Private banks wise up to untapped opportunity of women in wealth
Even though women’s wealth has been significantly and disproportionally impacted by Covid-19, it will continue growing faster than men’s. Women own a third of the world’s wealth and their share is expected to grow significantly in the years ahead, reaching $93tn globally by 2023, according to BCG forecasts. This will represent 34 per cent of the total $271tn wealth pool.
Yet, many private bankers continue to regard men as the primary financial decision-makers, leaving many women feeling underserved. BCG research shows 64 per cent of women feel their bank or wealth management provider needs to improve its value proposition, with working women and those in the highest wealth bands expressing their discontent with current models most acutely.
There is, however, a growing awareness among wealth managers that women represent a massive business opportunity. Catering to their specific needs, and getting them to invest more, is high on private banks’ agendas.
“As an industry, we have alienated women and have not catered to them as investors,” says Patricia Astley, executive director at Julius Baer International. Too many private banks and wealth firms rely on broad assumptions about what women are looking for, resulting in products, services and messaging that can feel superficial or condescending.
“For instance, there is a stigma or reputation that women are risk averse, while they are just more risk aware,” states Ms Astley. While men generally target specific investment returns within a given time frame, women prefer to invest in a “lifestyle way”, against a clear financial plan. Once they understand what they are doing and do not feel patronised, they would be “better stakeholders” in the investment world, she adds.
The hurdle to invest in capital markets tends to be higher for women, though. Women seek to achieve their goals with a high degree of confidence, meaning they need more data and are likely to ask more critical questions.
“Women tend to be more deliberative and are more averse to uncertainty,” explains Eva Lindholm, head wealth management UK and Jersey at UBS. “Once they have the data needed to make an informed decision, however, their investment profile is similar to that of men.”
Research shows that women take decisions based on facts, spread their risk, making less concentrated investments, trade less frequently and invest for the long term. Their approach seems to pay off.
Women investors earn nearly 1 percentage point more per year than men, according to Fidelity Investments, while a study by Warwick Business School shows women’s returns are nearly two percentage points higher than men’s returns overall.
Barriers to overcome
Women, though, face several challenges through their financial life journeys. The gender pay gap, the need for flexible working conditions, maternity leave, longer life expectancy, and arguably a lower risk tolerance, means women need to anticipate and plan for key events and life stages. And they need to invest more, otherwise they risk facing retirement with insufficient savings.
“While women are very good at saving, the biggest challenge is getting them to invest, which is especially important in this environment with very low interest rates,” says Charlotte Bobroff, executive director, JP Morgan Private Bank in London.
The “roadblocks” to overcome are lack of confidence and knowledge. Private banks need to be more accessible to women, give advice in a “clear and effective way”, especially to those with no financial knowledge or experience, and avoid any financial jargon.
Importantly, advisers’ conversations with female clients must focus on identifying their goals and what they want to achieve with their money, as indeed they should with all clients. “This allows bankers to connect with women on a personal level about their money, before coming to the solution and sharing product ideas,” says Ms Bobroff.
Trust and confidence in advisers are key to getting them comfortable with investing.
Women are also more likely than men to favour investments that align with their values and that not only perform well but also create a positive impact, as opposed to investing solely for performance.
Women have been leaders in adopting ESG investing, they get passionate about it, and are likely to invest more in this space.
“For women, it is much easier to think about making investments when they know they are going to have social impact with their money, in an area they have already an interest in, and connect with,” says Ms Bobroff.
Whether women are investing enough in the stockmarket depends on their goals and the risk they can tolerate to get to that goal, believes Joan Crain, senior director, global wealth strategist, BNY Mellon Wealth Management in the US.
Three decades of work experience with women leads Ms Crain to believe it is important to proceed very slowly, giving female clients time to get closer to the stockmarket.
Divorcees or widows in particular tend to be more risk averse early on, but equity allocations can grow substantially to a level deemed right for their goals and comfort. “It is dangerous to push anyone [to invest in the stockmarket] but especially women, because they tend to just be more conservative and really don’t want to lose their money.”
While younger women may have a higher risk tolerance, education and personal experience of equity investing are equally important, adds Ms Crain. “It is one thing learning about a stock, or hear someone talk about it, and another thing putting your own money that you are depending on and watching what happens to it over a couple of years.”
Better clients
Private banks have improved their way of catering to female clients over the past few years but there is still “a lot of distance to go”, states Nalika Nanayakkara, consulting leader at EY Americas Wealth & Asset Management.
Financial advisers have often viewed women as their secondary clients, or just “the wives” of their clients. But societal changes are changing this perception. Today, women represent the majority of college graduates and they are becoming wealthier, with an increasing number of successful female entrepreneurs and executives.
“Wealth management firms are realising that it is a business imperative for them to service women, not just a cultural imperative, and if they don’t they will miss out on grow opportunities.”
Moreover, research shows women make better clients, provide more quality referrals than their male counterparts, and are more inclined to work with advisers.
A recent EY study shows 51 per cent of clients globally plan to use more digital and virtual tools as a result of Covid-19, but a higher percentage of women (42 per cent versus 33 per cent male) view advisers as their preferred method of engagement (see Fig 1).
They are also more willing to consolidate with one financial provider (55 per cent versus 47 per cent male), which rewards those wealth managers who adopt the right approach.
