Overcoming gender bias in financial system

New research from Barclays Private Bank shows that the next generation of high net worth women are set to change family and banking dynamics as their share of global wealth steadily increases, they attain higher levels of education and they become more involved in family businesses.
Barclays Private Bank’s Smarter Succession: The Challenges and Opportunities of Intergenerational Wealth Transfer research, undertaken by global intelligence business Savanta, identified that four in five (82 per cent) women from wealthy families expect to inherit substantial wealth over the next 20 years, making them significant beneficiaries of the US$5 trillion estimated to transfer to the next generation by 2030.
Despite this growing share of wealth among women, two in five (41 per cent) HNW women are currently not involved in family financial decision making. Social and cultural change is prompting a shift in these family and banking dynamics, with women now holding similar levels of direct ownership in the family businesses to men (54 per cent compared to 57 per cent), and more HNW women achieving postgraduate qualifications (43 per cent) compared to their parents (14 per cent).
The research is based upon a survey of over 400 global HNW family members with at least £5 million in assets, in-depth interviews with 20 HNW families and their bankers and intermediaries and supported by independent expert behavioural analysis.
Involvement in family businesses but limited decision-making power
Barclays Private Bank’s Smarter Succession research series found that four in five (83 per cent) main decision makers around family wealth are men. These main decision makers, whether they are men or women, are then twice as likely to turn to their sons (29 per cent) rather than their daughters (14 per cent) on matters of wealth, finance and investment.
Nine in ten (88 per cent) wealthy women, however, are now involved in family businesses to some extent, with almost half (46 per cent) on a day-to-day basis, compared to 96 per cent and 60 per cent of men respectively. That means that women are still three times more likely than men to not be involved (13 per cent compared to 4 per cent), with a transition to having more decision-making power remaining an area of expected growth in the coming years.
The role of women within wealthy families is shifting, in part due to the younger generations having a less traditional outlook on life. Four in five (79 per cent) say that their parents hold traditional beliefs, but only a third (35 per cent) of parents believe the same of their children. Among women of all ages, a third (35 per cent) say that they do not have a traditional personal outlook on life, compared to 59 per cent of men who do.
This shift is further encouraged by higher levels of education and qualifications achieved, often at international institutions. Women who are involved in the family business are more likely to have achieved postgraduate qualifications (59 per cent) than those who are not involved (33 per cent).
Understanding and support set to grow confidence
As the share of wealth among women increases and family dynamics change, banking relationships are set to shift too. The research indicates that HNW women feel that the financial services sector has not yet adapted to their growing prominence, with almost three in five (56 per cent) believing that their financial adviser treats them differently to men.
Specifically, HNW women are less likely than men to feel that their adviser understands their knowledge about investing (75 per cent compared to 86 per cent) and risk tolerance (72 per cent compared to 82 per cent). Against this backdrop, wealthy women are more than twice as likely to not have a financial adviser, with 22 per cent saying that they currently do not, compared to just nine per cent of men.
In absence of this support, HNW women are often less confident about making family financial decisions, prompting the need for banking relationship dynamics to change. Three in five (61 per cent) wealthy women are confident in making financial decisions for themselves, but among those not yet involved in family wealth management, confidence drops to 43 per cent. In contrast, 78 per cent of all men say that they feel confident making financial decisions for their family.
“As traditional family roles change and more women hold prominent positions in international business, their growing global influence is going to be a major economic force over the next decade, redefining areas that have historically been focused on, and dominated by, men,” said Montserrat Marchetti, Director at Barclays Private Bank. “We focus on engaging both women and men of the next generation in succession planning and wider wealth management, as part of setting up the long-term security of their family legacy. For us, it’s a priority to make sure that they have the knowledge, confidence and support to feel comfortable leading the next generation of family wealth and shaping it towards their individual ambitions.”
Dr Ylva Baeckstrom, behavioural finance and gender expert, added: “The financial world has historically been male gendered. It was created by men, for men, to suit their purposes, in both subtle and fundamental ways. These established systems mean that women have been excluded from finance until relatively recently and are still treated differently. Many women haven’t gained the financial confidence and independence that is going to be crucial as many more come into wealth.
“The industry needs to overcome existing biases, work to deliver services and advice that are the equal of those presented to their male relatives and provide women with the base to support their role as global business leaders of the future.”
 
