer and more attractive to women, to help women "get in the door" emotionally, and to facilitate the kind of dialogue that will encourage women to do preventative financial planning for themselves and their loved ones.”

In the September issue of Investment Advisor, we interviewed long-time IA and Wealth Manager contributor Susan Hirshman (left) upon the publication of her book for women called “Does This Make My Assets Look Fat?”  Inspired by too many advisors who she heard referring to a client couple as “my client and his wife,” Hirshman suggested in the article that for advisors to better serve women clients, “the key is listening, being observant, and checking in, asking if they understand what you're saying, and have them reflect back to make sure that they understand you.”


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