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BOITUMELO NTSOKO: Investing is a critical tool for building wealth and securing a better future, but unfortunately women are often underrepresented in the investment world. Varying studies put the [proportion] of female investors at between 10 and 23%, which is worryingly low.
In this episode, I’m joined by Elke Brink, a wealth advisor at PSG Wealth. We’ll be discussing why this is the case, the challenges women face when it comes to investing, and what can be done to encourage more ladies to invest. Welcome, Elke.
ELKE BRINK: Thanks, Tumi. It’s good to be here.
BOITUMELO NTSOKO: Elke, why do you think women are often underrepresented in the investment world locally?
ELKE BRINK: This is a principal [phenomenon] that I think applies not only locally, but globally as well. I think it comes down to a few different factors. One of the main reasons that I have found is that I think in the average household you end up dividing tasks, and women end up mainly looking after the household or looking after the children. I would say in many cases the male counterpart would manage the finances. I think in a big way that’s normally how it plays out.
So when it comes to really investing and managing portfolios, women are definitely underrepresented – but also in working in the financial space, which is quite interesting.
Only around 10% of women end up being portfolio managers, which I found so interesting because women are really good at investing – and we’ll get to that later.
But I find that it’s a very male-represented industry, and it’s quite interesting that now more women are stepping into the industry.
BOITUMELO NTSOKO: And what are some of the challenges faced by women when it comes to investing?
ELKE BRINK: I think there are a few challenges or different components you have to plan for when it comes to planning a portfolio for a woman, which we don’t always take into account. One of the main factors, firstly, is longevity. Women do end up living longer than men – four to six years on average. So that actually means you have to plan for a longer retirement.
Together with that, there are one or two other implications that form a part of this. In many industries – not all but unfortunately still many – women do earn less than men. Together with that, women end up, which I just referred to, in many cases taking a break from employment to either take care of the children, go on maternity leave, help to raise a family, and maybe just work less than their male counterparts.
So when you look at the combination of all of these things, women are earning less, living longer, and taking breaks in employment, but they have to plan for the same financial outcome and a longer retirement period.
So I think there are a few plans that you have to bring to the table when planning a financial future. Together with that, because of the longevity component, what ends up happening in many, many households is that the woman in the relationship ends up managing the family wealth because the male counterpart has passed away earlier.
So not being involved in the investment process and the portfolio planning earlier on in life becomes a bit of a problem. You get to a certain age and inherit the wealth and you have no idea what’s going on in the portfolio. I think those are a few of the components we need to discuss.
BOITUMELO NTSOKO: Staying on those challenges, how would you then recommend women address them?
ELKE BRINK: I think it’s very important when planning a portfolio to do things right from the start. I think you save a lot of time if you start earlier in life – when you’re starting to earn an income and when you’re starting to put your portfolio together – to plan for the additional challenges that you might have.
For example, a few of the challenges that some of my female clients struggle with – if they are incredibly dynamic and managing their own industries or their own practices, for example – is that they don’t want to take maternity leave because no one is going to finance it, for example.
So, together with planning for certain life events earlier on, I think have a discussion in your household on what planning is in place, so you are all on the same page when it comes to planning the future, so you also as a female know that you are protected.
Does your partner have cover for sufficient retirement planning and financial planning in place, and how do you fit in with that? I think the easiest way to do that is by having an independent advisor in place. In a lot of these discussions that we’re having today, it’s not always the easiest of conversations in a relationship or in a household to discuss finances and future planning. So it’s easier if someone else asks the difficult questions.
My recommendation would be to work with a wealth advisor or financial advisor from earlier on in your life, and know you are planning from day one.
BOITUMELO NTSOKO: Single women definitely face different challenges from [the challenges of] those in a partnership, because you don’t have that second income to rely on. How would you then advise these women to overcome some of those challenges?
ELKE BRINK: I think that’s a big challenge and when you look not only at local but global stats, there are so many single women – not only single women but single moms – out there. That makes it very difficult to plan sufficiently and save sufficiently because you also need to take care of the child, or just provide. I think having two incomes changes everything. You can have everything from financing a car to possibly buying property. Everything becomes more difficult if you only have one income.
But I think, once again, in trying to plan a lot of these financial security measures – if I can call them that – two components are quite important.
Firstly, when it comes to your investment portfolios again, try to start off as early as possible, because then if you have the benefit of compound interest in the place you don’t have to save as much, and you have time on your side.
So, starting off earlier [you know] that you are putting an emergency fund in place, you are securing your own retirement, and just protecting yourself.
