Data & Research February 3, 2015

Affluent Women Cite Comfort with Investment Risks

A majority of high-income women feel comfortable taking risk in investments, feel fairly knowledgeable about financial products and possess advanced degrees, according to Spectrem Group.
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While they are younger on average than the general population of affluent investors, high-income women do not lack financial expertise. A report released by Spectrem Group finds more than six in 10 high-income women feel they are fairly knowledgeable about financial products and investments, but most also feel they still have more to learn.

When it comes to selecting investments, high-income women report risk and diversification as the two most important factors they consider, with 93% considering the diversity of the investments and 86% considering the reputation of the companies where the investments are made. Additionally, a majority (54%) are willing to take a significant investment risk on a portion of their investments in order to potentially earn a higher return, compared to 32% of all other affluent investors.

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The survey revealed that more than 93% of high-income women have a college degree, and 63% have an advanced degree beyond undergraduate work. Almost all (90%) credit education as one of the most significant contributing factors to their wealth creation. High-income women report the financial situation of their children or grandchildren as one of their most important personal concerns, and more in this group are focused on financing the education of their children compared with the overall affluent population (47% versus 25%, respectively).

Given their sophistication as investors, the Spectrem report encourages advisory firms to be prepared to provide the appropriate analysis and in-depth information needed when servicing high-income women. Their personal concerns drive many of their financial decisions, and many of these women are business owners, meaning a holistic financial approach combining business and personal goals can be appealing. Additionally, 43% of women say they enjoy investing and it is something they do not want to give up, while another 43% say they like to be actively involved in the day-to-day management of their investments. 

Opportunity presents itself for advisers specifically with estate planning, Spectrem finds. Less than 20% of high-income women own long-term care insurance, for example, which is well below the percentage for all affluent investors.

Other findings reveal that high-income women are more likely to use a financial adviser compared to all other affluent investors, with 81% using an adviser, compared to 74% of others. However, these women are more likely to be dissatisfied with their adviser. Research revealed the following statistics regarding high income women and their adviser relationships:

  • When rating their adviser, 59% of high-income women report overall satisfaction; 67% report satisfaction with the adviser’s knowledge and expertise; 74% are satisfied with responsiveness to requests; and 60% say they are satisfied with performance.
  • More than half (53%) say they rely and trust their adviser for the vast majority of financial needs. With certain types of investments, such as real estate or alternative investments, 51% rely on an adviser, compared to 33% of all other affluent investors.
  • Over half (54%) want a same-day response to a telephone call, and 58% expect a same-day e-mail response from their adviser.
  • High-income women are more frequent users of all social media platforms, with 70% using Facebook, 66% using LinkedIn, and 30% accessing Twitter.

The “High Income Women” report was compiled from an online survey of high income women conducted by Spectrem Group. For the study, high-income women are defined as those whose annual household income exceeds $200,000.

Products February 3, 2015

ETF Boutique Acquisition Reflects Growing Demand

With plans for a new exchange-traded fund platform branded under New York Life’s MainStay Investments business, one investment solutions provider says it’s time to double down on ETF offerings.
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IndexIQ is by no means the only investment strategy firm hoping retirement plan sponsors and advisers will grow more comfortable with the use and promotion of exchange-traded funds (ETFs) among retirement plan participants—but it is putting its money where its mouth is, says CEO Adam Patti, and has done so since its launching its first ETF in 2009.

The firm recently reached a definitive agreement with New York Life Investment Management through which IndexIQ will rebrand its services as MainStayIQ, gaining the scalability and support of the $101 billion MainStay Investments organization. The end vision of both firms is a robust MainStay ETF platform, Patti notes, but that step is still some ways off: “Step one is to close the deal.” He says the transaction remains on track and is expected to close in the first half of 2015.

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Patti says New York Life’s MainStay Investments business will leverage the acquisition of IndexIQ to enter the ETF market “with dominant position in alternative ETFs,” adding that the move is New York Life’s first entry into the ETF industry. Judging from this deal and other factors, such as a wealth of investment industry research showing continued strong growth in ETF assets, Patti feels 2015 will be a big year for ETFs, especially those offering exposure to alternative investments.

“Many solutions in this space are just reaching the point of having the 5-year track record that is so important from the plan sponsor performance evaluation perspective,” Patti observes. “What gets us excited is being able to present the 5- and 6-year track records for our liquid alternative strategies. In our case, the performance has consistently been strong and we are taking this message out into the marketplace.”

Patti also anticipates a favorable reaction from both plan sponsors and advisers once they see New York Life branding on a liquid alternative ETF. “As you see these solutions starting to be offered under an iconic and trusted brand like New York Life, that’s an indicator about where the investment markets are moving on ETFs.”

The movement towards mainstream continues for traditional and alternative strategy ETFs, he adds, and the retirement markets are slowly taking note. “It’s always been something of a struggle, as a small firm, to prove to people that we have staying power, and that we’re in it for the long term,” Patti explains. “My answer here is just to say, look at the amount of due diligence New York Life is putting us through, and you can be confident we’re a solid company.”

The same would probably go for other boutique ETF companies forming alliances with big brand providers, he predicts. “The bottom line is that having the New York Life brand on these ETF solutions will be impactful.”

Another favorable result for IndexIQ of the acquisition by New York Life, Patti says, is the firm’s robust marketing and outreach capabilities.

“Hooking up with the distribution power of MainStay Investments is a big opportunity for us, as a boutique ETF provider,” Patti says. “Looking at their 200+ sales and marketing folks, we are seeing a lot of opportunity to really scale up what we currently do.”

Patti says part of establishing the new MainStay ETF platform will be “continuing the expansion of our solution set to allow advisers to find new ways to construct effective portfolios for retirement savers.”

In this sense, Patti feels defined contribution (DC) plan sponsors and advisers can take a page from their pension plan counterparts. Alternative investments have been important for large pension funds and other big institutional investors for many years, he notes, but now it’s trickling down to retail investors and individual DC plan participants, along with a willingness to try new investment products like ETFs.

Other industry experts suggest a competitive retirement plan services market is pushing advisers and plan consultants into new territory, and could lead to greater adoption of exchange-traded funds in DC plans.

“Our simple message for plan sponsors is that, given their fiduciary duty to ensure reasonably priced investment portfolios, ETFs absolutely should be a part of their retirement solutions,” he concludes. “At this point many retirement programs are still waiting for the leaders to show what is possible with ETFs. The typical sponsor may have heard of ETFs, but they don’t have them on their plan menu just yet. We hope this will change.”

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