How advisors can boost ROI with gender lens investing

 With a significant wealth transfer underway, more and more women are coming into control of assets. Women increasingly run funds and take positions of leadership in multiple industries, and more companies produce products and services designed for women. This ongoing shift makes a strong case for financial planners to weave gender lens investing practices into their investment process. 

GLI is a unique investment strategy with effective and varied benefits for clients and advisors alike. The concept of gender lens investing is thought to have emerged between 2009 and 2011. Early investments were directed to women-led enterprises via micro loans, into private equity opportunities and to women entrepreneurs, with more recent efforts moving in the public equity arena. GLI seeks to increase the number of women in leadership positions, bolster women's financial independence, support gender-specific initiatives and improve corporate governance.

When financial advisors fold GLI into the financial planning process, they have the potential to increase financial returns and reduce portfolio risk. Using GLI can also improve an advisor's ability to connect with and retain current clients, as well as attract new clients. The concept of investing in women as a way to achieve a higher rate of return has been growing in popularity, and there is new evidence to support the approach. According to the 2024 Wells Fargo report, the rate of growth of women-owned businesses increased 4.5 times the amount of male-owned businesses between 2022 and 2023. 

One challenge for this type of investing lies in accessing quality data. As an asset manager that engages with our holdings, we are well positioned to encourage companies to provide additional gender data as part of our due diligence process, and we are seeing positive outcomes on this front.

READ MORE: ​​Are advisors ready for the tidal wave of women-controlled wealth?

Connecting with women clients

Over the past decade, the financial planning profession has been seeking ways to engage and connect with female clients. A GLI perspective can point advisors and asset managers in the right direction.

In my interactions with women investors and advisors serving women investors, there is a proactive interest in, and strong identification with, portfolios that include women in leadership. Women see and understand the research underscoring the benefits of diversity in leadership and want to align their investment dollars with this approach. I've also seen that women investors identify with portfolios that include companies whose products and services are designed with women in mind. 

On the flip side, in my experience as an asset manager, I have found that women do not want to benefit financially from companies supporting conflict or violence in the U.S. or abroad. Specifically, most female clients do not want weapons-producing companies included in their portfolios.

Upping ROI and de-risking portfolios

Across asset classes — from cash to fixed income to private and public equities — GLI can be a strong strategy for increasing return on investment and as a way to de-risk an overall portfolio. 

According to a 2023 McKinsey report, companies with significant numbers of women in senior positions can generate up to 50% greater earnings and share performance. Women in leadership do more than improve financial performance; having higher female representation may, according to one study, de-risk firm performance by reducing the likelihood of lawsuits, reputational risk and, according to another study, corporate crime. Including more women on corporate boards can also improve levels of corporate responsibility and attention to ESG issues by decreasing the chance of environmental infringements.      

Having the discussion

To assess clients' interest in GLI, advisors should gauge clients' views on women in leadership and products or services designed with women in mind. Highlight portfolio companies that include women in leadership, either in executive management or on the board of directors. Offer analysis of a client's current fund team's structure. Highlight women portfolio managers, asset management firms, and founders — or lack thereof. This last step will provide clarity about who is actually making investment decisions about their money. 

READ MORE: Single woman seeks wealth management: How to advise independent female clients

With women-owned asset management firms managing just .07% (yes, less than 1%) of assets as of 2021, selecting funds run by women can be a great way to diversify portfolios while incorporating GLI. Similarly, access to capital remains a critical barrier to women founders, so determine if a client's money is currently investing in female founders directly. 

At our firm, we see and hear from clients that they are more engaged in their investing when a gender lens is in play, and they feel more connected to the companies they know are working to produce products and services that are beneficial to women. We also hear from clients how excited they are about having women in leadership within their portfolios.

Lastly, to the extent possible, emphasize the power in shareholder proxy voting with a gender lens. Let clients know they have both a right and a responsibility in determining corporate policy.

GLI is an undersung and underutilized way to connect with clients but we have seen the positive impact on advisor-client relationship, and multiple reports bear out the positive financial returns: In addition to the studies cited above, a 2021 report by U.N. Women found that venture capital firms with 10% more women investing partners than their peers achieved 1.5% higher fund returns and saw 9.7% more profitable exits, while companies with women founders performed, on average, 63% better in the long term than exclusively male-founded startups. Companies with women executives are 30% more likely to outperform other companies.