Lee Goggin is co-founder of findaWEALTHMANAGER.com, the free, independent online matching service for high net worth individuals and wealth management providers. Here, he explains the factors prompting women to seek professional financial advice earlier than ever before.
Over the past year we’ve noticed a significant rise in the number of younger women coming to findaWEALTHMANAGER.com. Whereas the average age of our male users has stayed stable at 52, our female users are now coming to us at an average age of 43. Since our launch in 2012 our female users have consistently been a few years younger than their male counterparts, but now they are almost a whole decade younger and we think this forms part of a very interesting trend.
Part of the reason we are able to see such trends as they emerge is the combination of quantitative and qualitative methods we use to match HNWIs with wealth managers. Our proprietary algorithm narrows down the list of appropriate wealth managers, on the basis of the individual’s profile and needs, and then our in-house experts further refine these matches during an in-depth fact-finding conversation. This process gives us an invaluable client’s eye view of the factors which drive them to find a provider more suited to them, or indeed to start thinking about wealth management at all: we’re averaging over 3,000 users a month now and while we consistently find that around a third are unhappy with their current provider the majority – two-thirds – currently have no wealth manager at all.
In our conversations with women, we’re hearing about many factors which are driving them to seek financial advice sooner. These issues are certainly nothing new, but the ongoing media attention they are receiving seems to be making many younger HNW women in the UK start to think seriously about their financial future. First among these issues is the looming pension’s crisis. Women now in their thirties and forties can be only too aware that the state pension age is set to rise to 68 by 2046 (and in reality probably higher than even that) meaning that those who don’t wish to work into their dotage need to be thinking about funding an earlier exit from work. If we add to this equation the fact that women live an average of four years longer than men then the challenge of funding what might turn out to be decades without employment income becomes even more acute. At the same time, the lifetime pension contribution allowance has been progressively reduced to now stand at £1.25m. While this might seem like a lot, commentators have been quick to point out that an initial pension pot of just £72,000 could compound to take savers over this limit in thirty years (assuming 10% annual growth). Affluent people across the board are being forced to look for alternative ways to save for their retirement and it’s increasingly on the agenda of those still only in their mid-thirties.
Of course, it’s not just funding an appealing retirement that’s on people’s minds. What Americans call “elder care” is also high on the agenda because of coming Care Bill reforms which could mean those with over £118,000 in assets have to meet the full cost of residential care – expenses which can come to an eye-watering £25,000 a year. The burden of care fees, whether for their parents or eventually themselves and their partner, is something likely to trouble everyone with an eye to the future. And the issue is likely to be even higher on the agenda for women, simply because they tend to find themselves “sandwiched” between caring for the needs of their parents and young adult children. Studies suggest a tenth of such women are providing some kind of financial support to both parents and children. Most are probably very happy to do so, but having to provide for dependents in both directions clearly calls for careful financial planning well ahead of time. We’re hearing far more of these kinds of concerns from our female users now. Indeed, it is often the case that a simple – yet emotionally loaded – goal like wanting to help children get on the property ladder is the driver behind women seeking a wealth manager for the first time.
It hardly needs to be said that in matters of wealth the arrival of children is a big wake-up call for parents of both genders. But our experience over the past year is that certain emotive issues really strike a chord with affluent women in particular. Planning for retirement and elder care are certainly such issues, but another has been the rising cost of private education. The broadsheets recently revealed that families today commonly have to offer equity from their homes in lieu of fees and this kind of coverage seems to resonate with women in particular. Many helpful articles have outlined some of the strategies wealth managers can deploy to help families defray the cost of funding their children through their entire education. Thanks to these, we now have female users coming to us asking for providers with specific capabilities – advice on setting up offshore trust funds being a case in point.
In fact, I would say that this speaks to a far wider and more significant trend. From what we are seeing women are taking control of their financial wellbeing earlier than ever, but more importantly they are really opening their minds to all that a good wealth manager can do for them. It’s well known that women are generally far more reluctant to become investors than men, with studies usually finding that a perceived lack of knowledge or fear of losses are the biggest barriers to them. (Interestingly, research also suggests that these cautious tendencies make them better investors.) But things are changing. As with falling pension allowances, the persistently low interest rates on savings mean that more and more women are coming round to the notion that they must invest proactively if they are to achieve their financial goals. The wealth managers on our panel also report that their female clients are becoming much more open to taking on the necessary level of risk to get the desired return.
Of course, none of this is to imply that women are only just coming round to the concept of wealth management nor that institutions are neglecting to target the UK’s growing ranks of female HNWIs. On the contrary, most institutions are acutely aware that women hold more wealth independently than ever before and have developed specific offerings for them. They also know there’s no such thing as a “silent partner” when it comes to marital wealth – something which is underscored by the fact that several of our female users have been acting on their partner’s behalf. What our user analytics do suggest is that for women their early forties is when the desire for proper wealth advice really kicks in. Around this time they may be approaching the height of their earning power or their children might be about to start school; they may be contemplating a career change or they may have gone through a divorce (significantly, 42 is the average age for divorce for UK females). For many women, their fifth decade heralds major life changes, but for still more it seems to be a time when the future starts to loom larger and the need for advice becomes more apparent, urgent even. That’s certainly what female HNWIs are telling us and it will be interesting to see how the industry responds to what we predict will be an ongoing trend.