Photo source: Pixabay
 
 

Markets weekly

After Super Tuesday last week showed former vice president Joe Biden resurrecting his campaign and halting Bernie Sander’s progress, this Tuesday sees a flurry of state primaries and caucuses with Idaho, Michigan, Mississippi, Missouri, North Dakota and Washington among those being contested. The week in total has 371 pledged delegates up for grabs.
On the data front, fourth-quarter (Q4) gross domestic product (GDP) second estimates come from the eurozone on the Tuesday and the day after sees UK data on January GDP. The former is likely to confirm that European growth stagnated at 0.1%, three times less than Q3 growth. In the latter, the focus will likely be on whether a post-election bounce was evident in output after flat growth in the previous quarter.
Evidence of a post-election bounce in the UK economy has been seen clearly in the housing sector, with mortgage approvals rising to an almost four-year high in January. The February Royal Institute of Chartered Surveyors housing survey data on Thursday will provide more evidence on the state of the sector.
However, taking centre stage on Thursday is the European Central Bank March meeting, with President Christine Lagarde facing a dilemma in light of the ongoing Covid-19 outbreak between following the Federal Reserve’s unexpected 50 basis point cut and lowering already negative interest rates or providing further quantitative easing/measures focused on providing short term liquidity to struggling firms.
Investors have been contemplating if the disruption to output on the supply-side from the coronavirus is offsetting weak demand and creating inflationary pressures. February inflation data from China, on Tuesday, the US, on Wednesday, and the eurozone on Friday will give a clearer insight into which effect is stronger.

The almighty dollar

The US dollar (USD) has performed strongly across the board this year, breaching levels last seen in October in recent weeks. Driving USD strength has been robust economic growth, safe-haven flows amid previous Iran tensions, the Covid-19 epidemic and the dollar’s attractive yield relative to other currencies in the ten largest economies, or the G10.
Most market participants envisioned a weaker USD in 2020 and so the recent outperformance would have come as a surprise. Whilst the fundamentals of the US economy appear healthy and would suggest that the recent move has legs, we highlight that the 2020 elections and the uncertainty that comes with this could provide some volatility.
That said, the US Federal Reserve’s surprise 50 basis point rate cut on 3rd March may limit the attractiveness of the dollar.
For more information contact Barclays Private Bank in Monaco by clicking here or on +377 93 15 35 35
 
 
 

Markets weekly

The 34% of delegates up for grabs in the Democrat candidacy race on ‘Super Tuesday’ will be the main focus for investors this week. While senator Bernie Sanders is leading the pack, only 5% of the delegates have been contested. With the key contenders focusing their campaigns on 3rd March, Tuesday’s results will be of great importance.
On the data front, the focus on the first three days of the week will be February final purchasing managers’ index readings from the UK, eurozone, US and China. In the flash estimates, the two superpowers started to stutter in the backdrop of Covid-19. While the UK and eurozone held up, anecdotal evidence from businesses pointed to the Coronavirus outbreak impacting them negatively, with stretched supply chains.
January money and credit data from the Bank of England on Monday reveals if mortgage approvals and lending mirrored the recent boom in housing survey data, as well as the health of consumer credit growth.
Ending the week is February US non-farm payrolls data and trade numbers from China.
An impressive US employment reading in January of 225,000 came off the back of average jobs growth of 175,000 per month in 2019. Average earnings also moved back to 3.1% after dipping to 2.9% in December. Consensus is for employment to grow by 173,000 in February and earnings growth of 3.2%.
In January, China’s imports rose strongly relative to exports, signaling strong domestic demand. However, February is unlikely to continue this trend in the backdrop of coronavirus outbreak and raises questions over China’s ability to honour its “phase one” commitments at the end of February.

