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Abu Dhabi, UAEFriday 22 June 2018

Cautious female investors offer huge potential for banks

Although women tread carefully when it comes to money, some financial instituions are introducing female-friendly initiatives to draw them in

Britt Mitchell says her strategy in the last five to seven years has just been to invest in real estate. Satish Kumar / The National
Britt Mitchell says her strategy in the last five to seven years has just been to invest in real estate. Satish Kumar / The National

Some may say Britt Mitchell lacks confidence when it comes to investing because she no longer buys stocks.

But she would argue that she is just cautious – Ms Michell made the decision after watching the value of her mutual fund tank 15 years ago.

“I opened a mutual fund before I left [the United States] and I lost US$15,000.," she says.

"Now I think it’s rebounded. And I guess that’s the purpose of a mutual fund. You just have to leave it,” says the mathematics university lecturer from California, who has lived abroad for 13 years, the last seven of which she has spent in Abu Dhabi.

“But in the process of that, I realised that I am not very confident of putting more money into the stock market or in mutual funds, or anything like that. After that experience I wasn’t so thrilled. So the strategy in the last five to seven years has just been to invest in real estate.”

The decision has turned out well for her so far.

Ms Mitchell took on $80,000 of her mother’s mortgage – half of the debt – and paid it off in under three years, paying just $5,000 in interest, as opposed to the $75,000 that would have accrued over 30 years.

“There’s no way I would have made $70,000 in the stock market if I put my money there. And now I have a tangible asset and security for the future,” she says.

She is not alone. Numerous studies have concluded that women tend to be more cautious when it comes to investing.

Experts, and even female investors agree.

“I would agree that generally women probably don’t feel very confident in terms of finances and investments,” says Dorota Aguilar, the co-founder of the Bogleheads investing group.

However, she says, once they learn about the strategies, they are every bit as capable as the male members.

“It’s not a problem,” Ms Aguilar says.

In fact, Rasheda Khatun, a wealth and wellness planner, says women often help the family make more prudent financial decisions if they are involved in the planning.

“What I have found working with couples is, when they work together, even when the woman is taking care of the children and doing the household duties, they should still do their finances jointly,” she says.

“I have found couples who work on their finances jointly are much stronger couples and they have much stronger financial outcomes.”

Rahat Ghazanfar, 40, who is originally from Pakistan, but lived in the UK for many years before moving to the UAE four years ago, is a confident investor. But she agrees that women are generally more cautious when it comes to investing.

“I am a completely different person, but if I talk to loads of my friends, they are cautious. Absolutely,” she says.

“They would rather put it into their bank and not invest than invest. If I ask my female friends here in the UAE market they would say it’s risky, we are not sure what’s going to happen to the market. And similarly, even in the UK, they say it’s probably better to have cash just because they need it. The vast majority of them would say they would rather have the liquid cash than invest.”

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Priti Dev, who is from the UK but has lived in Abu Dhabi for five years, wants to invest, and has money saved up to do so, but is not sure how. She initially wanted to invest in the UAE in property but decided against it.

She says a lack of education here is to blame for the problem, and plans to invest in property in the UK, where there is more information available to help buyers.

“I don’t know what the process is here. It’s not like it’s readily available online and you get straightforward answers, so it doesn’t give me confidence,” Ms Dev says.

“I did want to buy property here rather than rent but because you hear all these stories about service charges and all sorts of things, it just doesn’t make you feel comfortable to invest large amounts of money. What I am doing instead is saving to invest in the UK.”

The problem is not limited to the UAE, however. Research consistently shows that women lack financial confidence elsewhere, too.

Just last month, a study was released by EQ Bank in Canada which found that compared to men, Canadian women are significantly less confident about their financial knowledge at 31 per cent compared to 49 per cent.

But women represent a huge opportunity for banks.

According to UBS, a Swiss bank, female investors expected to invest US$2.3 trillion in socially responsible investments by 2021.

And it was partly for this reason that UBS decided to implement a change programme called UBS Unique to help make itself more attractive to female investors.

“The journey started four years ago, when, importantly, research came out about how women were perceiving the financial industry and the perception wasn’t all that great, needless to say,” says Mara Harvey, a managing director at UBS Wealth Management and head of UBS Unique.

“We started investigating more deeply and asking our own prospects about how they felt about the financial industry and women. And the answers we got weren’t particularly pretty, either.”

The bank discovered that women do not like to visit their bank. And they do not like financial jargon, which they consider condescending and alienating. Statistics showed that when women are empowered to learn about their finances, they often change advisers.

The research even led it to question why women tend to take less risks.

“Are women taking less risks because they really don’t want to take any risks? Or are they not taking risks that they maybe could take, just because the financial industry has not made them feel particularly welcome and has enabled them to embrace all the tools of the financial industry and to feel confident about the decisions they are taking,” says Ms Harvey.

“And that’s why we set out to say we think we need to tackle women’s engagement with the industry because the industry is alienating them, and has alienated them.”

The bank's answer was UBS Unique, which has a number of aims including increasing the financial confidence of 1 million women globally, and supporting the Sustainable Development Goal Number 5 to achieve gender equality and the empowerment of women.

“It’s about how you get an industry to operate completely differently than it did in the past. And what do we mean by that?” says Ms Harvey.

“It means that we go across the entire value chain of wealth management and we look at every single part of our organisation, every single process we have and we essentially look at it through a gender lens while asking ourselves what needs to be done differently so that this will appeal to women,” she adds.

That includes everything from achieving its own gender diversity targets to making its events more inclusive by being hosted by a man and a woman to achieve a more balanced dialogue.

The bank hopes that its change programme will help it become the world’s leading wealth manager for women.

But its ultimate aim is even more ambitious – to change not only itself, but the entire industry along with it, says Olga Miler, also a managing director at UBS Wealth Management and Global Program Architect.

“If we can, after all this effort, inspire change across the whole financial services industry, not just within UBS wealth management, I think Mara and myself have achieved our goal,” she adds.