John Pipon, Client Advisor at UBS Jersey, discusses how wealth managers will need to reimagine advice to meet the growing demand from female investors
UBS wrote its first publication on women and investing in 2017, with Taking Action, Women and Investing, How women can best protect and grow their wealth. Since then, we have seen an increase in the number of women interested in taking control of their finances.
However, the arrival of Covid-19 has been a challenge for women, given the higher unemployment rates experienced during the recent ‘she-cession’ and the added burden of childcare responsibilities many undertook as a result of school closures and lockdowns.
But the pandemic has also had a silver lining. Increased precaution has led women to take more action. It has prompted many to review their financial situation and seek control of their destiny.
Based on research from Fidelity in 2021, the number of women in the US who say they are more interested in investing has risen by 50% since the start of the pandemic.
The survey also found that 67% of women are investing outside their retirement plans (44% in 2018), with young women taking more action.
Specifically, 71% of millennial women versus 62% of baby boomers are investing outside their retirement plan. This trend was also captured in a 2021 Nutmeg survey, where one in five women said they felt more confident dealing with money matters in light of the pandemic.
However, the current advisory process experienced by women often does not meet their needs. How can wealth managers reimagine their advisory process, and what are the key ingredients to help women achieve their goals?
In our view, wealth managers need to reimagine their value propositions – see diagram.
The impact of the gender pay gap and longer lifespans on women’s wealth can be reduced by:
• Accounting for individual circumstances, including financial goals
• Defining and recommending portfolios that maximise the likelihood of achieving these goals
• Helping women feel more confident about investing and understanding the relationship between risk and return.
Personalised and relevant investment advice delivered in a systematic way is key. We believe the advisory process should be based on a purpose-driven framework.
One example of such a framework is the UBS Wealth Way approach, which helps investors develop an investment strategy optimised for their goals and objectives.
Using such a framework, women can define investment strategies that help them clearly understand where their money is and why, and as a result invest with confidence.
Liquidity strategy
The Liquidity strategy consists of resources needed to meet a family’s short-term cash flow needs, including regular income from employment or a pension, safe borrowing capacity and investment assets earmarked for this purpose. The aim of the Liquidity strategy is to provide enough capital to give an investor the flexibility for greater risk-return potential in other portfolios. The strategy helps manage cash flow for near-term spending needs, usually for the next three years. This strategy can help women (and investors in general) with cash management and with making sure that budgeting concerns do not affect investment decisions.
Longevity strategy
The Longevity strategy focuses on helping investors meet their goals over their lifetime. Its aim is to ensure they’re invested in such a way that they have a high probability of meeting those objectives.
The risk here is measured in terms of shortfall risk – the possibility of not meeting investment goals. Such strategies should help women connect their investment portfolio to their objective, particularly addressing concerns around retirement planning. Looking at risk as the probability of not meeting a goal versus volatility allows for investors to measure success in terms of what matters to them.
Legacy strategy
Once Liquidity and Longevity strategies are adequately funded, investors can invest the remaining wealth in a Legacy strategy. The objective of this strategy is the wealth transfer over the generations as well as having a positive impact on society. As outlined above, these goals tend to be particularly important for women.
Using this framework, investments are positioned as solutions to needs and specific problems solved in the context of each investor’s circumstances. Such an approach should provide the necessary confidence and clarity that women are looking for to help them gain control.
FIND OUT MORE
If you are interested in finding out more about how UBS can help support your investment goals, please contact John Pipon for more information.
John Pipon, Client Advisor, UBS AG, Jersey Branch
1, IFC St Helier, Jersey JE2 3BX
Tel: 01534 701185
Email: john.pipon@ubs.com
UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. © UBS 2022. All rights reserved.
• This advertising feature was first published in the June/July issue of Businesslife magazine