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female investing
What women want
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The Great Wealth Transfer is upon us, with women becoming far bigger players in the world of wealth. So how do women’s approaches to investing and money management differ? And how can Middle Eastern wealth managers ready themselves as the pendulum swings?
Words:
Sophie McCarthy
THERE’S NO SHORTAGE of facts to
support the notion that an unprecedented amount of assets are set to be passed on to women. McKinsey reports that, by 2030, American women are expected to control “much of the $30trn in financial assets that baby boomers will possess – a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States”.
Boston Consulting Group states that women are adding $5trn to the wealth pool globally every year – outpacing the growth of the wealth market overall.
St James’s Place, meanwhile, notes that the wealth held by women globally is expected to grow to $93trn by 2023, up from $77trn in early 2020.
Whichever way you look at it, the financial power of women is growing exponentially.
“Although there remain many patriarchal societies around the world, things are beginning to change,” says Zoe Cousens, founder of the Women’s Investment Network. “This is becoming ▼
more prevalent in regions where women are actually major breadwinners in the financial sector, and also in the Middle East, where Shariah law enables women to possess wealth of their own accord.
“These laws give women in the region more ownership of assets, which has led to many more sitting on boards as directors of family businesses in the region.”
Lynda O’Mahoney, Business Development Director at Ocorian, concurs. “Traditional roles are changing in the Middle East,” she says.
“Women are taking charge of their wealth and are involved in family financial decisions now more than ever before, and this isn’t going to change.
“They are also taking up some very senior roles across a number of sectors, supporting peers who are entering the workforce and making money independent of their family.”
O’Mahoney maintains that, as a result, we’re also seeing a shift in the demographic of investors both regionally and globally.
GENDER DIFFERENCE
So, what impact are we seeing as a result of this? And in what ways are men and women approaching investing differently?
“Men often primarily focus on researching investment performance, whereas women consider many other factors,” O’Mahoney says.
“A great deal of the women I have spoken to who are new to investing are keen to get involved in a way that has a positive impact, and to understand how what they are doing is affecting the environment, as well as education and healthcare systems.”
She stresses that this isn’t to say men aren’t interested in these factors, but that they are, in her opinion, more focused on
result-orientated investments. O’Mahoney continues that, in her experience, when it comes to investment decisions, women are more focused on instrumental long-term goals and life events.
“Given that women, when dealing with their personal and family wealth, tend to be less focused on the bottom line and more focused on, for example, future family security, their approach tends to be more cautious than that of men.
“For some women, they are more comfortable sticking to what they know – especially what has worked for them in the past. Risk-taking in terms of investment can therefore more often be associated with men.
“Many reports show that, when women invest, they do a better job than their male counterparts, and that women who trade shares and funds do so better than men,” O’Mahoney adds.
“Given that women tend to be more risk-averse and cautious, they are unlikely to make compulsive decisions and instead base their choices on facts and proven data.
“Women also tend to think in an integrated way, with long-term views – almost always keeping family or personal goals central to decisions.”
“Women instinctively take a holistic view of the family and community’s interests, now and in the future,” agrees Cousens. “They tend to view finance as a tool for reaching life and family goals.”
This, she adds, makes them ideal champions for ESG causes. “The historical norm of women playing a more nurturing role, harnessing greater interest in doing good and applying values to their financial decisions, is really driving the ESG agenda.
“Research suggests women also have a tendency to perceive wealth more as a source of security rather than an opportunity,” she continues. “Indeed, achieving financial peace of mind is reportedly seven times more important to women than simply accumulating wealth.”
An Kelles, a Director at Jersey Finance, cites another interesting distinction – namely that women are more likely to display philanthropic behaviour in order to “enjoy the fruits of their giving”, whereas men “think more about the legacy they leave behind”.
Echoing sentiments expressed by both Cousens and O’Mahoney, Kelles also believes women are more likely to put greater stock into societal causes than men.
THE NEW WEALTH MANAGERS
So, what can wealth management firms do with this abundance of insight and learning? And what should they be keeping front of mind when looking to cater for this increasingly important audience?
O’Mahoney is of the opinion that wealth managers and advisers will need to be ready for a lot more involvement and participation from women when it comes to investment strategies.
“Preconceptions about female investors will need to change – a greater focus on providing quality service and developing long-term relationships needs to be a priority,” she says.
Kelles looks to the fact that when women become the decision-maker on investments, they may want to look at matters afresh. “Part of that review may mean a change to the adviser or advisers they inherited.”
In fact, according to Blair Duquesnay’s book Women Shall Inherit the Power of the Purse, some 70% of women switch wealth manager within one year of their husband’s death.
“They will look to those who appreciate the challenges they face on a day-to-day basis,” Kelles continues. “For example, if they have become the key decisionmaker for investments within a family environment while having other priorities, such as caring for their children.” ▼
Kelles is also an advocate for educating women who may be in line to inherit significant wealth. “This could include looking at how the family wealth is structured and what succession plans are in place to ensure a smooth transition from one member to the next,” she says.
“Ideas such as regular discussions and updates on family constitutions, or bespoke events for women to help bridge the wealth transition gap and women’s needs, would help satisfy female clients.”
Cousens, meanwhile, suggests that the classic positioning of wealth managers will have to change as women look to them for true partnership and, crucially, stronger empathy. “Such a shift is an essential part of what needs to be a broader effort to acknowledge and serve all stakeholders in the wealth ecosystem,” she says.
“The Middle Eastern culture places a great emphasis on loyalty and trust. Those who are seeking an expert to assist them with their – and the future generation’s – wealth will wish to establish a strong understanding of their wealth manager’s values, experience and reliability, sometimes for a number of years, before they feel ready to begin a commercial relationship.
“They also like to see a certain commitment to the region. So in my experience, the companies that have a physical presence, even if it’s simply a small representative office, tend to be among those best-regarded.”
Kelles adds: “One of the opinions expressed forcefully by panellists at the Jersey Finance Global Conference in July was that women tend to want advisers who empathise with them and understand their lifestyle, ambitions and concerns.
“We included a one-hour panel discussion devoted to the subject of ‘women driving wealth management’ at the event and there was general agreement that regardless of gender, advisers simply need to listen to their clients.”
“It’s true also that there is a greater focus on diversity and inclusion among female investors, families and other stakeholders, as well as a cultural realignment of values among the next generation,” she continues. “This is driving a shift in attitudes across the sector.
“And in direct response to that trend, advisers at wealth management firms need to adjust their mindset if they are to satisfy the demands of female clients.” n
