Shona Baijal’s article in Diversity earlier this week revealed some interesting traits about women’s investment trends. The UBS managing director showed many women are deferring financial responsibility entirely to their spouses as well as feeling they lack financial knowledge.
At a seminar exclusively for women held by Church House earlier this month (Wealth is Precious – What Women Need to Know), we noticed a marked difference in confidence between those who take an active role in the family finances and those who don’t.
It is well-documented that women who do participate in long-term financial decisions with their spouses not only increase their chances of financial security but also feel more positive about their future.
But does it all come down to confidence or are there actual differences between how men and women approach finances?
HM Revenue & Customs statistics show women save more in cash than men. Men tend to invest in stockmarket-linked investments and receive better returns, while women are known to be the savers who set money aside rather than trying to grow it.
Take ISAs for example. In 2015/16 (the last year for which this data is available), only 892,000 women invested in stocks and shares ISAs. 5.2 million women invested in cash ISAs. The same can be said of mothers saving on behalf of their children – 73% save into cash ISAs rather than stocks and shares junior ISAs.
As wealth managers, you will of course know that this reluctance to invest is costing women money in the long run. At the seminar the keynote speaker referred to this ‘reckless caution’ of hoarding money in cash, leaving it to be eaten away by inflation.
Women investors should be trying to maximise their returns at least as much as their male counterparts for some very important reasons. First, there is the widely reported gender pay gap that exists in many industries, the first hurdle when trying to save and provide for the future.
This is then compounded if, and when, many women take a career break or switch to part-time working if children come along. This, in turn, means that by the time women approach retirement, the chances are that their pensions and savings often fall well short of their male counterparts. Then consider the fact that women live longer. 68% of us will outlive our spouses (sorry, chaps).
For those that seek advice, the discplines of managing objectives, determining risk and deciding an investment strategy of course ring true across genders.
But there may be some gendered differences in the solutions. Absolute return or multi-asset funds may be part of the solution for the cautious investor, although women investors’ tendency for caution may be in making the investment decision itself, not about what they invest in.
We have seen many women happy to entrust their investment decision to a discretionary fund manager provided they feel they are in control of the overall investment mandate, in particular the risk parameters.
Trust is something that is built quite quickly when the time is taken to explain the principles of how risk can be managed, with examples taken from illustrative periods of turbulence in financial markets.
Recent history provides many useful instances of the potential for loss. We find that, particularly with women clients, a demonstrable track record of capital preservation and the consistent provision of a stable income go a long way towards building that vital long-term trust between client and manager.
So encourage your women clients to take control over their finances. It’s never too soon or too late to do so and it’s always sensible to plan for their future, whatever it might hold.
Emma Parkes is a private client relationship manager at Church House Investment Management