The investment challenges women face and how to overcome them

By: Famida Singh, Head of Investment Proposition for Standard Bank Investment and Asset Management

The gender pay gap is one of the significant barriers to financial equality in the private sector, with women still earning less than men on average, says Famida Singh. This discrepancy affects single-income households, particularly those led by single mothers.

Many women tend to be risk-averse, being more conservative with their investments – a tendency that must be addressed to ensure that women adopt appropriate investment strategies in order to meet their financial goals and objectives. There’s also a persistent cultural dynamic where men typically control the family finances, often leaving women unprepared to manage their finances when life circumstances change. Fortunately, the tide is turning here, but we still have a long way to go.

Financial education is a necessity, across all segments, and goes beyond simple budgeting and cashflow management. Both men and women need to understand the implications of, by way of example, the impact of the marriage contracts and how this will impact long and short-term financial planning. Women tend to factor in household needs when planning finances, often entering the process with pre-existing commitments like aged parents and children. These dynamics often clash, particularly for older women.

I am really passionate about financial education. There are many aspects to consider, such as the type of marriage contract entered into and how this impacts both parties, as well as broader considerations, like tax, liquidity and risk. A basic understanding of these concepts are valuable – particularly for women, who have unique financial needs over time.

Fortunately, a positive shift is noticeable among the youth, where a larger percentage of females are graduating and entering the traditional workforce. We now observe more women entering the professional market, bringing about some diversification and a larger degree of financial independence in younger females. This also highlights the importance of starting financial education early, dispelling investment myths, and promoting responsible financial decision-making.

As mentioned above, women have unique financial needs. Understanding that women, on average, live longer than men, is essential in tailoring financial planning strategies. Women’s financial plans need to account for possible breaks from work, for instance, for raising children, and their roles as primary caregivers for aging parents. Additionally, women’s health needs are different, and these must be factored into short, medium and long-term financial plans.

When planning finances, honesty about dreams, goals, aspirations as well as concerns is vital.
A successful financial plan should align with a woman’s life plan – because a financial plan is simply that – it should align to an individual’s life plan and enable the individual to meet his/her dreams and goals.

At Liberty, we’ve started to adopt goals-based financial planning to make the process more relatable and less intimidating. A financial plan must be real and tangible as it relates to life and life events and a goals-based financial plan is ever evolving, as we evolve. Life is not linear and there are good and bad times, and as such, managing a financial plan against goals, whether short term or not, really does help an individual plan appropriately.

The financial planning process using Liberty’s goals based financial planning tool is meant to make the financial planning process easy for the client to understand.

Financial advisory services for women

It is important to find the right financial planner and it is important for women to consider partnering with financial advisers who are registered with the FSCA.

It is also important to be clear about your risk appetite and reconcile this with the level of risk necessary to achieve your goals. In order to beat inflation over the long term, taking some risk is important. This needs to be considered as part of a holistic financial plan, and addressing one’s risk appetite vs ones desired goals is a very important step in the financial planning process.

With investments, diversification is key, both in terms of asset classes and geographically. We’ve got to make sure we invest not only with a local lens, but with a global lens too. South Africa is only 0,5% of global GDP. We are all global citizens to a large degree. I think it’s important for women to appreciate diversification not only from asset classes, be it equities, cash, property or bonds, but also geographic diversification, and that means local as well as global, in order to benefit from the full depth and breadth of diversification.

Lastly, building trust is crucial in the relationship between a woman and her financial advisor. Advisors must listen attentively to understand the unique needs and vulnerabilities of their female clients. If you get that chemistry right, with the right advisor, and you’re able to talk about some of your goals and your dreams a bit more realistically, that’s where you start putting in the proper ingredients for a successful recipe over time. Don’t be shy to ask a financial advisor for their value proposition. Clients sometimes get so intimidated because it’s subject matter they’re not familiar with, so they don’t ask the right questions. It can be as simple as: what is your value proposition? And what can you offer me? Can you give me some reading material to understand what you offer? Which brands and companies are you associated with? What can I do to get more familiar with the service you’re able to offer me?

Whether the financial plan involves both spouses, or is just for the woman, both partners should be well informed equally before any decisions are made. One of the most exciting things for me is seeing the change in the data. A lot more women are taking charge and becoming more financially independent.

Ultimately, financial education for women is the key to achieving true value and financial independence, and partnering with a good financial adviser is essential. “All our dreams can come true if we have the courage to pursue them.” – Walt Disney.