How the pandemic changed female perceptions of wealth planning

John Williams, Head of Wealth Planning, Nedbank Private Wealth, examines why so many women are seeking professional advice currently and what the industry needs to do help them improve their investing and financial planning strategies.

Tuesday 23 March marked the anniversary of the UK’s first lockdown as a response to the COVID-19 pandemic. The decision to effectively stop physical interactions between separate households, as much as possible, aimed to keep people safe from a disease we were only beginning to understand.

Now, 12 months later, the UK has vaccinated half its adult population, while the Bank of England’s chief economist, Andy Haldane, has talked of the UK economy as a “coiled spring” and “crouching tiger”, ready for a sharp rebound. However, I’m not so sure that psychologically we will be able to put the pandemic behind us quite so easily.

As I heard the numerous stories from clients about their experiences, one comment stood out: we were experiencing the same storm, but in different boats

As I heard the numerous stories from clients about their experiences, one comment stood out: we were experiencing the same storm, but in different boats. This has naturally prompted a range of different reactions.

One such reaction was flagged by Lee Goggin, in January, as findaWEALTHMANAGER.com hit the milestone that a quarter of its users were women. The Co-Founder of this platform noted that, while this did not seem particularly significant, given women make up slightly more than 50% the population, it was noteworthy since it came on the back of double the number of females getting in touch with his team in the previous 12 months.

People flocking to professional advice

This increase in people seeking advice isn’t just confined to this site and women. A recent panel at the FT Weekend Festival – online, of course – flagged that the latest lockdown has prompted many more to focus on their finances. It was encouraging to hear that 52% of 34 to 44 year-olds have updated their retirement plans, or are intending to. In the age group about to retire, 55 to 64, 34% have made, or are making, changes to their future finances. We also learned that some 9% of UK investors have been investing for 12 months or less.

In the age group about to retire, 55 to 64, 34% have made, or are making, changes to their future finances

Meanwhile, Boring Money highlighted the increasing number of women starting these critical conversations may be part of a longer-term trend. The biggest increase it has seen in the people getting in touch, over the past two to three years, is among women in their 50s and 60s. Many of them are divorced or widowed and have had to “confront their financial situation”. While it’s a generalisation, this is often the case because these women have delegated their financial decisions to their husbands. Without their support, they need help.

With advice, action can be taken based on the most appropriate options available to help meet financial objectives and to achieve the best possible outcome

Advice can help – whether to assuage concerns that there may not be enough money to fund retirement, or to rectify a mistake where the consequences became obvious very quickly. With advice, action can be taken based on the most appropriate options available to help meet financial objectives and to achieve the best possible outcome.

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Top Tip

As this piece explains, wealth management is far from the male-dominated industry people might think it is. There are abundant female relationship managers ready to serve you if that is your preference, but more importantly firms have developed a really acute sense of what today’s wealthy women need. Tell our smart matching tool what you require and we’ll quickly filter the market to a shortlist of suitable providers for you to talk to at your convenience.

Lee Goggin - Co-Founder

Lee Goggin

Co-Founder

An advice gap remains

The issue remains, however, that the wealth management industry hasn’t articulated the need for advice clearly enough to anyone. While women are more unlikely to seek advice, based on my experience, there is still a considerable number of men that would also rather muddle through than ask for counsel.

However, the issues are more pertinent for women in their 50s and 60s than for any other group. They are heading towards retirement and, while these are again generalisations as the original article stated, the average pension for women is typically around half the value of the average man’s pot, with females being 50% more likely to face retirement without any private pension savings. And yet typically, women will live between five to eight years longer.

The average pension for women is typically around half the value of the average man’s pot, with females being 50% more likely to face retirement without any private pension savings

This seems to jar with the view that many women are in charge of their household finances. My experience, however, is that may be the case today, but it was not always so. For women who started work in the 1970s, they needed a male guarantor to open a bank account, get a credit card or apply for a mortgage. It’s not difficult to appreciate, therefore, that the path that society defined for women earlier in their lives simply continued.

Education unlocks opportunities

But since we can’t turn back the clock, what can be done to redress this situation now?

Financial education is key. This has two immediate results.

Firstly, education allows everyone to understand the opportunities available and how much can be achieved through the creation of a wealth plan. This provides a roadmap for investing, the use of tax allowances and how to plan future finances, taking investment growth and inflation into account. It can also build in buffers, e.g. what would happen if the market were to fall in value by 30% in five to seven years’ time?

Firstly, education allows everyone to understand the opportunities available and how much can be achieved through the creation of a wealth plan

Coming back to those women who had gone through a divorce or were widowed, a wealth plan is even more important. For example, for those divorced, the courts and legal profession will often have assessed the split of assets according to a set of tables that resulted from the 1992 divorce of Mr and Mrs Duxbury. While they may be useful in allowing for a “clean” financial separation and a third-party view of what is equitable, they don’t provide any steer as to what that initial decision then leads to – wealth planning does.

In addition, divorcées or widows might suddenly be dealing with a sum far greater than they have ever managed. This is where cash flow planning can help. It plots out what can be spent, or gifted to family, or a charitable cause, without leaving their own financial future at risk.

Education builds confidence

Secondly, the education process can also help to simplify some of the potentially confusing terminology used by financial advisers. A colleague of mine recently pointed out that, for lots of people, a succession plan may be one a business implements to see who might take over a managerial role if it becomes vacant. For the wealth management industry, it means preparing for an estate to be passed on to the next generation over time, given that often people want their children and grandchildren to inherit family values as well as the money. Inheritance planning suggests that the owner of the estate has already died and that inheritance tax may be due.

Increased financial knowledge also leads to greater confidence. This assurance can enable women to easily articulate long-term goals and, as they gain clarity on their future finances, their confidence builds even further.

Increased financial knowledge also leads to greater confidence. This assurance can enable women to easily articulate long-term goals and, as they gain clarity on their future finances, their confidence builds even further

This confidence not only helps to initiate the conversation, but also to be able to push back when needs are not being met. Those that inherit wealth often immediately replace their existing wealth manager. They don’t feel they are being listened to, or are simply being steered down the same route as before.

The danger is that in moving firms, the new adviser may adopt the same approach. Unfortunately, this is primarily because the vast majority of advisers are men who have all spent time in multiple firms, as their careers have progressed, and have been taught “best practice”. In financial services, this often means that it has been copied, rather than evaluated as being the best possible process or option.

When clients first sign up to our services, the question is often asked whether they would like to talk to a man or a woman. At Nedbank Private Wealth, 49% of our client-facing team is female

When clients first sign up to our services, the question is often asked whether they would like to talk to a man or a woman. At Nedbank Private Wealth, 49% of our client-facing team is female. And while the vast majority of both sexes say they don’t mind, for those who do feel that the system is set up by men without taking women’s views into account, there is a choice.

What is important for us is that the conversation starts in the first place.

Important information

The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.

We always advise consultation with a professional before making any investment and financial planning decisions.

Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.

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