5 Things We Learnt From Wealth Advisory for Women

The unprecedented COVID-19 pandemic and the ensuing lockdown had a far-reaching impact on the Nigerian economy. For many people, this period came with loss of jobs, closure of their businesses, a host of socioeconomic crisis, and sadly the loss of loved ones. The adverse economic effects of the lockdown cannot be ignored. In fact, it is widely believed that the COVID-19 pandemic led to households incomes dropping by 25%, and data implied that there were “17 million more people living below the poverty line during the 8-week lockdown period — some of whom remain(ed) poor at the end of 2020”. Women and children were more vulnerable to the socioeconomic impact of this pandemic, as more women were employed in service sectors requiring human interaction than men.

As a company, we saw many women we thought should have a set-out emergency fund based on their income and lifestyle quickly become broke and when we probe deeper, we knew that we wanted to have a wealth advisor on our team. As a result, in December, we launched the Wealth Advisory service. This service was created to help women become more intentional about their finances and to become the CFO of their finances. In a few short months, we have served several clients in over 5 countries including Nigeria, Dubai, Cyprus, UK etc. We have also learnt a lot from interacting with these clients. Here is what we have learnt:

1. No understanding of their inflow and outflow:

Many women we advised had no deep understanding of their cash inflow vs. their outflow. Particularly interesting is the fact that people were genuinely surprised about the amount of money they spent on some lifestyle needs. For female entrepreneurs, it even gets more complex as we noticed that many have no clear boundaries between their personal finance and their business.

2. No financial goals:

What are your financial goals? How much are you going to be worth in the next 2 years?

We saw the shock on women's face when we asked these questions. NO one had told them that with finances, they also need to have goals.

Having no clear financial goals is one of the key reason many women stay calmly stagnant in a career or business. We have seen this from our work at Shecluded where women have done the same role for the last 5 year at a company for the same salary and after a wealth conversation on setting financial goals, they independently decide it was time to ask for a promotion and salary raise, change jobs or get into another career.

This result also applies to women in business. People always ask us how to get women motivated about their finances, we say show her what she is worth in the next 2 years and if she doesn't like it, guide her to set a financial goal. it will propel her forward.

3. No understanding of the implication of economic factors:

From our work, we find that many women have no clear understanding of how economic factors like inflation, naira devaluation, oil price increases etc. affected them. They pay little or no attention to it and fail to plan for the long term effect of this. We have women saving in Naira for masters who have never thought about quickly changing funds to dollars to hedge the naita devaluation. We’ve also talked with women who have forecasted a straight line food budget in Nigeria where food inflation is at all-time high.

4. Fundamental lack of confidence in investing:

The average woman that spoke with our wealth advisors had a fundamental lack of confidence when it came to investing, especially in capital markets. Even though many of them were risk-takers in their businesses and careers, this risk tolerance did not always translate into making investment decisions. Women and men are poles apart when it comes to investing: While men are comfortable taking on a risk and investing in more risky asset classes (which usually translate to higher returns); women are generally more risk averse.

This lack of confidence perpetuates the gender wealth gap, as women keep getting poorer, as their savings keep getting chipped at as a result of inflation and devaluation.

Working with a wealth advisor or other experts can help women build their confidence when it comes to investing.

5. Women are goals-based investors:

Women do better when they are working towards goals. In other words, women fare better with investing when they understand the “why”. Practically, this means that more women are more likely to save and invest more when they are working towards a specific goal, versus when they are just saving or investing for nothing in particular.

This means that women should have specific goals when thinking about their future wealth. Not only that, women should really understand why they are doing what they are doing as this will increase their chances of achieving their financial goals. Some common financial goals include building an emergency fund, saving for a down payment for a house, creating an education savings plan for yourself or for children, building a diversified long-term investment portfolio for retirement, and so on.