Inclusion of women in Financial Planning to have a future-ready society

Today’s dynamic and complex financial environment has made it crucial for every person to develop a certain minimum degree of financial literacy and awareness to enable them to make better money choices that are closely aligned to their financial goals.

Therefore, it’s unfortunate that the majority of women in our country relinquish the management of their long-term personal finances to either their fathers or their husbands. The bigger irony being that many women are temperamentally very sound investors and also excellent money managers when it comes to household savings and expenses – and yet, their proficiency at managing their home finances rarely extends to the personal financial planning front.

A recent paper by the Organisation for Economic Co-operation and Development (OECD) titled ‘Addressing Women’s needs for Financial Education’ drove this point home. Some of their key findings were that women have less financial knowledge than men in a large majority of countries surveyed. In addition, they were ‘less confident than men’ in terms of financial skills as well as knowledge, and also had a lower degree of awareness about critical investing concepts such as compound interest and the interplay of risk & reward. Another survey by DSP Winvestor conducted a few years ago highlighted that only 1 in 3 women take their own investment decisions – a shocking figure when you consider that so many more women are entering the workforce, excelling at their careers and earning impressive sums of money nowadays!

The need of the hour is to reverse this trend and bring more and more women into the gamut of financial planning by comprehensively including them in the financial decision making of their families. We strongly believe that failing to do so can have multi-layered and cascading consequences for society in more ways than one.

One of the chief reasons why access to quality financial planning becomes all the more relevant for women is their intrinsic risk aversion. Independent studies by Wells Fargo (2022) and Fidelity (2021) have highlighted that women display a more pronounced loss-aversion bias as a whole and tend to gravitate towards more conservative investments. This can have far reaching ramifications on the amount of long-term wealth they can create from their independent savings; since investments like fixed deposits, government savings schemes, endowment insurance and gold can never quite match the long-term returns that can be generated from a well-selected portfolio of mutual funds and stocks. This is where financial planning plays a crucial role – an advisor will need to step in and educate these risk-averse women investors about concepts such as compounding, risk/reward and inflation, in order to enable them to make better decisions with their long-term savings. After all – only when financial goals are brought into the picture does the devastating impact of risk-aversion come to the fore.

Many working women also undertake career breaks or reduce their working hours to care for young children or aging parents at some stage in their lives. Spending such large chunks of time away from the workforce can have far reaching financial implications. A formerly independent, earning woman may suddenly become dependent on her spouse’s income to support her wants and needs. This is actually quite a challenging dynamic shift to adapt to, and having access to an independent corpus to tide her through these challenging times can prove invaluable for her overall mental peace and well-being; during times when her bandwidth will naturally be stretched in any case.

Demographics are another reason why financial planning becomes all the more important for women. Women in India outlive their husbands by an average of three years, and this gap is widening.

This, along with the fact that the number of single-child households are on the rise (especially in urban societies), implies that a very large number of women stand to inherit not once – but twice in their lifetimes. These sudden influxes of capital and assets, coupled with a lack of self-confidence about personal financial planning can have devastating consequences when it comes to their effective management and eventually – their equitable right to property. It’s not at all uncommon in our country for supposedly well-meaning relatives to swoop in at these times to help them “manage” these assets, more often than not with unsavoury outcomes. Just imagine what a gift it is to be of sound financial mind when this happens!

The clear need for financial planning for women in India begs an obvious question – why are the clientele of most advisory firms still male-dominated? We believe that the answer lies in one word – empathy. Ultimately, there’s no taking away from the fact that money management is a sensitive business; employing a very wide spectrum of emotions including greed, fear, panic, euphoria, disillusionment, hopelessness, and hopefulness to name just a few. And women investors tend to be a lot more comfortable with advisors who adequately address the human side of personal finance instead of running away from it. Unfortunately, these are far and few between, with a “sales dominated” approach and culture being employed by the majority of advisors in our country even today.

Advisors dealing with women clients may need to be more sensitive to verbal and non-verbal clues that could signal distrust, distress, or discomfort; or may indicate that further information or clarity is needed on a certain aspect of their financial plan. Sadly, a survey concluded the opposite – that is, most women investors felt that that their financial advisors ‘talk down to them, are condescending and don’t answer their questions’! The need of the hour is the reverse – that is, respect and patience while addressing a clients’ queries, and the ability to broach the subject of money with the sensitivity that it deserves. Any advisor working with women needs to understand that their clients are looking for someone who really listens to them – and understands that their needs, goals, and dreams may be very different from their male counterparts.

Financial Planners who work with women must also be happy to wear the “educator” hat. This will help their clients build the confidence to invest outside the unprofitable realm of traditional investments. It becomes critical for these advisors to be able to simplify the complex idiosyncrasies of the financial world to their women clients without being impatient or derisive. In a sense, women investors enjoy working with advisors who instil confidence in them, inspire them to take control and really ‘own’ their money.

The practice of goal setting which is intrinsic to financial planning also plays an important part. Anecdotal evidence (and our own experience) tells us that women tend to be more disciplined and serious about their investing goals and are less likely to break the proverbial piggy bank to fund a frivolous ‘want’ than men! All the more reason why they are more than equipped to helm their family’s goal-based financial plan.

To conclude, the inclusion of women into financial planning can have far reaching positive effects. From fortifying their own financial stability and helping them tide through challenging life stages and events, to channelizing their burgeoning investible surpluses into the capital markets and boosting the economy, the impact can certainly be material at multiple levels. The bigger question is – how much can the industry adapt at a visceral level to meet their unique needs?