Investment Roundtable: Live with Jim Bianco
With Q4’s macro picture still looking grim amid the return of exponential coronavirus waves in Europe and the U.S. and Europe, we speak with veteran macroanalysis strategist Jim Bianco, CMT for a data-driven deep-dive into the global economy and financial markets on Sept. 7th at 12pm EDT.
- Learn from Jim’s unique combination of quantitative and qualitative analytics which provide an objective view on Rates, Currencies and Commodities to make smart investment decisions
- Identify important intermarket relationships he is watching with respect to Global Equities
- Roadmap a global outlook for 2021 in view of socio-political backdrop giving viewers key takeaways and intermarket perspectives on global investing.
Jim’s robust technical analysis includes a broad look at trends and themes in the markets, market internals, positioning such as the Commitment of Traders (COT), sentiment, and fund flows. Don’t miss out on this exclusive session from one of the investment world’s most insightful thought leaders.
Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election
By Rupert Thompson, Chief Investment Officer at Kingswood
Equity markets had another choppy week, falling for most of it before recovering some of their losses on Friday and posting further gains this morning.
At their low point last week, global equities were down some 7% from their high in early September. US equities were down close to 10%, hurt by the large weighting to the tech giants which at least initially led the market decline.
The market correction is nothing out of the ordinary with 5-10% declines surprisingly common. Indeed, a set-back was arguably overdue given the size and speed of the market rebound from the low in March. As to the cause for the latest weakness, it is all too obvious – namely the second wave of infections being seen across the UK and much of Europe and the local lockdowns being imposed as a result.
These will inevitably take their toll on the economic recovery which was always set to slow significantly following an initial strong bounce. Indeed, business confidence fell back in September both here and in Europe with the declines led by the consumer-facing service sector. A further drop looks inevitable in October – fuelled no doubt in the UK by the prospect that the latest restrictions could be in place for as long as six months.
The job support package announced by Rishi Sunak did little to boost confidence. Its aim is to limit the surge in unemployment triggered by the end of the furlough scheme in October. However, the scheme is much less generous than the one it replaces as the government doesn’t want to continue subsidising jobs which are no longer viable longer term. A rise in the unemployment rate to 8% or so later this year still looks quite likely.
Aside from Covid, for the UK at least, there is of course another major source of uncertainty – namely Brexit. Another round of trade talks start this week and we are rapidly reaching crunch time with a deal needing to be largely finalised by the end of October.
Whether we end up with one or not is still far from clear. That said, the prospects for a deal maybe look rather better than they did a couple of weeks ago when the Government was busy tearing up parts of the Withdrawal Agreement. With significant Covid restrictions quite probably still in place in the new year and the Government already under attack for incompetence, it may not wish to take the flack for inflicting yet more chaos onto the economy.
Markets remain unimpressed. UK equities underperformed their global counterparts by a further 2.7% last week, bringing the cumulative underperformance to an impressive 24% so far this year. The UK weighting in the global equity index has now shrunk to all of 4.0%.
It is not only the UK which faces a few weeks of uncertainty. The US elections are on 3 November. We also have the first of three Presidential debates this Tuesday. Joe Biden’s lead looks far from unassailable, a close result could be contentious and control of Congress is also up for grabs.
All said and done, equity markets look set for a choppy few weeks. Further out, however, we remain more positive – not least because the focus should hopefully switch from the roll-out of new lockdowns to the roll-out of a vaccine.
What Investors are Looking for in the Next Fintech
By Shaun Puckrin, Chief Product Officer, Global Processing Services
Are investors getting pickier when it comes to fintech? It’s hard to say for sure, but there are recent developments that point towards a shift in investor interests.
Firstly, research from Innovate Finance shows that investment in UK fintech dropped by 39% in the first half of 2020, compared to the same period in 2019. In H1 2020, $1.8bn of venture capital was invested in 167 startups compared to H1 2019, when $3bn was invested in 263 startups.
However, it’s worth mentioning that the $1.8bn UK fintech investment earlier this year was still a 22% increase over the second half of 2019, when funding totalled $1.5bn. Therefore, all signs suggest that investors will make significant increases in capital investments during the rest of the year.
Secondly, it appears that the current investor appetite is for more mature, later-stage fintechs: more than half of the $1.8bn went to just five companies: Revolut, Checkout.com, Starling Bank, Onfido and Thought Machine. Perhaps it is the ongoing economic uncertainty surrounding the COVID-19 crisis that is prompting inventors towards perceived “safer bets”, but what we do know for a fact is that early-stage fintechs raised just 8% of the total investments.
