Empowering Women Investors: Are Wealth Firms Truly Making the Grade?
Women in the UK are on the brink of a significant financial transformation, with predictions indicating they will manage 60% of the nation’s wealth by the end of this year. This remarkable shift is largely attributed to factors such as inheritance and entrepreneurship. However, despite this growing wealth, a gender gap in investing persists. The Financial Conduct Authority (FCA) reveals that only 13% of women held stocks and shares ISAs in 2022, compared to 22% of men. As women’s financial power increases, the question arises: are wealth management firms sufficiently supporting them in wealth growth?
The Insights from Jurgen Vandenbroucke
Jurgen Vandenbroucke, the managing director of everyoneINVESTED, shared his insights with FinTech Global regarding this critical issue. With a background as a former general manager at KBC Group and an academic in financial engineering and behavioral finance, he is well-positioned to bridge the gap between high finance and education.
Understanding Women Investors’ Needs
Vandenbroucke emphasizes the unique investment preferences of women. According to research conducted in countries like France, Italy, and the UK, women generally exhibit a more cautious approach to risk compared to men. He notes, “On average, women balance risk and reward differently than men, showing a greater aversion to risk.”
However, he also warns against generalizations, stating that within any demographic group, there is significant diversity. This awareness is crucial, as many women’s risk aversion stems from economic realities, including:
- Lower earnings
- Interrupted career paths
- Inadequate retirement savings
For instance, data from 2018/20 indicates that women’s private pension wealth at age 55 is 35% less than that of men.
Identifying Barriers to Investing
Despite the increasing wealth among women, various barriers hinder their participation in investing. Some of these challenges include:
- Uncertainty about where to start
- A persistent feeling of exclusion from investment opportunities
- The impact of the gender pay gap, which saw women earning 7.7% less than men in April 2023, per the Office for National Statistics
Many women, constrained by modest financial means, prefer to keep their savings in cash rather than invest in the stock market, even as inflation diminishes the value of cash holdings. A recent report by Aviva noted that 35% of women invested in cash ISAs, compared to only 17% in stocks and shares ISAs.
The Role of Technology in Investment Engagement
Vandenbroucke views the lack of engagement as a significant issue. “At everyoneINVESTED, we aim to create a digital relationship between investors and their investments,” he explains. This approach focuses on:
- Investor onboarding
- Investment proposals
- Portfolio reporting
By leveraging technology, firms can better cater to the emotional aspects of investing without needing constant human interaction, thus enhancing scalability and efficiency.
Rethinking Wealth Management Strategies
To effectively engage with the growing market of women investors, wealth management firms must reconsider their strategies. Vandenbroucke recommends moving away from generic products to more personalized profiling, stating, “Our advice is to implement refined profiling tools that capture detailed client preferences rather than making assumptions based on gender.”
The Importance of Inclusivity
The financial landscape remains daunting for many women, with their preferences for sustainable investment often overlooked. A recent survey indicated that 42% of women have invested at some point, an increase from 32% in 2023, yet men still outpace them at 60%.
To close this gap, wealth management firms must not only provide better tools but also foster a culture of inclusivity—listening more closely, communicating clearly, and understanding investors’ unique positions.
Future Implications for Wealth Management Firms
Looking ahead, a massive transfer of wealth is anticipated, with estimates suggesting that women will inherit 70% of global wealth over the next two generations. Failure to adapt could jeopardize the survival of many firms. Vandenbroucke emphasizes the importance of meeting regulatory requirements as part of building long-term relationships with investors. He states, “We see regulatory assessments not just as requirements but as essential components of sustainable investor relationships.”
As the financial landscape evolves, wealth firms must adapt to meet the changing needs of women investors or risk losing a significant portion of their client base.
