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The Seismic Shift in Female Clients’ Expectations Since COVID

Wealth Management

By Greg King, CFA  |  May 12, 2021

The impact of the COVID-19 pandemic on women has been serious, wide-ranging, and regressive. Already studies have shown that women across the world have been disproportionately affected by loss of income and employment compared to men, even while increased caregiving and homeschooling responsibilities have fallen predominantly on female shoulders.

An emerging concern is that the effects of the crisis could extend past the here and now and into women’s longer-term financial security. Our latest research study with Aon, conducted across five financial centers, shows that female investors are bearing the brunt of a challenging market environment, which has left some of their financial plans in disarray.

Consequently, female clients now look at their wealth and investments differently, with implications for how their financial advisors should serve them. Specifically, female investors are now expecting and hoping to receive better guidance on the impact of volatility and clearer investment advice on how to adapt their portfolio strategies to an era of lower dividends and higher corporate indebtedness.

Financial Plans Disrupted

The highs and lows of the rollercoaster ride taken by financial markets since the onset of the pandemic in March 2020 have left many investors unsure of their next steps. This hesitancy may be a good thing, as changing an investment strategy—with all the real-world implications for retirement and financial plans—should involve careful consideration and financial advice.

Female investors, who are feeling the squeeze on earning capacity, are already adjusting their risk profiles: 28% say they have become more risk averse because of 2020’s volatility spikes (compared to 20% of men). More than one in three women (35%) feel they need to change their spending plans and reduce daily outgoings to mitigate the impact, compared to just over one in four men (27%).

Female clients’ concerns go deeper than just the state of the markets. They are far more likely to cite health risks—to their own health or their loved ones—as a top of mind concern. Their medium-term worries include retirement plans being disrupted by macroeconomic uncertainty and that they may struggle to draw income from their portfolios [Figure 1].

Adding to the strain is the simultaneous pressure to maintain their financial commitment to other priorities. In fact, 87% of female clients say they are determined to keep up or increase the level of healthcare and retirement saving.

Unsurprisingly, a larger proportion of female investors than male do not currently feel secure or confident about their financial futures.

Health and financial well being

New Scenario Planning Tools Needed

Female investors’ changing risk profiles have an impact on the topics they want to discuss with their advisors.

When asked to identify their dominant concern for their portfolios, 47% of women cite volatility in financial markets. In contrast, male clients point first to low or negative interest rates and changes to the dividend environment (48% and 46% respectively).

Advisors must address this emerging trend of investors perceiving different threats and opportunities on the horizon in scenario planning discussions. One specific scenario that is troubling investors of all backgrounds is the potential for disruption from the pandemic acting as a drag on portfolios for most of 2021 and into 2022—considered likely by 82% overall.

Female clients want to go deeper on some of these top-of-mind issues, pointing to further planning to mitigate the prospect of significant global and domestic stock market drops [Figure 2].

This is not surprising against the backdrop of rising risk aversion. But what’s striking is that women have higher expectations of their advisors’ responsibility to manage specific risks for their portfolio, especially investing in credible products and ensuring asset allocation is appropriate. This points to a proactive role for advisors in building resilience into portfolio strategies, as well as communicating why these steps will help.

Sudden stock market declines are concerning female investors

Responsibility, As Well as Diversification

Diversification has long been the guiding principle of portfolio construction, reassuring clients that risks have been appropriately mitigated for unexpected shocks. The COVID-era has of course heightened concern with volatility, but the economy-wide impact of the pandemic has also intensified other relevant portfolio priorities.

For instance, 77% of female investors are trying to avoid high levels of corporate indebtedness, while roughly three quarters are now seeking to adjust to the lower dividend environment or inflated valuations [Figure 3].

Diversification should not be the focal point of portfolio construction discussions, with a broader set of metrics now required in the investment process. Female clients say they also want transparency over which brands they are investing in, so they can focus on ones with a strong ethical focus, as well as explore emerging sectors of interest.

New portfolio priorities are emerging

Conclusion

It is certainly a risk when reporting insights from “female clients” that the findings lend themselves to unhelpful generalizations. Instead, the latest research should be food for thought in wealth firms’ discussions of how to deliver a better advisory experience.

An unintended consequence of the pandemic year is that clients are now acutely aware of the emerging macro and micro threats on the horizon. Rather than sticking to the old ways of operating, advisors must carefully consider which topics and principles of the investment process are moving up the agenda, so they can be comprehensively addressed in portfolio discussions.

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Greg King, CFA

Senior VP, Senior Director, Wealth Management and Digital Solutions Strategy and Product Development

Mr. Greg King is Senior Director, Wealth Management and Digital Solutions Strategy and Product Development at FactSet. In this role, he focuses on the allocation of resources for all areas of the Wealth Management business; from market research and product development to implementation of a parallel sales and marketing plan. Mr. King moved to London from the U.S. in 1999. Prior to leading FactSet’s Wealth Management Strategy, he spent eight years as Director of Workstation Solutions for the EMEA and APAC regions, and before that, was Vice President, Institutional Sales in FactSet's UK Investment Management region. Mr. King earned a degree in Economics from Boston College and is a CFA charterholder.

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