Female investors are on track to manage more than $4-trillion over the next decade, prompting the financial-services industry to rethink the way investment advisers conduct business.
Currently, Canadian women directly control approximately $2.2-trillion of personal financial assets, a number that will grow by more than 70 per cent by 2028, according to a report released this week by CIBC World Markets Inc.
“For the wealth-management profession, this won’t be business as usual,” say CIBC economists Benjamin Tal and Katherine Judge, co-authors of the report “The Changing Landscape of Women’s Wealth.”
The growth in assets will demand greater attention by the wealth-management industry when it comes to financial planning and advice for women whose financial situations often vary from those of men. Women are more likely to quit work, reduce work hours and forgo promotions to care for children, a spouse or an aging parent. A third of women also stop saving as a direct consequence of those care responsibilities.
Yet, while female investors will continue to have “unique financial needs” compared with their male counterparts, they should not be bucketed into gender biases that can cause them to lose ground when it comes to investment returns, says Kathleen Woodard, a senior vice-president with CIBC.
“The industry has to acknowledge that there is a risk among advisers who fall into the trap of treating men and women differently based on old assumptions that men are more comfortable chasing returns and women are risk adverse,” Ms. Woodard says.
“We have to be careful over magnifying any marginal differences between men and women, which actually misses the point and creates a gender bias that perpetuates the problem."
According to recent CIBC research, men and women are quite similar in terms of what they are looking for in their investment goals as well as in the financial advisers they hire.
Both men and women prefer an adviser who understands them, as a client, over one who understands the market, with 67 per cent of men and 78 per cent of women favouring a more “personalized goals-based" approach that allows them to know whether they are on track to retire comfortably. That left only 33 per cent of men and 22 per cent of women who preferred a “10-per-cent return on their investment.”
While the industry has started to make changes in how finances are discussed with women, it still has a long way to go, says Jackie Porter, a financial planner with Carte Wealth Management Inc. in Mississauga.
“The financial-services industry was never really organized to give women the information they were looking for, which includes a big financial picture that shows how everything is connected,” Ms. Porter adds.
Traditionally, financial advisers focused largely on investment products and rates of return with limited discussions on overall financial-planning needs. Only in recent years has financial planning become a bigger part of an adviser’s practice.
Today, one of the biggest hurdles, Ms. Porter says, is educating women and having face-to-face discussions on what risk really means and the impact of inflation. “At the moment, conversations are not holistic enough.”
Another prevalent hurdle is a lack of confidence among women regarding financial matters, with 46 per cent of women admitting they do not have confidence when it comes to investing.
Mary Hagerman, a portfolio manager with Desjardins Wealth Management in Montreal, says one of the key discussions she has with female clients is identifying their risk profile appropriately – which she continues to see them identify as more risk adverse.
“Women might be saving or earning more, but [their portfolios] are not growing at the same pace [as men] because often they are much more conservative,” Ms. Hagerman says.
“So every opportunity we can take to discuss their risk profile and how equities work during different phases of the economic cycle helps women understand their money better, and shows the benefits of investing more aggressively over time.”