Overlooked and underserved: Advising female investors

As women’s investment behaviour continues to evolve, industry professionals argue that financial advisers are missing out on a promising group of clients. 

The growing number of female investors in Australia reflects the shifting scales in the wealth management landscape. 

Research from Fidelity International in 2022 identified that seven in 10 women were motivated to achieve financial independence. Moreover, two in three women said they wanted to take greater control of their financial future, but were unsure what to do from there.

Lauren Jackson, sales director at Fidelity International, reflected on the change occurring in the Australian investment space. 

“There is no doubt that attitudes of women towards investing have evolved in the last decade. The proportion of women who are starting to invest is picking up pace, but still lags behind men,” Jackson commented. 

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On the occasion of International Women’s Day on 8 March, Money Management spoke with Bianca Hartge-Hazelman, CEO and founder of software provider Financy, to discuss the trends surrounding women’s investment. 

“There is definitely a bigger appetite among women to learn more about investing and take action on those learnings,” she said.

“What I believe is driving this growth is the desire for financial independence and financial know-how. It's not having to rely on anyone else to give you financial security and being proud of what you have achieved as an investor.”

The founder noted that as women earned more, regardless of relationship status, the desire to engage with investing became more palpable. 

The emerging affluent cohort

A report conducted by Netwealth in 2022, which surveyed over 1,300 Australians aged 18+ including 681 women, examined the current wealth needs of Australian women and noted a particularly attractive subset.

Its findings reflected a noticeable wealth transfer occurring from men to women, underpinned by more married women making household wealth decisions, women outliving their male partners and the emerging number of younger, educated, affluent women.

Classified as women aged 45 years and under, this emerging affluent group had to meet a series of criteria including a personal income greater than $100,000 or a household investment portfolio of over $250,000.

Out of the 13.9 million women in Australia aged 18 and over, 1.6 million were categorised into this subset. 

Nearly 60% of the segment agreed or strongly agreed that they felt engaged with their investments, whilst also demonstrating higher levels of financial literacy than older female generations. 

Moreover, emerging affluent women were the most likely to seek financial advice out of the total 3.5 million women considering the use of an adviser. 

With 32% of the subset already seeing an adviser alongside 34% who were considering one, the figures posed a bigger question: are advisers overlooking a promising group of clients? 

According to Andrew Braun, Netwealth’s general marketing manager: “Young women with high incomes are the group most likely to seek advice and be engaged with their investments. 

“For advisers, women may be one of the most underserved and also most promising segments of the advice market,” he continued. 

Fidelity’s Jackson recognised that whilst investment had traditionally been daunting for many women, she was seeing a change. This particularly applied to women under 45 who were looking to take more control over their financial wellbeing and increase their investment knowledge.

This growing awareness of prioritising one’s long-term future was driving the upward trend of women investing, according to Jacqueline Fernley, chief investment officer at Mason Stevens.

“Additionally, the growing number of female role models, leaders, mentors, and influencers in the financial industry are inspiring and motivating more women to take control of their financial futures,” the CIO told Money Management.

Gender differences in investment

Despite the positive trends occurring in women’s wealth, the investment gap between men and women’s portfolio returns remained discouraging. 

Research conducted by McKinsey & Company surveyed almost 3,000 women and 2,000 men from Western Europe in the affluent, private banking, and high-net-worth investment markets.

Women’s portfolios equally consisted of 32% equities and 32% fixed income investments, whereas men were heavier in equities at 45% and only 24% in fixed income.

The differing portfolio allocation led to the surveyed women having an average portfolio return of 5%, compared to 6% for the men.

Whilst the difference seemed minor on the surface, it translated to a gap of €5,000 to €10,000 between men’s and women’s annual investment returns.

“I believe that this presents a significant opportunity for the finance and investment industry in Australia to step up and do more to support women,” said Jackson.

Netwealth also exposed that less than one in five women felt very confident about achieving their investment goals. 

“Many women are underprepared for their growing wealth management responsibilities and financial security needs. Advisers ignore this segment of the market at their own peril,” offered Braun.

With women exhibiting less investor confidence and less risk-taking behaviour, advisers would play a crucial role in providing them with peace of mind to mitigate financial uncertainty.

Educating women on the importance of portfolio diversification could also support them to better meet their financial goals as women tended to favour commonly-known asset classes such as Australian equities and term deposits.

“We know people who receive financial advice tend to be more confident and positive about their financial situation. Advised women have more confidence in their capabilities, they’re five times more likely than unadvised women to rate their knowledge of financial matters as very good,” Jackson noted. 

How can advisers bridge the gap?

For financial advisers to start tailoring their service offering to women, they need to better understand their investment behaviours and attitudes and how they differ from men.

When asked what financial success looked like to them, Netwealth’s survey found that 54% of women listed financial security, 39% said freedom and another 39% chose stability. ESG concerns were also important to 65% of women when considering investment products, with these issues particularly mattering to the emerging affluent cohort.  

Fernley said: “These women often need more comprehensive advice around retirement and estate planning, as well as investing for long-term growth and building a legacy for their families. 

“Financial advisers who specialise in serving this segment can certainly benefit from the opportunity to help these women achieve their financial goals,” she concluded. 

Netwealth also discovered that 81% of women said the client experience and service of a firm was important to them. Advisers were encouraged to build a tailored advisory service, meeting the specific needs of women, to acquire and retain them as long-term clients. 

Hartge-Hazelman said female investors in their 20s and 30s were one of the most lucrative segments of the market. 

“You want to attract women who are gearing up in their careers, are starting to earn good dollars and who are looking for how they build up their financial progress story,” she said.

Advisers should also clarify, rather than assume, whether the woman wants a coaching relationship, where they rely on the adviser to provide information and ideas or an outsourced relationship where the adviser provides support by carrying out the tasks for them.

Jackson said: “Women do want to feel empowered. They don’t want to be told what to do - and are keen to learn and make informed decisions for themselves. Advisers can play a key role in building that knowledge and confidence”.