Then I think the second component, which is quite important if you are on your own, is to ensure that you are – from a risk perspective – protecting yourself. The main benefit you have at the moment is the ability to earn an income. Are you protecting that income in terms of there being an illness or disability, or anything that happens that you can’t work anymore? That’s quite important, and I think it applies to a lot of women.
A big mistake that I see unfortunately a lot of people make is that they – and I think it’s a beautiful quality – are relying too much on a partner.
Things do go wrong in life, and it’s not necessarily just planning for something like a divorce that can happen – which is unfortunately something we do need to talk about, with 50% of people getting divorced. So, know that you’re going to be financially protected should that happen. But should someone pass away or become ill or disabled, are you financially okay if that happens?
These are just a few topics, especially with younger people, where I find a lot of individuals think it’ll never happen to them, and they end up not planning for it.
BOITUMELO NTSOKO: Elke, in your experience, what are some of the common investment mistakes that women make, and how can these be avoided?
ELKE BRINK: I think a few mistakes that apply not only to women, but which in many cases do play a role, are that women can be too risk-averse when it comes to how you invest your funds. This is not necessarily a negative quality because women actually end up making really good investors, because they do really think about the outcome of the investment portfolio.
There have been quite a few interesting studies which I really enjoy.
When it comes to women investing compared to men, women actually tend to outperform not only their male counterparts, but they’re actually outperforming the index as well.
What it comes down to is that, when the markets go through difficult cycles, women trade less than men. So they are better able to sit on their hands and just wait out the cycle, which is exactly what provides a successful portfolio.
So women actually are really good at investing; they just end up not trusting themselves so much when it comes to that. I think the main risk of being too risk-averse and investing too conservatively is that you are just not seeing enough performance in your portfolio, so eventually, inflation ends up eating away at your capital, [whereas] you do need to be more equity-based. I think that’s the one thing, and perhaps relying too much, as I mentioned before, on someone else to take the responsibility.
Where you are an individual by yourself you need to plan for your own financial future, ensuring that you are doing so, and that you are very much aware [of] all the stats we look [at] in terms of women’s financial interest, if I can call it that. I’m not saying you have to be interested in investing in markets and all of that; it’s not everyone’s industry and you don’t have to be so involved in it, but you do need to know the basics.
You need to know what you need to be doing, what tax implications there are on your investments, whether you are saving sufficiently, and what ‘sufficiently’ means.
So it’s just making the time to be interested in what’s going on in your own financial planning, because it’s your own future that you are planning for.
BOITUMELO NTSOKO: You mentioned earlier that women don’t trust themselves when it comes to investing, and I suspect that knowing the basics will definitely help with that. In what other ways can women become more confident when it comes to investing? Are there perhaps resources available to assist with that?
ELKE BRINK: Definitely. There are so many wonderful platforms today to really educate yourself. This is a principle that still applies globally, and I don’t know if it’ll ever change. I think the way women do business, compared to men and just the utmost confidence men have, women are not ready to do something. Women aren’t that different, and I don’t see it as a negative thing.
There are actually some interesting results on this when it comes specifically to Fortune 500 companies, but this applies to all exec boards locally as well. If women are involved on the decision-making board of a company, the company’s net profit normally increases by 10 to 15%. So women have a significantly good [sense] of empathy and management style when it comes to making financial decisions in a company.
I think it’s just our nature to be a little less forward about it. I think when it comes to being financially skilled and protecting ourselves, using a platform like Moneyweb or Financial Mail – or whatever it might be – to read up on finances and know the gist of it, to know if you are invested in the right portfolio for your age and for your goals, and if you are saving enough.
Maybe have a few discussions with different advisors to know what the norm is out there. I think it’s important to at least do that review on an annual basis and really check in on this. Unfortunately, too many individuals are guilty of not focusing on themselves in terms of really planning their own future.
BOITUMELO NTSOKO: Elke, we’ve gone through quite a few hurdles that trip women up. You mentioned that we’re good when it comes to market turmoil in terms of our being able to sit a bit and wait out the market. What other advantages do women have when it comes to investing?
ELKE BRINK: I think women are actually really good when it comes to this component in their lives, and that that’s where the nurturing side and almost risk-adversity, which is something to be aware of, plays a very good role when it comes to planning. I think once planning is in place, we automatically have a way of thinking that we are planning not only for ourselves, but planning for our family, planning for our children, and planning for a financial future.
So I think there’s a lot of value to be found in the way we approach things.
But definitely, in terms of management style and actual management of investments, we end up doing those quite well, being more involved in the process and the decision-making, and just the structuring around it.