Also, a higher proportion of women (57 per cent) are willing to pay more for personalised experiences, when compared to men (51 per cent). As women feel less prepared than men financially, they are willing to pay more for personalised education, for instance.
“It is easier to encourage women to take more control of their financial future, in a very personalised way, rather than push them to invest,” adds Ms Nanayakkara. Private banks have moved towards goal-based wealth management, but need to go further and think about clients’ individual goals and then personalise the relationship based on them. “That is what clients need, to achieve their financial peace of mind,” she says.
An increasing number of wealth management firms are running training programmes to help advisers improve their ability to service women clients. This is particularly important as women live longer than men, the likelihood of becoming widowed or divorced increases, while the upcoming great wealth transfer is set to benefit women in greater proportions than in the past.
At a certain stage of their lives, women are likely to become responsible for the management of their own assets, and so advisers who have never connected with their clients' wives before risk being discarded.
Virtual world
The massive move to virtual induced by the pandemic has paradoxically helped advisers to get closer to their female clients, because “we are now in clients’ living rooms and see their families”, explains Julius Baer’s Ms Astley. Some of her male colleagues have only recently started to speak to female stakeholders and realised how important that is for their relationship, “for gaining client loyalty and passing it onto the next generation”.
Pre-pandemic, older female clients in particular would just not turn up to in-person meetings, rather they would delegate financial matters to their husbands, reports BNY Mellon’s Ms Crain. With lockdowns, women have started “to show up at online meetings next to their husbands”, as not having to leave the house makes it easier for them.
“At the start, women would not say a lot, but at least they were there. I think for us as advisers, it is important to acknowledge them and get them more involved.” Before, some advisers might have not ever seen the woman until her husband died, she says.
Online events have also driven greater female engagement, reports JP Morgan’s Ms Bobroff. Before Covid, it was a struggle for women to attend events in person, as they had to fit them with their busy schedules, be it the management of their business, school runs or other responsibilities. Now, they can listen to content on demand, in their own time and at their own pace.
Importantly, online events take away women’s widespread fear of attending male-dominated conferences where they often feel too intimidated to ask a question or engage.
“Whether that is a conversation around philanthropy or succession planning or a market outlook event, virtual events have made a big difference and generated a huge amount of engagement.”
The virtual model will also boost women’s attendance at physical events covering a broader range of areas, encouraging them to engage with specific topics and follow up with advisers, she believes.
While some are more sceptical on the impact of digital events on women’s engagement, the trend of hosting women-only wealth management forums or conferences, to cater to their specific needs and requirements, is going to continue. “Women are visibly more comfortable when it is all just women and they can say whatever they want,” says BNY Mellon’s Ms Crain.
Flexible working
Whether women clients prefer to be served by female advisers is up for debate. Many private bankers believe building a relationship is all about gaining trust, and that the adviser’s gender is irrelevant. Women, like men, want a person who understands them and put their interests first.
Other senior private banking executives have experienced that female clients, especially older ones, tend to ask for female advisers, as they feel more at ease talking to them.
Either way, there is a strong consensus that recruiting more women advisers, who only represent 20-25 per cent of all advisers in the US, can only make the wealth management industry more diverse and inclusive.
"The financial industry is still overwhelmingly male, and while men tend to be promoted based on potential, women, and minorities, tend to be promoted based on achievement," says Sallie Krawcheck, CEO and co-founder of Ellevest, a US-based financial services organisation that is built by women for women.
“There is a different standard in the financial industry and it is important to be aware of it and make sure that people are uncomfortable about it,” she states.
For all its dramatic impact on human lives and the economy, the pandemic may have a silver lining in this regard, as the more flexible working conditions expected in the post-pandemic world may attract a higher number of women to the sector.
“Financial adviser is probably one of the most entrepreneurial jobs in financial services, where success is very measurable, in terms of new clients and new assets,” says EY’s Ms Nanayakkara. “The hardest part is attracting female financial advisers and helping them become successful.”
Women tend to have natural relationship-building and networking skills, which help them build trusted relationships. Wealth management firms who understand this will increase their proportion of female financial advisers, and benefit from it, she adds.
Flexibility has been “one of the biggest barriers for women” in this industry, says Julius Baer’s Ms Astley, but Covid has validated working from home and therefore there is more acceptance of flexible arrangements.
A UBS study this year revealed that two-thirds of women in the US plan to work from home more often, believing they are more productive, have a better work-life balance, and as a result feel less stressed. It is however paramount that organisations support hybrid working, and do not exclude those at home from key meetings and strategic decisions.
“It will be down to everyone to continue to support diversity in decision-making. We all have a responsibility to that, as we know that diversity in businesses leads to innovation and successful outcomes,” says UBS’ Ms Lindholm.
In the post-pandemic world, the winners will be those firms that are going to be “remote first or remote friendly”, says Ellevest's Ms Krawcheck.
Firms need to look for opportunities where work can be done asynchronously, “where people do not have to all be in the same Zoom call at once”. But it is important that people who work remotely do not feel “second class citizens” or they are not treated like that, she warns.
“How we make sure they are picking up on the meetings between the meetings and the words between words is not easy stuff,” she adds, but firms will be rewarded by the happiness of their employees, the talent they will be able to retain and the increased creativity.
