Female inclusion may be the key to your family business’ success

05 March 2021

6 minute read

Today, women are driving economic change on a scale that has never been seen before. Despite this, they often remain excluded from discussions about wealth transfer. Are global families and advisors missing an opportunity? Is diversity the key to creating lasting wealth legacies?

Today, the relationship between women and wealth has shifted considerably. A third of the world's wealth is now under the control of women. In fact, women are increasing their share of the wealth with unparalleled pace, adding US$5trn to the global wealth pool every single year1.

Yet despite this shift, they often remain excluded from discussions about wealth. When it comes to making plans for the future of family businesses, and family wealth, women are often absent from the conversation, according to our latest Women and Wealth report [PDF, 703KB]. Are wealthy families and their offices missing a trick? Is diversity the key to creating and sustaining wealth?

Is money from Mars or Venus?

Christine Edwards was 23 when she decided to buy a moped to get to work. It was one you pedalled before the engine kicked in. However, the salesman at the local dealership explained to her that she would need her father’s signature to secure the contract2.

This was 1970s Britain, where attitudes to women and money were vastly different to today. “Finance is an industry that was created by men for men. Everything in banks, including the shape of the building, the temperature of the computers and the shape of the soap is tailored for men,” says former banker, fintech entrepreneur and gender bias expert, Ylva Baeckstrom. In fact, women in the UK, couldn’t even open a bank account till 1975.

Even today, four in ten women say they aren’t involved in the management of the family wealth, compared to one in ten men, our report found. Women who are involved tend not to be the main decision-maker. That role continues to be occupied by fathers and sons. In fact, there were more CEOs named Peter than there were female CEOs on the 17th April 2020, in the UK3.

However, things are changing. “In my line of work, I'm consulting with families that have daughters on their way to being future CEOs or board members. In some instances, we're seeing that daughters are being selected over their brothers. Increasingly, success is being evaluated not just by gender, but by merit,” says independent family business expert, Nike Anani.

“In one case, the father, the founder of the business, invited his daughter to intern at the business in Ghana, while she was at college in the US. He also encouraged her to join relevant mentoring groups, networking circles and deepen her capacity. She's now on track to chair the family business within the next five years,” says Anani.

The confidence gender gap

However, a historic and systemic exclusion has left some women lacking in confidence when it comes to financial matters. It’s been coined the ‘confidence gender gap’. Research shows that despite a woman being competent in her field, she may still exude less confidence, influence, and control than a man with the same skill set4.

Baeckstrom advises women: “Forget about confidence. Confidence is not important. The real danger is not trying, not taking the risks you deserve to take to show off your competence, your skills and your abilities.” To male decision-makers, she adds: “Give these women a chance because they're much more competent in what they are doing than they may appear to be.”

Female-run businesses can make ten times more profit

Net profits were on average ten times greater in FTSE 350 companies with more than 33% of its executives being female, than those companies with no women at this level3. If we follow this data, the UK economy and shareholders would have made an additional £47bn in pre-tax profit – had all companies had more than 33% female membership on their executive committees.

There are various reasons for this. One is that the more diversity of thought in a team, the more room for creativity, innovation and quality ideas there is. This is something modern businesses - facing challenges of climate change, epidemics and global inequalities - need more than ever.

Interestingly, Baeckstrom suggests another reason may be that some women’s lacks of confidence helps them to succeed as it can also lead to better business decisions. “Studies show time and again, that women take less risks, are less confident and feel less knowledgeable in the areas of finance and business and entrepreneurship. And while this is detrimental to women investing in their own personal portfolios, [a more cautious approach] can benefit businesses. That’s because traditionally, businesses suffer from overconfident risk taking and decision-making,” she says.

It’s time to redress the balance

To reap the benefits of women in business, it’s important to educate women in finance from an early age. “This impacts wealth transfer, business and all other aspects of financial management that they could be involved with in the future,” says Baeckstrom.

Anani adds: “I think we can become more inclusive by just having conversations, being very intentional about having periodic conversations about the business and the wealth, inviting all voices to participate, where we collectively explore shared values and the purpose of the family business.”

One way to do this is by instituting a formal family council, with male and female members. The role of the council is to develop the values, vision and purpose of the family. It can outline entry criteria for family members to work in the business, look at remuneration and next-generation education as well as a conflict-mediation process.

Sometimes it’s helpful to have a third-party to facilitate this process, if a family is new to it. “Quite often, in family businesses there's a lot of distance and disconnection, not only along gender lines, but also along generational lines. Advisors can act as bridges to connect the family together, and enable families to collectively and collaboratively build a legacy through this foundation of communication,” suggests Anani.

If you would like to find out more about facilitating family wealth conversations and constituting family councils, contact your Private Banker.

Learn more about this topic by listening to The Power of Inclusivity podcast.


The Power of Inclusivity

Our panel of experts explore the gender bias prevalent in succession planning and provide guidance on how families can become more inclusive.

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