Women as the new face of wealth with Sara Prince, McKinsey
In this free-flowing conversation, The Lola founder Martine Resnick and McKinsey’s Sara Prince, discussed a number of subjects centering womxn and their role in the world of wealth.
Introductions
MR- Tell us more about you, what’s your story, how did you get to where you are today?
SP- I grew up in Atlanta. I grew up going to schools where I was always in the minority. Part of that was driven by the fact that my parents were divorced, and my mom, who was a teacher, was constantly seeking to make sure that we lived in communities where the public schools were excellent. I ultimately did well enough to go to Duke University where I studied Economics and Japanese. I had the opportunity to participate in this program called Sponsors for Educational Opportunities and was placed at Morgan Stanley for a summer internship and ultimately got an offer to return full time. I traded bonds there for a handful of years before realizing I wasn’t having the impact in the world and making a difference that I had envisioned. It was very clear that I had a certain financial level of life that I wanted to maintain. I went back to business school and ultimately found that I get really excited about helping organizations figure out how they can do something better and bolder than they had envisioned and that would in turn create good for the individuals in the company as well as the company itself and whatever impact they were trying to have in the world. That was my way of finding a way to do good. I came to McKinsey about fifteen years ago and eventually stayed to become a partner and lead a lot of work and growth as well as our diversity, equity and inclusion.
Messages on success, money, and finances
MR- What messages did you personally receive early on about success, money and finances, how has that impacted your story?
Growing up, if you were a well -performing student in a black family, and a female, success looked like becoming a doctor, or lawyer, perhaps a teacher. Because those careers were going to have high salaries and demonstrated a high educational attainment. It was narrowly defined and explored.
SP- There weren’t people in my family that traded bonds on Wall Street or even held C-Suite roles in major corporations until later in my life. My dad eventually became a Chief HR Officer at , but that wasn’t until I was in college. The messages were about getting the highest salary possible and getting the best retirement plan. My parents are divorced, and my mom had primary custody. What I thought was that my mom had to make choices between what she needed versus what we needed. It stuck in me a very basic principle that I didn’t want to have to choose between buying books for myself, because I like to read, and clothes for my children. I want to be able to do both, and I know that sounds very basic, but that was the mental model in my head. Have a good salary and have protection for retirement.
My big, bold aspiration was not to have to trade off between the things that I wanted to enrich myself and the things that I would need to support the rest of my family members.
This mindset has colored my life at different points. When I said things like “I wanted to do good in the world” and “I wanted to help,” I still had that model of “I still need to have a decent salary.” There was no inheritance to start my financial life. There were no big dollars and funds dropped on me when I graduated high school to go forth and buy a house or not be debt-free from school.
I am a pretty atypical Black-female in that I got to get educated at amazing institutions and had a path forward, but pretty typical in the sense that there was no inheritance, there was no big savings, there was no trust fund.
My parents had lots of school debt; I was going to have lots of school debt. However, protection was emphasized. When my husband and I had got to a place where we were financially secure and our careers were starting to progress, my background in financials allowed me to use the wealth-building tools available to me. If I hadn’t spent the time in financial services, I wouldn’t have had the time to think about these things. I have taught my children very differently because of my background.
Womxn and wealth management
MR- Through your work, research and studies McKinsey does what broad trends are you seeing evolve around money and wealth management, specifically when it comes to womxn? What is driving those changes?
SP- It’s been interesting. I’ve been part of the Diversity Matters research series that focuses on the greater levels of diversity and leadership of organizations and the financial outperformance of those organizations since 2014. When we started that work we talked about the rise of the female consumer: more control over household spend decisions/where the spend was allocated. We’ve seen that for quite some time now, but what we are seeing now is not only the rise of consumer spend but also the wealth management by womxn.
If we look today, there is about $10.5 trillion of assets controlled by womxn. We expect that to be more like $30 trillion in terms of wealth assets over the next 8 or 9 years.
That’s incredible acceleration, especially over the next few years in terms of womxn controlling wealth assets.
Historically, wealth management has been for men by men. The large majority of wealth managers have been men. The large majority of their clients have been men. That is shifting pretty aggressively.
We’ve seen some of this in Europe as well, and there has been this period of financial institutions really embracing diversity, equity, and inclusion. This is not just in terms of what they do inside of their organization, but how they think about their customers. This is because as the dynamics of life expectancy play out: womxn living longer than men and therefore having to make more of those decisions, womxn waiting until later to get married, womxn having fuller careers for longer periods of time, womxn are having more and more of those assets coming into their hands. When that transition happens, about 70% of womxn choose different financial advisors when they get the reins of the financial assets. Financial institutions are going to have to change how they interact. There is a lot underway, in terms of womxn being ready to take on those tools, and financial institutions and asset managers being ready to receive them.
