Understanding the female investor

14 February 2020 by National Bank Investments
Two women discussing financial strategy.

Women investors are a not-so-niche market that, for today’s standards, is incredibly underserved. With an almost $1 trillion wealth transfer underway in Canada, women are set to control half of all financial wealth by 20261.

Crucial trends are emerging in this market:

  1. More women are choosing to stay single longer;
  2. More marriages are dissolving, resulting in financial strain for single mothers;
  3. Wealth is being inherited from their deceased parents;
  4. Women outlive their male partners, having to manage wealth left behind by their spouses.

As a result, most women will, at some point in their lives, become the sole financial decision-maker in their household. It’s time we equip them with a financial plan based on their objectives to not only protect their wealth now but ensure its growth for the future, too.

Women relate to wealth differently than men do.

Historically, the advisor’s pitch has revolved around performance: how much their client has gained so far and what to do to add more to a pile of money devoid of any actual significance.

Women tend to relate to their money differently. They do so by establishing goals and meticulously choosing where to house their wealth, less so on continuously outperforming returns.

Women are used to conversations with advisors leaning more towards management and performance recaps instead of planning for life events and goals. Your client wants to know if she can afford university for her three children, if she can comfortably travel the world, and if she can retire on time, and if so, still have enough left over to give future grandchildren.

Advisors’ success now depends on that of their female clientele.

The challenge resides in learning how to listen to her and establishing a trusting relationship. It’s not about how well you understand a portfolio, or how smart you are. It’s about how well you listen to what she wants. Why should she trust you to help her manage her late mother’s money, for example? That is no easy task.

The advisor pitch hasn’t seen much change.

In the past, women have been ostracized from financial conversations, particularly in a marital context. There is a very real financial literacy problem in the women-over-65 demographic2 (the age group three-quarters of widows fall into, a surprising fact). This is a longstanding issue, especially given that women in Canada live on average four years longer than their male counterparts. Missing out on a key contributor’s vision of what she expects in retirement is detrimental to the planning process; failure to incorporate her perspective will make you miss the mark on building the right plan for them both. Retirement plans shouldn’t be crafted for him, but for her. The numbers don’t lie: following the event of a death of or divorce from a partner, 80% of women leave their financial advisor3.

Women have a different perspective on risk.

Female investors vote with their money – they want to know what they’re investing in. Once they understand this, they tend to actually have a similar if not slightly higher risk profile than men. Having visibility into what they’re getting themselves into helps put their mind at ease and contributes to the likelihood of them making a sound investment decision.

Dipping into alternatives.

Because women take risks differently, alternative investments have become increasingly popular among high net worth investors. They prefer diversifying their risk and playing a longer-term game. Though alternatives are still an emerging asset class, investing in real assets (which already represent approximately 30% of that $1 trillion wealth transfer) allows her to inch closer to that income property she’s been eyeing in Greece.

The advisor who listens will leverage this diversification opportunity to contribute to his female client’s dreams.

This could also be why women have been so loyal in the uptick to responsible investing initiatives: returns aside, how are this company’s employees treated? How many women reside on its board? In a recent study by the Responsible Investment Association, over 60% of surveyed women believe that it’s important for their advisor to be knowledgeable about RI trends4.

The answer is simple: listen. Active listening enables you to summarize your conversation with her and asking if you grasped it correctly. Discuss relationship-based topics instead of delving straight into fact. When you need more information, ask clarifying questions. Get involved with women’s organizations. Ask your clients questions about their goals. Get to know them.

To create a dedicated, holistic approach to serving women investors, you could also implement a strategic advisory team. Leverage this team to help foster new ideas on how to attract this new customer base. Establish specific metrics like number of newly acquired female clients, growth in assets from current female clients, and even increase in client referrals. Identifying her objectives by leveraging these tools and earning her trust will allow you to take the steps necessary in evaluating your client’s success.

Legal notes

1 Source: IPC Private Wealth.
2 Source: IPC Private Wealt.
3 AdvisorAnalyst.com. Suddenly Single: How to Plan with Female Clients. October 2019.
4 Responsible Investment Association. Millennials, women, and the future of responsible investing. April 2016.

The information and the data supplied in the present document, including those supplied by third parties, are considered accurate at the time of their printing and were obtained from sources which we considered reliable. We reserve the right to modify them without advance notice. This information and data are supplied as informative content only. No representation or guarantee, explicit or implicit, is made as for the exactness, the quality and the complete character of this information and these data. The opinions expressed are not to be construed as solicitation or offer to buy or sell shares mentioned herein and should not be considered as recommendations.

National Bank Investments is a member of Canada’s Responsible Investment Association and a signatory of the United Nations-supported Principles for Responsible Investment.

©National Bank Investments Inc. All rights reserved. Reproduction in whole or in part is strictly prohibited without the prior written authorization of National Bank Investments Inc.

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