Consumer spending drives approximately 70% of US GDP and the more discretionary spending rises, the better the economy and risk assets are likely to perform. There are signs that is happening this year.
Granted, it’s just one metric, but the Consumer Discretionary Select Sector SPDR (NYSEARCA: XLY), the largest consumer cyclical exchange traded fund, is higher by 31.36% year-to-date. That’s not the end all and be all of economic strength and there are ample weak spots in this economy, but sturdy consumer spending trends represent a positive theme.
For registered investment advisors, consumer spending data is important on multiple levels, not the least of which is data confirming women have done a lot of the heavy lifting in recent months. Thanks to the “Barbie” movie, Taylor Swift’s wildly successful Eras Tour and a record breaking one-month concert series courtesy of Beyoncé, women spent big this summer and made important contributions to the broader economy.
On the surface, advisors don’t need to get carried with how clients – men or women – indulged this summer. However, female spending habits portend opportunity with those clients and those in the prospective camp because data indicate women are grappling with the some financial insecurities.
Women Spending, But They Have Financial Concerns
While women spent mightily this summer, they’re also concerned about their personal financial outlooks. Eight in 10 admit to pondering their finances on a monthly basis while 52% said they frequently think about money, according to a new Morning Consult poll.
“This raises questions about whether women’s high-octane summer has come because of financial security or in spite of it — and it carries implications for financial services providers looking to best serve a demographic that has great influence over consumer spending,” notes the research firm.
Point is women are earning more and taking on larger roles as financial leaders of households while exerting more influence over macro spending trends. All of that should spell opportunity for advisors. However, women face a variety of circumstances that make relationships with financial advisors vital. Problem is, many of those women either don’t have those relationships or are not fulfilled by them.
To be sure, there is an element of psychology in working with any client and that’s true of women because a case can be made that some are too worried about their financial pictures.
“Women are likely better off than they think they are. Even if many aren’t convinced they have the money to make large discretionary purchases, nearly 7 in 10 women (68%) surveyed by Morning Consult were ‘very’ or ‘somewhat’ confident they could pay their monthly expenses in full,” adds Morning Consult. “And they don’t seem to be going into debt to do so: Just 13% are considering opening a new credit card, and only 16% reported overdrafting.”
In recent years, demographic and generational factors have taken on added importance in the financial advisory business and those trends are highly applicable when discussing spending and personal finace with female clients.
“Gen Z women post higher financial well-being scores than any other generation except baby boomers, who have had the longest to accumulate wealth that might insulate them from economic volatility,” concludes Morning Consult. “But their actual progress toward other financial markers is relatively mixed. Some of this could stem from their age: Gen Zers are more likely than older adults to live with parents or have fewer big expenses, which makes discretionary spending easier. But it could also stem from an attitude to money that differs from other generations’ as part of their overall value alignment toward self-indulgence and living in the moment.”
That’s confirmation that the conversations advisors have with women in Gen Z should be and need to be different than what’s discussed with their Gen X and millennial counterparts.