I think women do need to be more involved in the average household and the average business.
BOITUMELO NTSOKO: And are there any specific investment strategies or products that are particularly well suited for women?
ELKE BRINK: I wouldn’t necessarily say products. I think to the contrary there is definitely still a bit of a gap in the market. As I mentioned earlier, for example, certain products maybe should be invented that provide protection, for example, if you have your own business and want to go on maternity leave or whatever this may include.
But I think specifically management’s investment strategy is quite important when it comes to women, as I mentioned earlier, because the calculation definitely looks different [when ensuring] a secure retirement compared to men, because we are living longer, possibly earn less and still have to plan a successful outcome. So the strategy becomes very important.
You can’t be invested too conservatively because you need to optimise your returns over a longer period. Together with that, I’m sure you are – within [your] means of course – actually saving enough.
So optimising your tax returns every year, optimising your actual percentage of savings to know you’re going to be financially secure, and then of course the risk benefits to protect yourself should you not be able to work even for just a period of time – I think that’s quite important.
But I think the strategy [should be] to know that your planning can’t look exactly like your partner’s, because the picture might look quite different in the future.
BOITUMELO NTSOKO: What advice would you give to a woman who wants to start investing but doesn’t know where to begin?
ELKE BRINK: I would always recommend – and I would recommend this to any individual, not just to a woman – working with an advisor. I think it’s important to have that independent person who’s not emotionally involved in your finances, who can do the planning for you, and help set long-term goals and adjust the portfolio accordingly. I don’t think the average individual has the time to do so when you have another occupation that you’re involved in. So I would recommend doing that from the start.
It’s much easier implementing the right portfolio from day one, compared to making a few mistakes, and then it’s difficult to correct them later for many reasons – either a wrong fee structure, or penalty structures, or being invested in the wrong asset classes for your needs and for your age. You can waste a lot of time.
So I would definitely do my homework to work with an advisor from the start, and know you are optimising your time, your money, and everything from the start. And then learning how to speak about finances within a household, I think, is one of the most difficult things to do.
Interestingly enough, one of the biggest reasons people get divorced is money.
So be able to implement that from the start within your partnership or your household and actually speak about it. I think what ends up happening is that it’s just a topic that’s not spoken about, and then you make assumptions that certain things are sufficiently in place. It ends up mostly never being so.
So be a part of that and, once again, you can soften this conversation or ease up this conversation by having an independent person get involved so you don’t have to do this by yourself. I think that’s important.
And then one thing that’s [also] quite important is to ensure that you are protected as well within a partnership, which applies to the same thing.
Don’t assume your partner has life cover in place or has disability cover or sufficient retirement planning. It might be that none of these things are in place and then you are not protected should something happen.
These things also apply to other assets. For example, if you own a property, in whose name is it? Is it just in your partner’s name or is it in your name as well? The same with other assets. How are you married, and what implications can that have in future? I think a few of those components just ensure you are also protected financially.
BOITUMELO NTSOKO: And finally Elke, what do you think needs to change in the investment industry to encourage more women to invest?
ELKE BRINK: I think this is an industry where not many women are aware of the benefits, if I can say that. There’s a huge lack of information globally when it comes to knowing about investment strategies, knowing about tax, knowing about all of this as we grow up. It’s not something that’s covered in school and it’s not covered in university if you don’t study in that direction. So I think that’s something that needs to change fundamentally in the world.
But I think when it comes to women, firstly there need to be more women actually working in the financial industry. I think it’s a fantastic career where you have a lot of flexibility around time. And as we’ve [discussed] today, women are actually good at managing investments.
And then together with that, just discussing it more, I think the average [woman] needs to understand what she needs to do to be financially secure. I don’t think this is spoken about enough. A lot of individuals would have a retirement fund at work, or they would have one in their personal capacity, and they start contributing, and kind of assume they will be okay for ‘one day’.
But really delving deeper into what is actually needed to be able to be okay one day, and the risks that you need to plan for [is essential].
It just [needs] more discussion, and I think involving women in the conversation more, even in a time-efficient way. I do understand a household needs to split responsibility; someone needs to raise the kids, and someone needs to manage everything else in the household. But I think it’s important to try to [foster] the mindset of ‘Let’s make the whole household a part of this conversation and plan financially together’.
BOITUMELO NTSOKO: Thank you for joining us on this episode, Elke.
ELKE BRINK: Thank you for having me. I appreciate it.
BOITUMELO NTSOKO: That was Elke Brink who is a wealth advisor at PSG Wealth.
Listen to more episodes of the Money Rules podcast here.