ETF Strategy Summit

October 15-16, 2018 | Hyatt Regency | Dallas, TX


Marguerita Cheng – Blue Ocean Global Wealth

Portfolio Construction for Female Clients

Rita ChengMarguerita Cheng is the CEO at Blue Ocean Global Wealth. In 2017, she was named the #3 Most Influential Financial Advisor in the Investopedia Top 100, a Woman to Watch by InvestmentNews, and a Top 100 Minority Business Enterprise (MBE®) by the Capital Region Minority Supplier Development Council (CRMSDC). We recently sat down with Rita, who will be speaking at our ETF Strategy Summit (Oct. 15 – 16 – Dallas), as she shared her thoughts on building portfolios for female clients.

ETF Strategy Summit: As average career, lifecycle and longevity trends among women continue to diverge from those of men, should advisors think about ETF portfolio construction differently for their female clients? How?

Rita Cheng: Lower wages, less cumulative time in the workforce, and work and pay gaps associated with exiting and re-entering the workplace mean women tend to have lower Social Security balances, reduced assets, smaller pensions and fewer opportunities to save money or contribute to their retirement plans. Longer life expectancies mean their money needs to sustain their lifestyles for longer periods of time. Financial planning is the foundation of every client relationship. ETF portfolio construction can incorporate core and satellite portfolios to provide our female clients both a strategic and tactical approach while balance their shorter- term needs for liquidity and income and longer-time requirements for growth.

ETF Strategy Summit: Clearly, the ranks of asset managers and analysts still skews towards males, even in the more progressive realm of ETF managers. Do female clients need or desire access to a broader range of female ETF managers and strategists?

Rita Cheng: According to an article published on International Women’s Day (March 8, 2018) of the Economist, investment by women and in them is growing. Women represent a growing financial force because they control most of the household spending and increasingly more wealth. The numbers speak for themselves, based on research from the Boston Consulting Group, between 2010 and 2015 private wealth held by women grew from $34trn to $51trn. Women’s wealth also rose as a share of all private wealth, though less spectacularly, from 28% to 30%. By 2020 they are expected to hold $72trn, 32% of the total. While the gender gap among money managers persists, women are thriving in the ETF industry. For example, Women in ETFs, established in 2014, is the first women’s group for the ETF industry. It is a non-profit organization that brings together over 3,200 members, including men and women globally to advance the careers of women. The success of organizations like Women in ETFs can help increase awareness of opportunities in the ETF industry for female managers and strategists.

ETF Strategy Summit: You’ve written about the need for young people to save and invest more earlier to help stave off the retirement crisis – this advice seems most crucial to women, who live longer – does the industry need to pivot to try to serve more young people at earlier stages of their financial lives?

Rita Cheng: I think it is important for the industry to understand the distinction between financial planning advice and investment advice. Investment planning in isolation does not constitute financial planning. Financial planning helps clients understand the impact that each financial decision has on the other areas of their financial lives. Financial planning is about controlling spending, managing credit, reducing taxes, increasing savings, protecting family and assets, and building wealth for the future.

ETF Strategy Summit: With a need and/or desire for more defensive strategies among many female clients, should women be served with more tactical asset allocation than men? Is passive investing, as it is most commonly exercised with index funds and ETFs, more suited to men than women?

Rita Cheng: I think that goals-based planning integrated with portfolio management resonates well with women. Women value this work/life integration approach because it contributes to a more collaborative and meaningful relationship. The clarity and simplicity of a passive approach resonates with all clients, particularly women. Simplicity is elegant. When we provide clarity and simplicity, we can eliminate financial clutter. The goals-based planning aligns better with female clients because they adopt a more intentional approach with their wealth.

ETF Strategy Summit: While the matter is still one for debate, many polls suggest that women tend to be more risk averse than the population at large. Is it helpful for advisors to encourage female clients to be more opportunistic when it comes to risk-taking? When is it counterproductive?

Rita Cheng: In the world of investment management, winning and losing has much to do with the concept of risk.
Based on my experience, the most successful investors consider investing as an art, rather than a science. They rely on their common sense and experience. As individual investors gain more experience with investing throughout their lives, they may develop a heightened sense of confidence about their financial decisions. Experience and intuition, however, are not always reliable: they need to be constantly monitored and adjusted to ensure consistency with one’s life financial goals. I prefer to say that women are risk aware. In fact, women may appear to lack financial confidence, which can be perceived as risk averse behavior.
Women are more comfortable with taking risks only when they are reasonably sure about the chance of winning; while men seem to enjoy competing against all odds.

ETF Strategy Summit: Thanks Rita. We look forward to hearing more of your thoughts at the ETF Strategy Summit October 15 – 16 in Dallas.

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