For far too long, a woman’s role was defined by the relationships she shared with the men in her life. However, over the last twenty to thirty years, we have seen an encouraging shift away from this chauvinistic paradigm. As the barriers of discrimination are being torn down, we are witnessing women rising to the top of their chosen fields; including traditionally male-dominated bastions such as science, business, politics, and of course, finance. But when it comes to the ground reality - financial independence among women is still miles from where it needs to be.
Today, only 64 per cent of women globally have access to an account in a financial institution, compared to about 71 per cent of men. India appears to be an exception to this, with over 80 per cent of Indians possessing bank accounts and only a 6 per cent gender gap. But a closer look reveals a less-rosy picture. The reality is that nearly half of all women who do possess bank accounts only use it in a limited manner or not at all. So, their financial progress is missing a key element – engagement. And this reality holds true for all women - from those in the agricultural hinterland to the homes of wealthy Family Offices.
Women in Indian families, unlike men, face unique challenges when it comes to matters of independence and financial well-being. Women, who are dependents find themselves disproportionately impacted by the death of a male breadwinner, and even by events such as divorce or being abandoned by the next generation.
In situations where women can access family assets, they are overwhelmed by the sudden onslaught of information and responsibility, and lack the skills and tools required to effectively manage their finances. This reality is all the more precarious for wealthy families as they possess large asset pools and complex portfolio structures, which even under the normal course of events, can be a challenge to manage. Now imagine doing so with zero experience - the challenge becomes even more daunting.
For generations, women were excluded from being active participants in the family’s financial affairs. Outdated stereotypes such as women “should not have to worry about finances” or that they’re not good at managing money matters has led to this dangerous disparity. As a result, most portfolios are controlled and managed by male members of the family. Often, women are not even informed about details of the family’s wealth and the frameworks that govern the family’s assets and finances. So when the unthinkable happens, most of them do not possess even a fundamental understanding of financial products such as mutual funds, stocks, bonds, property, etc., or how to execute their inherited investments.
Today, thankfully, we have reached an inflection point where real change is close at hand. The role of women in family asset management, independent entrepreneurship or as strategic decision-makers at organizations, is steadily growing. This is the perfect opportunity for women in Family Offices to step out of the shadows and take charge of their financial futures. In fact, nearly 57 per cent of all women entrepreneurs make all their financial decisions independently while only about 39 per cent do so with advice from their father or spouse.
I believe there are three critical aspects of achieving this kind of empowerment, not only to advance the security and independence of women but to strengthen the futures of Indian families as well.
In my experience as a financial advisor, I’ve had the opportunity to work with numerous families, helping them take the right steps towards securing their financial futures. We strongly encourage the women in the family to undertake a comprehensive financial literacy and knowledge building programs. This can help them achieve a detailed understanding of the entire family portfolio, including all family and personal asset allocations, nominee listings, insurance entitlements, and even the finer details of different financial products, how they work, and how they’re traded.
Once women are empowered with financial literacy, the possibilities for their value-addition are endless. Interestingly, in my personal experience, I have observed many cases where the women tend to be just as educated, if not more, than the men. Many of these women have studied finance and commerce, and some even hold degrees in the subject. But they were still not active participants in the family’s business interests. This is a persistent challenge to the goal of empowering women – by denying them avenues of engagement. Families that are able to overcome this obstacle may discover valuable intellectual capital that can enhance their corpus.
As Indian families witness a shift from joint families to nuclear ones, the issue of planning for the next generation also requires women’s participation. Even in scenarios where women are financially literate and engaged in the family finances, they may not have any direct control over the long-term future of the family’s wealth. As the family patriarchs begin their journey towards retirement, the structure of family finances tends to undergo a shift. This is another reason why it’s critical that women take control of future planning and have a voice in establishing a Family Charter or Constitution. This should be followed by a formalisation of the Charter by way of writing a will, forming a trust and putting in place an estate plan. Through these processes, a family can not only ensure a smooth succession process but also imbibe the next generation with a set of inclusive beliefs and principles.
While the measures we have discussed may seem accessible and actionable in theory, the actual execution of change is far more complicated. For example, something as simple as insurance can easily be understood and enacted by women and families. But that is not necessarily the case. These financial products are rife with problems such as their distribution model, where advertising is not at all helpful in informing customers.
In most cases, agents step in, not to advise but to make a sale. After all they are motivated by commissions. In other cases, some family offices have a consolidated financial advisor in the form of a family tax advisor or something similar. These advisors may be very savvy about tax matters, but are perhaps not the best source of financial literacy or investment advice. Typically, these advisors are more conservative and usually provide “safe” recommendations in the form of fixed deposits and tax-free bonds.
So, women who are ambitious in their investment goals are, once again, hampered by narrow-minded thinking. The simplest solution to this is to engage with advisors who offer a more diverse and customized array of services, from client education to investment advice and even the execution of complex succession planning. These advisors can’t be biased or incentivised by distribution models where they operate on commissions or distributions fees. Rather, it is a fee advisory model that assures the most unbiased, transparent and outcome-driven results.
It’s a long-held truth that only by educating women and including women in social affairs can we uplift society. An empowered and independent woman means a financially strong and healthy family. As women achieve ever greater financial literacy, access to engagement, and participatory control in family offices, they can add value and become unique engines of financial growth. Women with high levels of financial literacy can foster and grow family finances, from planning and budgeting to long-term decision making. But this change needs to sprout from a renewed and respectful collaboration between men and women, and families - a partnership that shares the responsibility for financially managing the present in the hopes for a brighter future.
The author is the Executive Director of Waterfield Advisors