Steering a Path to Financial Success for Women

Jessica Cutrera, President, Leo Wealth

As women earn, inherit, and control more money and assets than ever before, they are emerging as the new face of wealth, on track to control approximately US$30 trillion of assets by 2030[1] in the US alone.

But there are challenges. The gender pay gap and longer life expectancy put increased pressure on women to meet the same financial goals as men. These challenges necessitate smart planning for a longer future with potentially fewer assets, requiring saving a greater percentage of income or working  for longer. This is further complicated for women who live and work abroad, with financial and estate planning made more difficult by complex tax regulations.

What does this mean for women living overseas, and what are the best approaches for wealth protection, accumulation and planning?

Complex Challenges for Women in Wealth Planning

Over the last few decades, women have been increasingly taking the lead in making financial decisions for themselves, for their families, and for their businesses. Their investment decisions are generally influenced by their income, education, age, and marital status.

Whether it is supporting their own post-retirement lifestyle, endowing a family business, leaving a legacy for the next generation, or making a social impact, women tend to invest to support a specific objective in their life or on the basis of their own values.[2] In the contemporary world of investment, this means they are more likely to favor ESG investments that outperform traditional investments and can create a positive impact.[3]

Beyond investment, tax planning can be an extra challenge for globally mobile women, who must be acutely aware of local tax rules and those of their home country to avoid unnecessary pitfalls. Such concerns are especially profound for those with ties to the US, who should avoid foreign investments as US tax rules can make reporting it punitive and complicated[4].

Estate planning is another certainty on the financial planning journey. With a longer average lifespan, women are more likely than men to independently manage their finances and be responsible for the ultimate disposition of their own wealth, and the wealth of their significant other. Despite its great importance, estate planning remains an overlooked task in financial planning for men and women alike.

Holistic Wealth Management Approach for Success

For a long time, the wealth management industry has fallen short in providing what women needed. The gender bias in the financial services industry, often manifested by the generalized wealth management products and services on offer, typically does not meet the need of international women, with many women feeling they are being underserved by the wealth management industry. While products “designed” for women are on the rise, the actual gender distinctions are, at most, superficial and some are still guilty of reflecting outdated assumptions about women’s roles and interest in managing their financial affairs.[5]

Women, therefore, need to seek financial advice that provides a holistic approach to investment planning to support their long-term objectives and create a long-lasting positive impact for themselves and their loved ones. Advisors must understand the challenges women face in managing cross-border assets and the different milestones in their lives. The most successful advisors are usually other women who have been through similar situations.

The ultimate mistake in wealth planning is thinking that your plan won’t change over the course of the years. Even the best plan could be impacted by circumstantial situations and yield unwanted consequences, such as distribution of assets to unintended beneficiaries, excessive tax liabilities, or in some cases, the forced sale of assets to pay other liabilities. Proper planning and regular review are essential to guarantee that assets are protected and preserved in a tax-efficient way, and in the case of estate management, they go to their intended beneficiaries to minimize family turmoil during an emotional time.

The complex challenges women face across the financial planning spectrum are well-known, and yet the discussion on how we support women to tackle these challenges still does not get the attention it deserves. Although important for all women, this is a particular issue for women and Americans living abroad, who face the additional complications and complexities of dealing with unfamiliar rules and regulations. These challenges also make women more likely to anticipate and plan for various life stages and key events. Robust financial planning can be key to overcoming the many challenges women face every day, it is best to start early and act on sound advice.