Monthly Archives: December 2016

Is Women’s Wealth Growing Faster Than Men’s Wealth?

Is Women’s Wealth Growing Faster Than Men’s Wealth?

One study says yes. Two major factors may be influencing the trend.

BY GREG OLIVER

Picture the women of the world growing wealthier. It’s happening right now. Research from the Boston Consulting Group affirms this development. BCG, a leading business strategy advisor, says that as the world grew 5.2% wealthier between 2015 and 2016, women’s wealth grew 6.6%. In total, women own about $39.6 trillion in assets worldwide, and possess a 5% greater share of global wealth in 2016 than they did in 2011.1

What are some of the reasons behind this shift? One reason is that more women are becoming successful business owners. Census Bureau data from 2012 (the most recently available year, at this writing) shows women owning 36% of U.S. businesses, a 30% leap from the levels of 2007. As the ranks of middle market companies rose 4% from 2008-2014, the number of women-owned or women-led middle market firms soared by 32%.2

This has all taken place even though female entrepreneurs typically start a business with 50% less money than their male peers, according to research from the National Women’s Business Council. Perhaps most impressive has been the growth of businesses owned by Latina and African-American women. American Express OPEN found that from 1997-2015, the number of U.S. firms owned by Latinas increased by 224%. Simultaneously, the number of businesses owned by black women rose by 322%. African-American women started up companies at six times the national average during those 18 years.2,3

Beyond the business world, there is a second major reason for the increased net worth of women. They are acquiring or inheriting significant wealth from parents, spouses, or relatives, some of whom are millionaire baby boomers or members of thriving business-class households in emerging economies.1

In reference to the latter phenomenon, the net worth of women who live in Asia-Pacific nations other than Japan has risen by an average of 13% a year since 2011. Globally, assets under management owned by female investors grew 8% per year in that time.1

The BCG white paper projects that women may grow even wealthier by 2020. It forecasts that by then, women will control $72.1 trillion of assets around the globe, thanks to their collective wealth increasing by about 7% a year.1

GREG OLIVER
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Citations.
1 - time.com/money/4360112/womens-wealth-share-increase/ [6/7/16]
2 – forbes.com/sites/geristengel/2016/01/06/why-the-force-will-be-with-women-entrepreneurs-in-2016/ [1/6/16]
3 – blackenterprise.com/small-business/black-women-business-owners-outpace-all-other-startups-six-times-national-average/ [3/4/16]

Is the Fiduciary Standard a Plus for Investors?

Is the Fiduciary Standard a Plus for Investors?

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Will it make a difference in the quality of the advice they receive?

BY GREG OLIVER

Next year, the Department of Labor is scheduled to introduce new rules regarding retirement planning. Under these rules, any financial services industry professional who makes investment recommendations to workplace retirement plan participants or IRA owners in exchange for compensation will be considered a fiduciary.1

What does that mean? It means that this person has an ethical and legal duty to provide advice that is in your best interest.1

Many investment and retirement planning professionals have reacted to the DoL’s move with “We already do that.” After all, the suitability standard – something very close to a fiduciary standard – has been in place in the financial services industry for decades, and numerous financial services professionals already serve their clients as fiduciaries.

Detractors think the new rules amount to overkill, and they argue that an-across-the-board fiduciary standard will not make a difference in the quality of retirement planning or investment advice that retirement savers receive. The legal implications of the new rules may send retirement planning fees higher, and another effect might be that fewer retirement savers have access to these services.2

So, what positive difference could a fiduciary standard make? It could lessen the potential for conflicts of interest creeping into an advisor-client relationship.

The suitability standard emerged in the brokerage industry decades ago. It guides a financial services professional to recommend only investments that are “suitable” for a particular client, given his or her age, income, goals, and net worth.

The DoL sees a shortcoming in the suitability standard. Suppose there are multiple “suitable” investments that a retirement planner could recommended to a retirement saver (a common occurrence). Under the suitability standard, what is to prevent a retirement planner from suggesting and recommending the investment that could result in the most compensation for him or her, over the others? What if the alternate investment options are never mentioned? If this sort of thing happens, is the investment recommendation being made truly one in the client’s best interest?

In theory, the installation of a wide-ranging fiduciary standard takes the potential for conflicts of interest out of retirement planning. It also encourages even more retirement planners to charge fees for services, rather than earning some or even all of their incomes from commissions.

This encouragement will likely sit well with most investors, who naturally want less potential for conflict of interest. It is also sitting well with many retirement planners. While exemptions to the rules can be made and while the rules will not apply to existing investment assets, the implementation of a broad fiduciary standard for retirement planning is good news and reduces potential dissonance in the relationship between the retirement planner and the retirement saver.1

GREG OLIVER
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Citations.
1 - money.usnews.com/money/blogs/planning-to-retire/articles/2016-04-08/the-new-retirement-account-fiduciary-standard [4/8/16]
2 – nytimes.com/2016/04/07/your-money/new-rules-for-retirement-accounts-financial-advisers.html [4/7/16]