Recently Whitney Wolfe Herd, founder, and CEO of Bumble, made headline news following the companies successful IPO as a rare example of a self-made female billionaire. In many senses, her story signals a new reality within private wealth where many are looking to set new norms. Herd leveraged her own personal experience of sexual harassment in the workplace to create a product that empowers women in their ability to make the first move.
She likewise overcame the biggest hurdle of any female entrepreneur: funding. Through a smart partnership, she proved that tech is not the exclusive preserve of men, and instilled a culture of “for women, by women” uncovering the profitability of such a market.
Changing realities and norms
Women wealth owners are a growing market that has not yet been tapped into. In 2018, 35% of millionaires were women with their earnings reaching an estimated $24 trillion in 2020. The expectations are that around 37% of HNWIs (High Net Worth Individuals) might be women by 2030, with control of nearly 20% of the total global wealth market. Their position is particularly strong in the Asian business sector where they stand at the helm of families’ businesses with 96% of those being active wealth creators.
Entrepreneurship has always been the primary source of wealth creation. Until the beginning of the 21st century, real estate, oil production, and other success stories from the third industrial revolution represented the main sectors producing wealth. Yet today, successful entrepreneurs are largely emerging from the entertainment industries – celebrities, athletes, artists – or tech with data being the new oil. Therefore the hurdles are different than before for women. Even if access to funding remains outrageously limited with less than 3% of Venture Capital funding in 2020 dedicated to women-led start-up, entertainment role models from such as Beyoncé, Rihanna, and Kim Kardashian are paving the way towards wealth empires created by women, refusing to play into existing roles of ideals.
As Whitney Wolfe Herd signed Bumble’s IPO with her toddler on her hips, she knowingly or unknowingly shaped the new image of women empowerment in the wealth space. This very act alone will encourage new generations to speak up, leverage new tech opportunities, and become the “CEO you’re parents always want you to marry”.
According to Forbes Billionaires List, among the 227 women included in its ranking, 56 were self-made – in 2019 alone, 15 self-made women entrepreneurs were added all from Asia. More than half of Asia’s female billionaires are self-made, compared to a global average of 20%. Self-made women are a growing segment – the growing faster than the overall billionaire’s segment. They have a very different profile from those women who married into or inherited we self-directed, keen to create a family office as a continuation of their entrepreneurial spirit in their personal life, leveraging strategic outsourcing, combining intellectual curiosity, and maintaining a laser focus on results.
Inheritance is indeed the second source of wealth, with the data being pretty clear. We are in the midst of a massive shift of wealth to women with 90% of women anticipated to be the sole financial decision-maker in their household at some point in their life. For instance, over 30% of Asia’s family businesses will go through a generational change in the coming 5 years.
Thanks to highly mediatized sexual harassment scandals, global activism movements, and growing individual awareness for the conduct, gender roles are slowly but surely evolving throughout the entire society. Whatever the culture, this has a massive impact on marriage and divorce for women. As women become more educated, women are entering into marriage with more assets and a great earnings potential. The prenuptial agreements are becoming attractive for women who seek to protect their premarital assets and future career or business projects.
Women outlive men by an average of five years and over 75% of women are widowed at an average of 56. Then, an estimated 70% of women who are widowed change advisors within a year. Indeed, women have a tendency to leave financial decisions to their spouses and are not prepared to manage the sudden wealth that occurred through divorce or widowhood. Specific education and support are needed to establish that trust and understand their situation in order to prevent any devastating financial consequences.
On an inheritance level, the women who might soon come into wealth belong to the millennial generation –generation Y, born after 1977. This will be sure to create new investment practices, dramatically different from previous generations. They have a strong desire to align personal and investment values and to be comfortable with disclosure and transparency. They also seek simplicity and comprehensibility, are open to extra-financial sources of returns, and have a desire for bespoke solutions.
Disruptive opportunities for women
This new reality sets new norms that the private wealth industry should be willing to adapt to. The rise of wealthy women – whether entrepreneurs, investors, or heiresses – is accompanied by some radical and less radical changes within the private wealth sector itself.
One can witness some moderate signals of change in key leadership roles in private banking, finance, and business globally. More and more women are present on boards of FTSE-100 (30% women), there is a global push for more diversity from financial backers, and gender diversity is gaining weight on B-schools ranking criteria. Even the biggest corporates understood that diversity is key to innovation, enhance reputation from a legacy perspective, and ensure a future talent pool. In the United States, family offices are a very traditional and stable industry in terms of human resources, due to a very low employee turnover rate. However, the vast majority of management positions are held by men (59%). A recent study (Blackburn, 2017) showed that only 8% of CEOs are female, however, an advantageous pay gap, while they are managing fewer assets, suggests that only the most skilled women are reaching the top. For other top management positions like CIO and COO and CFO, the gender pay gap is disadvantageous to women who are still in charge of much fewer assets than men. It also shows that family offices are slower to integrate gender diversity in their practice, even despite the fact that there are a number of academic papers proving the outperformance of diverse teams.
Yet fintech and wealthtech are on the rise, challenging and even disrupting the traditional wealth management organizations, with their focus on women, bringing them information, education on wealth literacy, and empowering digital tools to encourage females to become investors. As of today, the wealth gap is even more starker than the pay gap and only 53% of millennial women are saving for retirement compared with 71% of millennial men.
Yet research shows that women are consistently doing this better than men – at 0.4% higher returns making a huge difference over time. They are also stronger investors thanks to better savings habits, have better risk tolerance awareness, and better able to stick to their plans.
Today there is an obvious gap between the next generation’s expectations and the private wealth industry value propositions. Wealthtech might be successful through the creation of a new class of female investors that have been neglected and overlooked by the traditional stakeholders. The latter are tempted to create services and departments dedicated to female leaders, however, this could be considered would be short-term to a deeply engrained patriarchal leadership style.
Towards an integrated & balanced leadership
As 2020 has shaken the world and with fundamental assumptions being challenged, many female leaders have been celebrated for their ability to successfully manage successfully the crisis. Several research studies have argued that women are better leaders during a crisis leveraging better interpersonal skills. Men could perhaps perform equally well if such interpersonal skills and integrated leadership were incorporated. The current leadership model that is currently mainstream is based on a gender-biased system that has been ingrained since childhood. assigning a gendered. Mothers, fathers, teachers, and more broadly role models impact beyond the scope of the education of NextGen’s girls and boys. As the system has so far privileged a “command and control” leadership style, men have been favored on the basis that they behave in this way. This has resulted in a pervasive imbalance in the entire value and decision-making chains. The recent and continuous breakthrough of “female leadership” is simply offering the offset of this imbalance. Soon we may be able to talk interchangeably about male and female leadership and instead use the term “integrated leadership”, similar to integrated governance. To reach that much-needed balance, leaders must do the necessary inner work to change their leadership style.
2020 reveals the volatile, uncertain, complex, and ambiguous digital world we live in. The ability to manage decision-making in such environments requires both men and women to step out from this duality, harness their inner vulnerabilities and strengths in order to achieve a sense of wholeness, as well as an inclusive and systemic mindset.
The new generation of wealthy individuals, who are born or educated in a globally interconnected world, are leading this trend toward good conscience. With the deterioration of the wealth imbalance, reconsideration of international institutions, and combined with the power of social media, the wealthy clients are now more and more in the limelight. They are pushed to move beyond their opacity– and lethargy–, and be held accountable to public relations scandals. We should ask ourselves, what kind of leadership do we want to address those challenges?