UBS - Women and Investing: Reimagining Wealth Advice

Women´s wealth is growing, and there is a trend toward women wanting and taking control of their finances. Women are not satisfied with the current advice they receive, and they tend to value the importance of expert advice more than men. A 2022 study by BNY calculated that if women invested at the same rate as men, there could be more than 3.22 trillion of additional capital to invest globally with over 1.87 trillion flowing into more responsible investing.

In this publication, we (UBS) review the differences between men’s and women’s wealth journeys and focus on how the wealth management industry can best support women in taking control of their finances. We start by looking at women’s wealth and the trend of women investing. We then look at how women tend to make investment decisions along with their needs and preferences. Based on these insights, we identify the key components for a compelling wealth management value proposition for women.

Positive momentum in number of women wanting and taking action

Over the past years, 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 they 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 situations and seek control of their destinies.

Furthermore, UBS’s 2021 Investor Pulse survey in 2021 showed that 68% of women had started talking more about finances within their families. However, only a fraction of these followed through with the actions they intended to take.

Nevertheless, financial participation has also increased among married women. A 2020 McKinsey report showed that 30% more married women were making financial and investment decisions than five years previously.

• 50% - 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.

• 67% - The survey also found that 67% of women are now investing outside their retirement plans, compared to 44% in 2018.

• 20% - 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.

• 68% - Furthermore, UBS’s 2021 Investor Pulse survey in 2021 showed that 68% of women had started talking more about finances within their families. However, only a fraction of these followed through with the actions they intended to take.

• 30% - Nevertheless, financial participation has also increased among married women. A 2020 McKinsey report showed that 30% more married women were making financial and investment decisions than five years previously.

What makes women’s wealth journey different?

Life events and situations

Many women’s life events and situations raise barriers to the creation of wealth. Apart from pay differences, career breaks and the greater need to work flexibly for childcare can also have a detrimental impact upon wealth. On average, women also tend to live longer than men, so their wealth-planning needs must often span a longer time horizon.

Investment risk tolerance

Often women are more reluctant to take financial risks than men, according to various research papers. This can also be seen in women’s pension allocations, which often favor bonds versus equities. According to a recent Nutmeg survey, just 3% of women are comfortable taking risks to achieve a good return, compared with 26% of men. Men’s favorite asset class is stocks, while that of women is real estate. Men also are twice as likely as women to hold crypto currencies.

Investment preferences, investment performance and purpose

Women are twice as likely as men to say that it’s extremely important that the companies they invest in incorporate environmental, social, and governance (ESG) factors into their policies and procedures. Furthermore, a preference for ESG investing isn’t limited to younger generations of women. A recent report from market researcher Cerulli found that the majority of women in the US under age 60 favor ESG investing. The UBS Investor Sentiment Survey has also highlighted that more women (71%) take into account sustainable considerations when investing compared to men (58%). Women also seem interested in investing in women. For example, in crowdfunding we see more women investors investing in women-led startups.

Reimagining wealth advice: Wealth management value proposition for women

The current advisory process experienced by women often does not meet their needs. Women often report they are not satisfied with their wealth management arrangements or financial advice, stating that they often feel their wealth managers simply do not understand their needs. Based on EY research, 67% of female investors globally stated that their wealth managers misunderstood their goals. This dissatisfaction is also demonstrated by the finding that 70% of women switch their wealth relationship to a new financial institution within a year of their spouse’s death.

How can wealth managers reimagine their advisory process? What are the key ingredients to help women achieve their goals? In our view, wealth managers need to reimagine their value propositions in the following ways:

1. Investment plan in the context of goals and needs

Personalized 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 optimized 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.

Cash flow for short-term expenses

The Liquidity strategy consists of resources needed to meet a family’s short-term cash flow needs, usually for the next three years. It's designed to help give an investor enough capital to have the flexibility for greater risk-return potential in other portfolios. This strategy can help investors, including women, with cash management and making sure that budgeting concerns do not affect investment decisions.

For longer-term needs

The Longevity strategy is focused on helping investors meet their goals over their lifetimes. Its aim is to ensure they’re invested in such a way that they have a high probability of meeting those objectives. Since women tend to live longer than men, this strategy can be especially useful in helping women put capital to work for the long-term when it comes to planning for retirement.

For needs that go beyond your own

Once Liquidity and Longevity strategies are adequately funded, investors can invest the remaining wealth in a Legacy strategy. The objectives of this strategy are the transfer of wealth over generations as well as having a positive impact on society—two goals that tend to be particularly important for women.

2. Sustainable and impact offering

We expect assets invested in these offerings to increase further in the coming years. As mentioned above, women tend to prefer investing in a way that is aligned with their values, and as their wealth increases, they are well-positioned to drive growth in sustainable investments and effect meaningful societal change with their investment dollars. Specifically, based on recent data from RBC Wealth management, 74% of women claimed they are interested in increasing the share of sustainable investments in their portfolios. Given the transfer of wealth to this segment, we would also expect to see continued growth in sustainable investments. In particular, we also expect a material increase in gender lens-investing. This is a strategy or approach to investing that takes into consideration gender-based factors to advance equality and better inform investment decisions.

As mentioned in the previous section, women tend to have greater confidence in getting their money invested when their values are aligned with their investments and when they see a social benefit. Sustainability-focused advice and solutions offerings can drive positive impact not only by encouraging more women to invest, but also through certain underlying investments’ ability to contribute to positive social or environmental progress.

3. Holistic, trusted advisor at pivotal times in their lives

Many women decide to take financial advice at pivotal moments in their lives such as divorce or widowhood. It is key for them to have a trusted advisor to help navigate the daunting task of taking control of their finances. Furthermore, advice should be holistic and reflect the entire financial situation. It should include wealth planning, estate planning, and a life insurance offering.

As mentioned previously, women are not a homogeneous group. Goals, experiences, and expectations differ, and advisors should carefully address their respective needs. This includes the needs of widows, next-generation daughters with inheritances, and entrepreneurs. For the latter segment, for example, it is important to understand and incorporate business needs into a wealth plan and offer truly holistic advice.

Want to learn more? Download the full report "Women and Investing: Reimagining wealth advice" to dive deeper into this topic.