The Markets October 17, 2017

Many Women Do Not Fit Their Investing Stereotypes

One of the most common stereotypes women investors face is low appetite for appropriate investment risk, but their investment preferences suggest otherwise, according to a survey.
Reported by

Women do not fit the negative stereotypes that have been attributed to them regarding finances, a poll finds.

According to a survey of 1,200 investors conducted by Capital Group, 81% of women investors say they have personally experienced negative stereotypes regarding finances, including their investing acumen, income, role in making financial decisions and appetite for risk.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“American women are a powerful economic force with $11 trillion of assets,” says Heather Lord, senior vice president and head of strategy and innovation at Capital Group. “Women are a complex and varied group of investors, and they have a clear vision for their investing goals. They want enough money to retire and to take care of children or aging family members. They want investments that outpace the market over time and show resilience in market downturns. And more than men, women want to invest in companies that are not only financially successful but also deliver economic and social benefits.”

More than half (52%) of women investors say they are always or usually confident they have the knowledge to make good financial and investment decisions. Half of Baby Boomer (50%) and Generation X (48%) women investors say their top priority outcome is to beat the stock market over time, while for 51% of Millennial women it’s to grow their investments in line with the market.

One of the most common stereotypes women investors face is low appetite for appropriate investment risk, but their investment preferences suggest otherwise. When asked about the investment approach that best aligns with their retirement savings objectives, only one out of 10 women (11%) chose the most conservative option: bank CDs and high-quality bonds with little or no money invested in the stock market.

In contrast, the top choice overall for about one in three women (30%) and men (33%) was a mutual fund with a track record of outpacing the stock market over the long term. However, women investors do not ignore the concern for market downturns. Nearly one in four women (24%) investors surveyed voiced their highest preference for mutual funds that do better than the stock market during downturns, compared to 19% of men, indicating a somewhat higher interest in downside protection on the part of women.

Of the generations surveyed, Millennials are most confident about investing and started earliest: 63% of Millennial women say they began to care about money and investing in their 20s; however, only 28% of Gen Xers and 16% of Baby Boomers say they focused on financial decisions and investments in their 20s. Millennial women across all races, as well as all three generations of African-American and Hispanic women, are much more likely than other groups to have concerns about paying for their children’s education and taking care of aging parents. In addition, 57% of Millennial women are concerned about having enough money to retire with peace of mind.

Generation X is the most anxious about retirement by far, having weathered the collapse of the dot-com bubble in the early 2000s and the 2008 financial meltdown, as well as sluggish wage growth during their formative adult years. Two-thirds of Gen X women (66%) say that not having enough money to retire keeps them up at night. Conversely, Baby Boomer women are the least worried about money in retirement (51%) and three in 10 (31%) say that nothing related to finances keeps them up at night. Boomer women are also most focused on reducing their losses during periods of market downturns, compared to Millennials and Gen Xers, given the need to preserve capital and generate income when they are closer to retirement age.

More information about the survey is here.

Client Service October 17, 2017

Vanguard Emphasizes Trust in Client and Adviser Relationships

A study suggests best practices for advisers to gain an investor's confidence.
Reported by

A recent Vanguard whitepaper highlights the importance of client and adviser relationships regarding trust, and how advisers can earn an investor’s confidence.

The paper, “Trust and financial advice,” found most investors place a large amount of trust in their advisers, with eight in 10 respondents (81%) giving their advisers a high trust rating in the study. However, on the other side of the spectrum, nearly one-quarter revealed they have had an experience that shifted confidence in a current or previous adviser.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“While we’ve inherently known that trust is vitally important to investors when working with advisers, we were able to uncover through our extensive research both the drivers of trust and practical ways advisers can build it,” says Anna Madamba, Ph.D., author and research analyst in Vanguard’s Center for Investor Research.

The study revealed the top two drivers of an adviser’s trustworthiness are “advocating for a client” and “acting in the client’s best interest,” and that high trust levels with investors can lead to optimistic business outcomes for advisers.

To gain trust, Vanguard recommends advisers practice ethical behavior by reinforcing a principled culture with oneself and in the work environment; assure that quality and pricing of products and services align with the client’s needs; be transparent with compensation arrangements; and focus on marketing and client experiences. Vanguard suggests offering a solid financial plan to investors; following efficient communication standards; and making sure the client feels valued and respected.

In fact, not paying enough attention to an investor or his portfolio was one of the main causes of distrust, according to the study. Forty-four percent of respondents indicated their reason for broken trust was because the adviser “did not pay enough attention to me or my portfolio.” The leading cause for broken trust, with 46% of respondents, was underperformance in the investor’s portfolio.

According to the whitepaper, trust in a financial advisory relationship is divided into three categories—functional; emotional; and ethical trust. Functional trust is described as the client’s confidence with the adviser’s credentials, qualifications and skills; emotional trust relates to “aspects of the relationship between the investor and financial adviser that bring about positive feelings or sensibilities in the investor;” and ethical trust concerns the adviser’s practices and behaviors in accordance with appropriate conduct.

Of the three, emotional trust was rated as the highest impact on overall trust. Ethical trust followed, with functional trust coming in last.

More information about the study can be found here. 

«