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The financial landscape in the UK is changing and 60% of wealth is projected to be in women's hands by 2025¹. That means there’s a growing need for financial advisers to adapt their advice strategies to better serve this growing demographic.

So what are the considerations for financial advisers to create more tailored and robust, goal-oriented investment strategies that accommodate women’s needs and preferences?

The psychology behind risk and female investing

A well-documented human bias called “loss aversion” says that losses impact investors twice as much as acquiring gains. And recent research from the University of Bath School of Management² found that women are particularly sensitive to potential losses, which can make them appear more risk-averse in financial decision-making. This is further supported by a recent study we’ve conducted which reveals a significant risk aversion amongst older women³.

Three-quarters of women aged 55+ feel uncomfortable with financial uncertainty, while over half of women generally prioritise avoiding losses over potential gains when making financial decisions. 66% of women in the same age group prefer traditional bank accounts over other investment options, compared to just 47% of younger women aged 18-34³.

This highlights a clear trend that women, especially as they get older, prioritise financial security and stability. This cautious approach can be particularly beneficial in volatile market conditions, as women are less likely to make impulsive decisions based on short-term market fluctuations.

The majority of financial female wealth in the UK is held by this generation of women, who are living longer than their spouses and inheriting their wealth⁴. This shift can be a stressful time, often as a result of bereavement or divorce, so it’s crucial that financial advisers provide tailored support to help navigate these significant life transitions.

Understanding typical gender biases 

Our research shows only a third of women feel confident about their retirement savings, compared with over half of men⁵. This lack of confidence stems from the financial challenges women face, including the gender pay gap and career breaks that often come with raising children - which can see women missing out on as much as £136,000 in pension savings compared to men⁶.

By focusing on long-term, goal-oriented investing, we can help close these gaps and empower women to build more secure financial futures. And while women may be more risk-aware, this doesn't mean they're totally risk-averse.

Instead, they tend to take a more holistic, goal-oriented approach to investing⁷. They are:

• More likely to invest for the long term and less likely to sell during market dips
• Inclined to consider their personal values such as environmental, social and governance (ESG) factors in their investment decisions
• Wealth is often seen as a means to specific ends, such as funding retirement, leaving a legacy or making a social impact
• Invest less frequently, which can result in lower fees and potentially higher returns over time

Bridging the gender investment advice gap

Recognising typical gender biases in financial services is crucial, as it allows advisers to consider how they can better serve their client base. Additionally, understanding the specific financial challenges women often face, such as career interruptions for caregiving or longer life expectancies, can help advisers tailor their strategies more effectively too. 

Financial advisers can better serve their female clients by addressing women’s unique financial experience through a multifaceted approach. This includes providing education to bridge knowledge gaps, focusing on goal-based planning aligned with women's long-term life goals, communicating clearly about risks and benefits, offering ESG investment options to cater to values-based preferences, and maintaining regular check-ins to provide reassurance and adjust strategies as needed. Providers and advisers both have a key role to play in empowering women to make informed financial decisions while respecting their unique perspectives on wealth and risk.

Empowering women in finance

Understanding and supporting female investors is not just about tapping into a growing market, it's also about retaining clients through major life transitions. Many women change financial advisers after experiencing a significant life event such as divorce or the death of a loved-one. By building strong, trust-based relationships with female clients from the outset, advisers can provide continuity of service to help them through these transitions.

As the financial industry evolves, those who recognise and value the unique perspectives and needs of women investors will be best positioned to succeed. By adapting the approach, advisers can play an important role in empowering women to take control of their financial futures, ultimately leading to better outcomes for all.

Sources:

1. How industry can help women in the great gender wealth transfer - FTAdviser
2. Women feel the pain of losses more than men when faced with risky choices – new research (bath.ac.uk)
3. LV= Wealth and Wellbeing research, Waves June 2023 to March 2024
4. Advisers must engage with women when it comes to wealth transfer - FTAdviser
5. LV= Wealth and Wellbeing report (December 2023)
6. Gender pensions gap | Fair Pensions For All (nowpensions.com)
7. Boston Consulting Group – Managing the Next Decade of Women’s Wealth (April 2020)