Is there a silver lining? The coronavirus crisis has rapidly accelerated the digitisation of financial services, with lockdown restrictions encouraging those previously resistant to engage with digital financial services. The stage is set for fintechs to thrive and deliver offerings that meet shifting consumer demands. To be in with a shot of wooing investors, fintechs will need to demonstrate certain qualities that set them apart from other companies.
So, what are the four things investors are looking for in the next big fintech?
- A strong, differentiated proposition
The fintech marketplace is crowded and filled with mature innovators setting a high standard for everyone else. Against this backdrop, “challenging the incumbents” is, unfortunately, no longer a USP.
To really catch the attention of investors, you must be addressing a clear, pressing market need that no one else is tackling. Not just that, your proposition must be easily articulated and backed to the hilt with market research that proves the opportunity is worth pursuing.
Ultimately, investors are going to ask the question: why you? What are you doing that’s unique? What do you have that means you – and only you – can do this? They will also want to know how defendable that proposition is once you’ve built it. What is your moat? Getting this right means a foot in the door with investors.
- A path to profitability or exit
This is an extremely pertinent point, especially given recent news surrounding the financial results for many of the big challenger banks, and how they show the route to profitability for challengers isn’t necessarily straightforward or easy.
In the current environment, an attractive fintech must be able to demonstrate a concrete, long-term plan for the financial viability of the business. There are different paths for investors to make their returns, be it a trade sale or IPO, but the fundamentals of securing a successful outcome are usually the same. By being able to demonstrate how you can plot a course to attract and serve your customers for less than you can monetise them will be at the route of any subsequent valuation, no matter how its outcome is achieved.
Whatever the goal, you need a plan to support your ambitions. You need to demonstrate an understanding that building a scalable and sustainable fintech is likely to require significant capital – you must invest in the right people, partners and technology to make money. Developing competitive services, attracting customers and, crucially, monetising your offerings, requires hard work and the ability to adapt to your customer’s needs.
- Strong leadership and core team
Ultimately, securing investment is about building relationships and what often tips the scales is having the right people in the room. This is why a great team is crucial.
A great team means many things: Strong leadership with the vision to build something revolutionary. The skills and expertise to turn that vision into reality. The experience to traverse the pitfalls and opportunities you’ll face. And finally, the ambition and determination to make the business successful no matter what.
Building the right team with the right qualities is often what convinces investors that they’re putting their money in the right place.
- The right partnerships
Partnering with the right organisations can give you strategic access to the solutions that will help build and scale your offering. Their expertise and experience are often invaluable; many partners have been in the game for years and may have already solved problems you might be encountering for the first time.
From an investor’s perspective, seeing that you’re working with credible partners and proven tech helps build confidence. It shows that you’re a less risky investment, and that you respect their investment and are going to be using their money to build real value.
Fintech investment is not dead
After this recent blip, we expect the amount of investment into fintech to continue to be significant, at least in relation to other industries. But there’s no avoiding the fact that investors will be looking to stress test potential investments much more than before.
By creating a differentiated proposition, planning a clear route to profitability, building a strong team, and finding the right partners, fintechs will be in with a shot of securing the funding they need to make their grand vision a reality.
Death of the workplace friendship: study shows how remote working is eroding our meaningful connections with colleagues
Employee experience platform Perkbox’s research on 1,296 employees and 300 business leaders reveal 65% think the ‘new way of working’...
Half of UK’s finance sector confirms diversity should be more of a priority in the workplace, with calls for action across the industry
Almost half (45%) of Britain’s banking/financial services workforce think their employer could do more when it comes to diversity, according to a...
American Express and Amazon Business Launch Co-branded Credit Cards for Small Businesses in the UK
The co-branded Cards offer flexible benefits and payment optionality by allowing small businesses to decide between earning rewards or adjusting...
Go Global To Expand Your Revenue Stream
By Christian Spaltenstein, Managing Director, AFEX Americas Banking and financial operations have evolved immensely in the past few years. Innovation...
Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild
23% of UK’s top performing businesses have been supported by local enterprise partnerships and growth hubs Similarly, 30% of Britain’s...
What Does the FinCEN File Leak Tell Us?
By Ted Sausen, Subject Matter Expert, NICE Actimize On September 20, 2020, just four days after the Financial Crimes Enforcement...
Investment Roundtable: Live with Jim Bianco
With Q4’s macro picture still looking grim amid the return of exponential coronavirus waves in Europe and the U.S. and...
Equity markets react to a rise in Covid-19 cases, uncertain Brexit talks and the upcoming US election
By Rupert Thompson, Chief Investment Officer at Kingswood Equity markets had another choppy week, falling for most of it before...
October furlough changes – what you need to know
By Alan Price, employment law expert and CEO of BrightHR The Job Retention Scheme is coming to an end on...
Do we really need banks? Yes, but digital transformation industry-wide is vital
By Charley Cooper is Managing Director at enterprise blockchain firm, R3 The Coronavirus crisis has taught us that we are...