The almighty dollar

The US dollar (USD) has performed strongly across the board this year, breaching levels last seen in October in recent weeks. Driving USD strength has been robust economic growth, safe-haven flows amid previous Iran tensions, the Covid-19 epidemic and the dollar’s attractive yield relative to other currencies in the ten largest economies, or the G10.
Most market participants envisioned a weaker USD in 2020 and so the recent outperformance would have come as a surprise. Whilst the fundamentals of the US economy appear healthy and would suggest that the recent move has legs, we highlight that the 2020 elections and the uncertainty that comes with this could provide some volatility.
Furthermore, should inflation continue to remain below target and the global economy worsens, an interest rate cut by the US Federal Reserve cannot be ruled out. Such a move may limit the attractiveness of the dollar in the medium term.
For more information contact Barclays Private Bank in Monaco by clicking here or on +377 93 15 35 35
 

Markets weekly

As financial markets approach the end of February, the growth seen in the final three months of 2019 (Q4) takes centre stage.
Germany’s second estimates of Q4 gross domestic product (GDP) kicks the week off. The first estimate showed that output was flat on the quarter as the export-oriented economy continues its struggles.
Despite early signs in January of a recovery in the country, recent survey data, such as the ZEW economic sentiment indicator, have been noticeably weak since the Covid-19 coronavirus outbreak.
The impact of the Covid-19 outbreak on the US consumer, who has been fundamental to US growth for some time, will be reflected in the consumer confidence survey out on Tuesday.
The US second estimate of GDP growth for Q4 follows on Thursday. The market expects growth of 2.1% in the first estimate to be confirmed. The core personal consumption expenditure data for Q4 (also that day) is likely to show inflation remaining muted, again questioning the central bank’s efforts to achieve its goal of ending the disinflationary trend that has been prevalent in the US.
The UK housing market appears to be showing early signs of a post-election boom, according to survey data. The nationwide house price index published on Thursday will show if the upturn has legs, after the index rose to a 14-month high in January.

UK housing shows signs of rebound, but uncertainty looms

While UK house prices grew by 2.3% year-on-year in December, it was the first time since February 2018 that all regions saw positive annual growth and better than 2018’s disappointing 0.1% growth. However, the figure is still below the 4.5% seen in 2016 and a far cry from 2014 levels.
The effects of elevated levels of political uncertainty, tighter lending standards and unfavourable changes to tax rules on the housing market explain the downturn in growth somewhat.
However, political uncertainty appears to have moderated with December’s election of a Conservative party with a strong majority and the UK’s subsequent departure from the European Union (EU). Also, the prospect of some fiscal easing at March’s budget and historically low interest rates provide a healthy environment for the consumer.
Since the December election, survey data suggests that a post-election bounce in demand is underway. The Nationwide and Halifax surveys both showed an uptick in house price growth which surged to 14-month and 2-year high in January respectively. February data from Rightmove showed prices of properties coming to market just below a new all-time high from June 2018.
The demand and supply fundamentals suggest a stable housing market. However, an agreement to leave the EU and a trade deal with the bloc are two very different things. Growth could be impeded if the latter fails to materialise at the end of the transition period, scheduled for the end of the year, and potentially offset the positive impact from foreign buyers attracted by a likely weaker sterling.
Furthermore, even if a deal is reached and a no-deal scenario avoided, the housing market is unlikely to generate the returns seen in the past decade over the next one.
 
For more information contact Barclays Private Bank in Monaco by clicking here or on +377 93 15 35 35
 
 

Markets weekly

This week’s key macroeconomic data for the main developed economies start on Tuesday with the UK’s December unemployment figures. The number of vacancies rose for the first time in seven months in November, with those in employment climbing at its strongest pace in over 50 years at 208,000. That said, December’s election may make it difficult to get a true gauge of the resilience of the jobs market.
UK inflation and retail sales data for January follow on Wednesday and Thursday respectively. Inflation fell to a three-year low in December, hitting 1.3%. January’s data is unlikely to show much of a pick-up, with the rate of price increases remaining significantly below the central bank’s target.
Retail sales ended 2019 poorly and survey data is not suggesting spending bounced back in the new year. Also on Thursday, January US housing starts is out. In December, housing starts rose to a 13-year high of 1.61m and consensus expects 1.39m this time.
The week closes with February’s flash purchasing managers’ index readings for the UK, eurozone and the US. January showed signs in the UK of a “Boris bounce”, with manufacturing at the 50 mark (implying output is neither expanding or contracting) and services moving into expansion.
The eurozone has also showed signs of improvement of late, though manufacturing is still contracting, while services has been weakening, but still expanding. The US remains the only region out of the three still in expansionary territory for both manufacturing and services. That said, a sustained rebound will be contingent on progress on the trade front and the coronavirus epidemic.

