Our Views

Women and wealth: how taking control is empowering

If there was a quote that sums up the mission behind International Women’s Day 2021, it’s this one: “A gender equal society needs empowered women and girls who take control of their lives, make their own decisions, and succeed in their chosen pursuits.”

We believe one of the ways women can feel empowered is to take control of their financial lives. A mission that is close to our hearts in the work we do with clients – women and men alike.

WOMEN’S EARNING POWER GROWS

Women have been making huge strides in recent decades. According to a recent report by Boston Consulting Group (BCG), women now control 32 per cent of the world’s wealth and are accumulating it at a faster rate than any time in the past, adding $5 trillion to that share each year.

As the BCG study also notes, women tend to approach investing their wealth in a different way than their male counterparts. Generally, men have a greater tendency to base investment moves on instinct, while women make more of their decisions with data. In the long run, research finds women’s cautious approach results in outperformance, as they are less likely to sell when the market dips and often have more diversified portfolios.

WHY THE CONFIDENCE GAP THEN?

“Women are typically successful and patient investors—the research suggests even more so than men,” explains Newport Associate Portfolio Manager Amélie Beauregard. “But where we sometimes see women lag, is in their confidence around managing money.”

While there are many who feel truly empowered, still others admit to being less confident—even embarrassed—because they think they should know more about managing their money. Particularly when they are high achievers in other areas of their lives.

Case in point: a highly-respected female lawyer who spends her day litigating complex cases confided to us, “Every time I see my broker I come away feeling stupid because I think I should know more… and I don’t like feeling stupid, so I avoid it.”

It may be because, according to the BCG report, many women feel like they can’t ask basic financial questions of their advisors. “All too often, women have felt under-serviced by the financial industry,” adds Beauregard. “But thankfully, this is changing. It must, as more and more women become powerful creators and holders of wealth. They should expect and deserve more.”

HOW TO TAKE CONTROL OF YOUR FINANCES WITH CONFIDENCE

Admittedly it is our bias, but we believe achieving greater confidence and financial well-being—regardless of gender—means having a solid financial partner – someone or a team of people working with you in your best interests, and giving you good wealth planning advice, as well as investment management expertise.

A good wealth manager should work to understand your unique circumstances and help you develop a plan for your future that you can feel comfortable about. A recent study found that at the highest level, high-net-worth individuals look to their advisors for ongoing guidance to help them reach their goals (90%), help them avoid costly financial/investment mistakes (84%) and provide ongoing monitoring of their goals versus actual results (81%). These attributes were the most important after investment management.

Everyone’s plan will be different. Maybe yours puts you on a path to early retirement, allows you to purchase a dream home or to start a philanthropic foundation. Or maybe it’s more basic than that. As one successful female investor said: “I now know where my money is coming from and where it’s going. I know my assets and liabilities—that’s empowering.”

A key part of being able to achieve your plan with the greatest amount of comfort is your Investment Policy Statement (IPS), which outlines how your money will be invested. Think of it as guard rails on your roadmap that helps determine your target levels of return, your risk tolerance, projected annual income requirements and (maybe most importantly) makes sure you and your money manager are aligned by setting targets that allow you to chart progress against your plan.

Every one of our clients at Newport has an IPS for their money.

Another thing to keep in mind: While women’s investment prudence can be an asset, being overly-cautious is a detriment. BCG’s research indicates that women tend to hold larger cash balances of about 30 per cent of their investable assets, which over time can drastically impact their wealth. One should be careful about letting idle cash build up to amounts that exceed your spending and short-term savings needs.

Lastly, communication and education. Your wealth manager shouldn’t just have impressive credentials and advanced skill sets, they should also be willing to really listen and learn about your preferences, your level of interest and experience in managing money, your desire to learn more (or not) and how you like to learn best. They should communicate in a way that makes sense to you.

So, on this International Women’s Day, let’s celebrate the women who feel self-assured in the management of their money, while supporting and encouraging those on the journey to financial empowerment. Wherever you are on that continuum, we will meet you there. This is a message we shared in a recent video created for our sponsorship of the Women + Wealth Gala today and it is a direction we try to pursue every day.

If you haven’t already read it, our recent interview with economist and trailblazer for women, Maureen Farrow, is a great example of a woman in full control of her finances and at the forefront of her industry.

If you’d like to discuss your financial roadmap or review your portfolio strategy, please get in touch with us at any time.