Capital Markets Corporate

March 27, 2018

Women in investment: The new frontier

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By Kaj Sahota, Junior Account Manager Instinctif Partners

The amount of wealth held by women is increasing. Between 2010 and 2015 private wealth held by females grew from $34trn to $51trn with that figure set to rise to $72trn by 2020, according to Boston Consulting Group.

More than ever before the number of women in well-paid jobs is increasing, they receive more from baby boomer parents splitting inheritance equally between sons and daughters, and have greater financial resources at their fingertips than ever before.

Given this, it is no surprise that women are taking a greater proportion of the world’s wealth as they progress through the 21st century.

But what does this shift mean for the financial services sector and how can it ensure it is best placed to cater to and benefit from a more gender-balanced market in the future?

Savvy investment

Data from Hargreaves Lansdown, a leading online investment platform, reveals that female customers consistently outperformed their male counterparts by an average of 0.48% a year between 2015 and 2017.

The comparison found that 44% of women had most or all of their portfolios held in funds, compared to 38% of men. By diversifying their holdings via a fund women were able to manage risk and experience less overall volatility in their portfolios.

Analysis found that females typically adopt ‘buy and hold’ investment strategies enabling them to profit from long term gains, rather than trying to make a quick buck. They also tend to avoid smaller, more volatile AIM-listed stocks.

The more risk-averse approach frequently employed by women is starkly different to their male counterparts whose top investment goal is more likely to be about purely outperforming the market.

The ability to cater to different risk appetites and communicate this effectively to both male and female customers is crucial to attracting investors at both ends of the spectrum.

Transparency, use of balanced language and avoiding jargon are all key to prevent alienating either side of the market.

Building confidence

Despite the numerous signs pointing to the strength of female investors, it is clear that a large proportion of women lack confidence when it comes to the stock market.

According to a recent poll by Boring Money, only 23% of women hold some sort of investment product compared to 35% of men. Meanwhile, the ratio of male to female customers at the top ten DIY investment platforms is over two thirds male.

Many women cite lack of confidence, uncertainty and risk aversion as the top factors causing them to avoid the stock market. Though many are open to the prospect of using a financial adviser to guide and educate them, most wealth managers admit to their client base being male dominated.

The lack of diversity within such firms is a factor in attracting a more balanced investor base given the highly personal nature of the client-adviser relationship.

Women want to feel represented and understood within investment firms – a fact some have begun to cotton onto as they improve gender imbalance in the workforce with some even setting up specialist teams to focus on female clients.

However, more must be done to communicate these initiatives externally and businesses improving diversity in the boardroom or taking action against their gender pay gap should actively promote such activity.

Prospective clients will be encouraged by such developments and any momentum in this space will only chivvy along others in the sector to do the same.

Appeal to your audience

Like millennials, many wealthy women are keen to invest their money ethically by looking at options that offer both social or environmental returns, as well as financial gain.

A relatively new trend in the sector has seen the use of a so-called investment ‘gender lens’. This strategy enables clients to invest in businesses that support females, whether that be through backing ventures that help less advantaged women or by engaging with funds that only hold companies with a gender-balanced board.

Just as firms have adapted to the surge in popularity of sustainable investing in recent years, it is important that they remain nimble as their ever-changing investor pool continues to grow.

The new frontier

Ultimately, an investor’s priorities and risk appetite are determined by a nuanced set of personal characteristics and goals, and cannot be defined solely by their gender.

However, it is clear that the investor pool is evolving and businesses must be able to respond to the changing face of their client base as it develops.

Catering to alternative investor profiles, through both product and service, is crucial, but it will be the effective communication of these strategies which sets the champions in the sector apart from their peers.

Those that are able to adapt and appeal to the growing base of female investors must not only instigate change internally, but shout about their accomplishments in order to attract this new pool of clients and encourage wider change across the industry.

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