Practical analysis for investment professionals
02 December 2016

The Female Asset Mix: Value Investor or Investor in Values?

There is no distinct definition of “female asset mix,” but the term deserves consideration.

All too often, people use broad generalizations when discussing masculine and feminine qualities and the differences among them. In this context, however, the term “female” is a proxy for a client with more of the conventional feminine traits and interests to consider.

How is a client’s optimal asset mix determined?

Portfolio recommendations are largely based on an individual’s objectives — risk and return — and constraints — time horizon, tax issues, legal restrictions, and unique preferences. These factors are clearly outlined in an investment policy statement (IPS) and it is these inputs that drive the asset allocation decision.

All good advisers cover the “unique preferences” section of an IPS by having in-depth discussions about the merits or values that their clients find important. But these values are not always explicitly included as inputs to the asset mix calculation.

How should we determine an asset mix for a female client?

In order to properly construct a portfolio for a woman client, we need to discuss all of the items in our standard IPS. We also need to include the softer investment objectives referred to as feminine values.

What do I mean? In my 2013 Rich Thinking white paper, I asked 100 accomplished women around the world two important questions: “At this time in your life, how are you spending your personal time, energy, and/or money?” and “What are you most passionate about and why?”

I discovered that women invest much of their time, energy, and money into specific causes and concerns that matter to them. In fact, many of the women I interviewed mentioned investing sizable amounts of their investable assets outside of their traditional equity portfolio. They wanted to spend money on the things they are passionate about — the personal causes and private businesses that reflect their core values.

Assaf Weisz, co-founder and partner at Purpose Capital, noted that “there is a generational change happening and the new narrative revolves around how we now view money as an expression of values. Because women and millennials don’t see their wealth and values as being distinct and separate, there has to be a level of emotional intelligence in working with these clients in the future.”

It is important to understand that a woman’s definition of investing is much broader than just stocks or bonds. Women want to make a difference.

How do we determine what our female clients value?

The first question to ask is: “What are you trying to accomplish through investing?”

For the women I interviewed, investing is a means of taking control and becoming financially independent. They have an interest in building their knowledge and their wealth.

Bonnie Foley-Wong, founder and chief investment innovator at Pique Ventures, had these tips:

“My advice is to help people think about why they are investing. What outcome do they want? Are they making an investment to support innovation, because they like a company’s values, or maybe because they believe in entrepreneurship? Maybe they just want to learn how to invest and meet other investors.”

The second question should be: “What really matters to you?”

This is a simple enough question to ask, but you must listen very carefully to the response.

A female executive shared that she used to work with a broker who had her portfolio allocated in mutual funds. On several occasions she asked her adviser about alternative investments and social impact investing, but all she got in return was a blank look. Eventually she realized that her broker was only interested in selling her bank products, so she decided to do her own investing.

Anna Ponten, partner at Deloitte Sweden, explained her views on the importance of an in-depth discussion between client and adviser:

“My adviser needs to get personal enough to understand MY needs, not general needs. The difference between a good adviser and a bad adviser is their ability to adapt to the person in front of them. You could have a very informed client, but their needs may not have been sufficiently explored.”

The next question must be: “How are you defining success and who is that success for?”

Here is where it gets interesting, and this conversation will certainly separate the professionals from the robots!

Hamoon Ekhtiari, a Canada Millennium Scholar, described the evolving role of advisers:

“Ultimately the heart wins when it comes to how we make decisions. I think the role of women in finance is to help us to think deeper, feel more, and build better organizations. . . . A big trend for the future is using finance as a powerful tool for good. Rather than the old ‘keeping up with the Joneses,’ you need to ask your clients how they are defining success and who is that success for?”

Let’s add value to the IPS.

As a portfolio manager, I have had many discussions about investment objectives. Often clients aren’t sure what is important to consider, so they might quip something along the lines of “deliver a high return with no risk.”

The greatest benefit of an IPS is that it acts as the point of reference for all portfolio discussions.

It is our fiduciary responsibility as advisers to make sure we have a deep understanding of our clients’ investment objectives and constraints. Their values are just as important.

In the same way that we need to remind our clients to ignore market volatility or political instability and focus on their long-term return objectives, we may also have to remind them of those stated values.

If investors aren’t clear as to their values, they will be vulnerable to scare tactics, mass marketers, and dubious investment sales pitches. By helping clients take personal responsibility for their values, they will have a better appreciation for our investment recommendations and will find it easier to stick to their plan.

Adding a V (for values) to the IPS acts as protection for both the adviser and the client.

So is it time for the female asset mix?

I say yes, but not just for women!

According to Ashvin B. Chabbra, author of The Aspirational Investor and president, Euclidean Capital:

“It is time to a) get clients and advisers on the same page, b) be willing to look at the deeper meaning of what needs to be accomplished through investing, and c) make sensible decisions on that basis.

“With privatization, there comes a shift in the burden from the state or companies to the individual — this will affect the entire world of finance. The future is about ‘know thyself.’ The role of the sophisticated adviser will be less about finance and much more about having the skills to assess complicated problems that people face and being able to translate them in a cohesive way to a system of investing that makes sense for each individual.”

My Rich Thinking research has shown that women want to invest in causes and concerns that matter to them. My hunch is that men would prefer to have their interests and values included in an investment objectives discussion as well. Certainly millennials of both genders would embrace an asset mix that has purpose and meaning.

The big opportunity for the financial industry is to understand the value preferences of our clients and to offer the best advice as to how they can allocate some of these “value investments” via traditional equity markets.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/erhui1979

About the Author(s)
Barbara Stewart, CFA

Barbara Stewart is a chartered financial analyst (CFA) with 30 years of investment industry experience; five years as a foreign currency trader, more than two decades as a portfolio manager for high net worth entrepreneurs, and during the past six years, as an interview-driven researcher for multiple global financial institutions. She is a keynote speaker for CFA societies, banks, stock exchanges, and industry conferences globally, and she is a columnist for CFA Institute, Canadian Family Offices, and Canadian Money Saver. She is on the Advisory Board for Kensington Capital Partners and also is the Ambassador for the Kensington Women’s Forum. Fourteen years ago, Stewart saw a need to challenge outdated financial industry stereotypes and share positive messages about women and money. Today, she is recognized worldwide as one of the leading researchers in women and finance. Rich Thinking® global research papers quote smart women and men of all ages, professions, and countries, and are released annually on International Women’s Day, 8 March. To find out more about her research, visit Barbara Stewart.

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