Women own one third of the world’s wealth, and are increasing their share year on year, yet many still feel underrepresented and underserved when it comes to financial planning.
Boston consulting group reports that the wealth management industry is still plagued by gender bias. In their recent survey, 64% of those questioned felt that wealth management options for women were limited. When it came to women of considerable wealth, there were huge disparities in the options open to them compared to their male counterparts.
One of the main issues that seems to emerge repeatedly is that the male-dominated industry does not always understand the female approach to investment and wealth management. Emerging evidence points to the fact that women do not want to receive bracelets for opening a bank account or pink-colored folders full of the same old jargon. No. Women want to be treated respectfully, as equals.
Don’t relegate women to second place
In meetings, women report that advisers will defer to the man. Even in cases where the woman is the ‘breadwinner’, advisers might assume that the man will make the decision. This outdated and lazy assumption highlights negative, prevailing attitudes. The reality is, many women are high-earners and want to be financially responsible. Certainly, their performance in the market suggests that women may enjoy better investment returns than men. It’s unfair to assume that women have no interest in their financial future. Given that women live longer than men, and tend to think more in terms of life’s bigger events, it’s more likely they will make major investment decisions.
Leah Steele, holistic wealth strategist and thought leader, advocates an even more radical approach. “It is time for women to embrace their divine birthright to be wealthy in all areas of their lives. But they don’t need to look outside themselves to know how to do this. Many wealth strategists and money coaches advise women to speak to a financial consultant, and my advice is the exact opposite of that. Financial advisers and people in traditional financial systems and structures are a big part of the problem. The current financial system and structures incentivize financial advisors to keep women playing inside a program that keeps them disempowered.”
Women are more risk averse
Steele is not the only one raising concerns about the ethical standards in the industry. In the US, clients especially need to know whether the adviser is a fiduciary—always putting the client’s needs and interests first. There are, in fact, two other standards. The ‘suitability standard’ and the ‘best interest’ standard may sound similar, but, according to the SEC, neither of these holds the adviser to the same ‘fiduciary’ ideals. In short, it’s always best to check whether an adviser is regulated and, if so, to which standards they adhere.
When it comes to investing, women are inherently more cautious and like to avoid unnecessary risk. This means they have to be comfortable with the adviser and also the wider financial plan. They tend to think about their decisions for longer, before committing.
Regarding the frequency of trading, men also tend to move in and out of stocks and shares more often. The movement attracts fees and charges that diminish the overall returns on the portfolio. Women, on the other hand, tend to stick with a strategy for a longer period of time and maximize their returns.
In their overall strategy, men will focus on one stock or share and put all of their proverbial eggs in one basket. Women prefer to spread their risk, a strategy that protects them from huge downsides. Steele advises that women consider a range of non-traditional options: “I do think alternative investments in crypto-currencies and precious metals are powerful ways for women to invest and take control of their financial futures.”
Women consider life’s big events
Perhaps because of the financial realities that women face ( the gender pay gap, the need for flexible working conditions, maternity leave, longer life expectancy, and a lower risk tolerance ), they are much more goal-oriented. Evidence suggests that women invest in a way that supports their future, long-term aims.
As a result, women are inclined to invest in line with their core values and beliefs. This is not to say that they ignore performance and historical data—they are apt to look for a blend of returns and social impact. BCG’s research found that 64% of women factored ESG into their investment choices in stark contrast to men, who tended to focus solely on performance.
The rise of ethical investment
It seems that women are not blindly accepting the traditional investment models and are carving out their own niche. ESG (economic, social and governance) investing—sometimes called sustainable or ethical investing—is one of the few fields of finance that is overwhelmingly dominated by women. The new investment approach is putting pressure on the biggest investment firms to become more socially aware.
In a recent announcement by Larry Fink, head of BlackRock, he stated that climate change was a real problem and should be taken more seriously. An announcement like this, from an industry leader, is an indication of how pervasive ESG has become.
Over the last number of years, money has poured into ESG investment funds. According to the Global Sustainable Investment Alliance, $23 trillion was invested at the start of 2016. That figure has now risen to $30 trillion. Women tend to be better represented in top E.S.G. roles compared to the industry as a whole. JPMorgan Chase & Co, for example, has placed a woman at the helm of their UN sustainability objectives.
If the wealth management industry is going to continue to attract wealthy, female investors, it’s going to have to work harder to understand their needs: wealthy women everywhere want to be treated as equals; offered a range of sophisticated, ethical investments; given full disclosure and valued for their contribution to the global economy.