The low inflation, low unemployment paradigm

The traditional inverse relationship between unemployment and inflation seems, at face value, intuitive. As companies hire more workers, the pool of employable people begins to fall, resulting in companies having to pay higher salaries to lure workers or those that are inactive. In turn, higher salaries and the need for companies to preserve their margins means prices of final goods and services increase. That’s the theory.
We have seen the unemployment rate in the eurozone, UK and the US touch a 12, 44 and 50-year low, respectively, over the past few months. However, inflation has remained noticeably below the central banks’ targets across all respective regions.
Partially explaining the breakdown in the relationship between unemployment and inflation is how consumers have used their earnings. Since the financial crisis, consumers for the most part have had to juggle paying down debt and spending combined. Consequently, businesses have struggled to increase prices of final products due to the fear of deterring consumption further.
Simultaneously, costs of production have increased through tariffs, in particular with regards to the US, and in the case of all three regions, uncertainty leading to the delay/postponement of investment decisions.
While firms have substituted labour for capital (explaining the high employment level), the participation ratio in the US has continued to increase, with the ratio at 63.4% in January, a seven-year high. This remains however well below the participation ratio observed pre-2008.
 
For more information contact Barclays Private Bank in Monaco by clicking here or on +377 93 15 35 35
 
 

Markets weekly

The financial markets’ focus this week will remain divided between economic fundamentals and the uncertainty around the coronavirus outbreak. On the data front, the week is due to be relatively quiet.
The UK gross domestic product data (GDP) for the final three months of last year will confirm how much output was boosted by December’s election result. The UK’s business sector has shown signs of recovery, prompting the Bank of England (BOE) to keep interest rates on hold last month at 0.75%. However, the BOE downgraded its long-term prospects for the economy by an average growth rate of 1.1% over the next three years. With fourth-quarter (Q4) UK GDP figures being published on Tuesday, investors will gain more insight into the health of the economy.
January’s US consumer price index (CPI) on Thursday is probably the most significant American data release next week. The index will show if the downward trend in prices persists, despite consumers experiencing real earnings strength amidst a tight jobs market. Indeed, inflation remaining below the central bank’s 2.0% target, despite three rate cuts from the US Federal Reserve (Fed) in 2019, is a concern for Chairman Jerome Powell, as he noted in last month’s Fed meeting.
Friday’s US retail sales data for January will reveal if consumer spending started 2020 strongly, after easing in the previous two quarters. In December, growth was 0.3% on a month-on-month basis and consensus is for the same reading again in January.
Also on Friday, Germany reports Q4 GDP numbers. The export-heavy economy struggled significantly in 2019 as trade tensions remained heightened. That said, the economy avoided a technical recession, or output contracting for two consecutive quarters, and Q4 will reveal if news on “phase one” of a US-China trade deal helped alleviate some of the pressures faced.

Mixed earnings season warrants caution

While it’s still early days in Europe, the US earnings season for the final three months of 2019 enters its final stretch with around 60% of companies having unveiled results. So far performance can best be described as “mixed”.
On one hand, as we expected, US companies beat analysts’ expectations once again and are on track to deliver around 2% earnings growth for the fourth quarter. On the other hand, 2020 estimates have bled lower with many reluctant to upgrade guidance in the wake of the coronavirus outbreak in China. Yet, after a short-lived period of consolidation, equity markets are back to posting all-time highs.
The discrepancy between rising share prices and weaker fundamentals (or earnings forecasts for 2020) has pushed valuations significantly above their long-term average (see chart). In our view, such valuation levels leave American equities with very little room for disappointment.

Whether it’s a function of the “known-unknowns”, like this year’s US election, or completely unexpected events as already experienced with the Middle East flare up and the coronavirus, volatility spikes are likely to be more frequent and possibly more pronounced.
While central banks’ liquidity support should prevent significant and long-lasting drawdowns, we believe investors should get ready for a bumpier ride in 2020. First and foremost, this means ensuring proper diversification across asset classes and taking advantage of pullbacks when they present themselves. It also means exploring ways to use higher volatility to enhance, protect and diversify portfolio returns.
 
For more information contact Barclays Private Bank in Monaco by clicking here or on +377 93 15 35 35