While many wealth management firms and financial advisors believe that men and women have the same financial needs, research shows that a more customized approach may serve women better.(1) When developing an investment framework, it’s vital to understand how women view financial success. For most women, financial success is a means to live and improve their lives.
A recent PIMCO survey showed that women rank health and wellness on par with financial longevity.(2) By contrast, male investors typically prioritize market outperformance as their primary goal.
There also tend to be marked differences between men’s and women’s investment decision-making and behavior. Three behaviors that tend to differentiate men and women from an investment standpoint are: confidence in investing abilities, portfolio risk tolerance and financial discipline. As highlighted in UBS’ Own Your Worth survey, research shows that “women consistently underestimate their own abilities while overestimating what is required to be financially involved.” Women’s lack of confidence in their financial literacy and the belief that it is too complicated or that they don’t know where to begin are some of the primary reasons women invest less than men.(3)
WHAT WORKS? PERSONALIZED ADVICE AND GUIDANCE
Education is key to overcoming this hurdle. Financial advisors who take the time to provide comprehensive explanations can help women become more comfortable with investing.
While men and women are both willing to take risk, women are more comfortable taking calculated risks that are based on the certainty of achieving their goals. Women take a more “fact-based” approach, however; this can make them less willing to invest in the capital markets.1 Higher cash balances and an over-allocation to low risk investments, including fixed income, can dampen returns. Thoughtful financial planning can help women take an appropriate amount of risk aligned with meeting their goals.
Lastly, on average women are more disciplined investors than men; they trade less and are less likely to try to time the market.(4) Women tend to stick to a long-term plan, which discourages buying and selling assets opportunistically. By contrast, men trade more over time, which detracts from their portfolio returns, with the result that women’s investment portfolios often outperform men’s, assuming the same level of risk.(5)
These findings are supported by a UC Davis study that found women beat men by an average of about 1% annually on a risk-adjusted basis.(6)
A FRAMEWORK FOR IMPROVEMENT
Given what we know about the differences between men and women, it is important to have a way to address these differences.
UBS Wealth Way can be an effective approach to help prioritize and pursue personalized goals and objectives. Starting with questions and a discussion, UBS Wealth Way helps you to focus on what’s really important. This allows your Financial Advisor to help organize your financial life into three key strategies:
• Liquidity to help provide cash flows for short-term expenses
• Longevity for longer-term needs
• Legacy for needs that go beyond
one’s own
This framework allows women to define risk and returns based on the financial and personal goals that are uniquely important to them. 74% of investors say that this approach helps ease anxiety about their financial future, no matter what’s happening in the market.(7) Recent research also indicates that what women want aligns with these three key
strategies.
Read more on the wealth way framework for women as well as detailed guidance on considerations for women during estate planning in UBS Matriarchs on the Rise. Then,
let’s talk. Contact us at [email protected]
Information for this article was provided by UBS Financial Services. For more information, visit ubs.com/women or call (213) 972-1561. Main contributors: Emily Brunner and Kristin Kostiw
UBS Wealth Way is an approach incorporating Liquidity. Longevity. Legacy. strategies, that UBS Financial Services Inc. and our Financial Advisors can use to assist clients in exploring and pursuing their wealth management needs and goals over different time frames. This approach is not a promise or guarantee that wealth, or any financial results, can or will be achieved. All investments involve the risk of loss, including the risk of loss of the entire investment.
As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business, that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. For more information, please review the PDF document at ubs.com/relationshipsummary. IS2005857
1 Zakrzewski, A. et al. Managing the Next Decade of Women’s Wealth. Boston Consulting Group 2 Shanahan, E. R. Women, Investing and the Pursuit of Wealth-Life Balance. PIMCO 3 Own your worth. UBS (2018)
4 Odean, T., Barber, B. M. Boys will be boys: Gender overconfidence and common stock investment.
Quarterly Journal of Economics (2001).
5 Taking Action. UBS (2017).
6 Gender Differences in Investing. UC Davis (2012).
7 2019 UBS Global Wealth Management survey of more than 6,200 high net worth global investors (with at least $1 million in investable assets). Survey results are based on investor responses (either “agree or disagree”) to a specific question about organizing their assets according to the approach with Liquidiity. Longevity. Legacy. strategies. In this case 74% said it will help ease their anxiety about planning for their financial future.