To take a very personal example, my step-dad passed away last October. My mom is now having to manage all of their assets and make all of those choices. Frankly, while they certainly talked about their common goals and aspirations, the managing of it was left to my step-dad. Now she has to figure all of that out, or actually I have to figure it out with her. “Figuring it out” is going to be trend, not only because of the life expectancy, but also the fuller careers, getting married later and building our own businesses in larger numbers that will put us in that position.
MR- It’s quite scary. It’s hard enough losing a partner and going through all of that and then on top of it you have this sinking feeling of: “ I have no idea where our finances are.” I just can’t imagine adding that double impact of stress. Luckily, your mom has you as support and you know finances so well. Not everyone has that support system.
SP- Not at all. And frankly, when I was younger my grandmother had a similar story. Watching how all those choices were made for her was another lesson for me to check sooner, for my mom, to make sure that she had the right things in place. I’m just so fortunate that I’ve had the exposure to correct those things.
My hope is that financial institutions lean into this moment to fill the gap. Because they will have to reinvent what they sell how they sell, because womxn shop, buy and engage differently than men. If they want to be the leading institutions going forward they will need to figure how to shift and play a role in helping womxn educate themselves, equip themselves to go on that journey.
Intersectionality and wealth gaps
MR- When looking more closely at womxn’s intersectionality, for example, across race, identity, income level, etc – what trends are you seeing there and where do we still have gaps?
SP- There are gaps aplenty. If you look at the family wealth gap it is about 10x between white families and black and Hispanic families. If you look at the wealth attainment over time for the average white family versus the average Black or Hispanic family, it is the very definition of inequity. You will see that just by nature of being born a particular race or ethnicity in this country there is a very likely outcome of that gap. That’s driven by a whole host of elements. If you just look at the representation of Black men and womxn in C-suite roles, it’s about 1% for womxn and 2% for men. Opportunity to create enough income to be able to create the savings and the generational pass-throughs that will help build wealth are less accessible to Black and Hispanic families. These groups are also underbanked. If you look at the number of financial institutions in white neighborhoods versus Black neighborhoods or white counties versus Black counties, you will find tremendous disparities: 41 banks for 100,000 people in white communities versus 27 banks for 100,000 people in Black communities. Another gap exists in resources for entrepreneurship.
If you look at the number of loan approvals and the amount of loan approvals despite the fact that Black womxn in particular attempt more entrepreneurial efforts than most other groups and ethnicities, they get approved for resources and funding far less often.
All those dimensions combined create wealth gaps and disparities. So, while greater levels of wealth control and management are on the rise for womxn, that is less true for womxn of color and Black womxn specifically. There is a lot left to be done in that dimension in order to progress.
Preparation for a changing climate
MR- What can we as womxn, whether we’re 25 or 65+ do to prepare and position ourselves for success in this changing climate?
SP- The idea that you actually have to wait until you have a certain level of wealth to start building and managing your wealth, is not true. The value of starting as early as you can creates platforms as you go forward. It’s not that complicated. There are plenty of resources to get yourself educated.Having crystal clarity of what you want to achieve and allowing that clarity to evolve as you go through different stages of your life is important. I don’t think that the responsibility falls on womxn it falls on organizations to build that long term relationship.
Resources for womxn
MR- What financial support do womxn need that is different from men and where can we find those resources, who is providing them?
SP- The data shows that women worry about different things and choose their financial advisors differently from men. They care more about the relationship with the financial advisor. They want that relationship to come through a trusted source and that they trust the advisor themselves. They care more about the clarity and alignment of their financial strategies to their life goals, i.e. they would like to retire at a certain time, they would like to leave this legacy. Womxn tend to want to have more face-to-face engagement. They are actually lagging on the uptake of technology. That means that solutions that have been built for men by men will have to evolve. Not all, but several institutions are taking notice of that and are beginning to evolve their interaction models.
Building equitable workplaces
MR- As business leaders (both big and small) what bold actions can we take to build more equitable workplaces that set ourselves and other womxn up for success in the years to come?
SP- It is really critical as a leader to make concrete your commitment to diversity, equity and inclusion. No matter the size of the entity. Literal articulation of your commitment. Defining what inclusive leadership looks like in your conversations, and role modeling that yourself. It is important to make sure everyone is speaking up and to take the initiative to invite people into the conversation.
Socially conscious business trends
MR- Are you seeing an uptick in the investment of female-owned and socially conscious businesses? What do those trends look like and how can business owners position themselves to capitalize on those changing trends?
SP- I have been hearing more talk about it, but hearing and seeing are different. I’m not sure if investment in female-owned and socially conscious businesses has manifested itself as a trend yet. I think it’s more scaled organizations owned by women or socially-conscious areas. Depending on what business you’re in, reach out proactively to these organizations and hold them accountable to their standards of diversity, equity and inclusion.
