Women make the bottom line more attractive!

I spent a very uplifting day in the company of some of the top financial brains on Tuesday, at the Financial Services Research Forum in Westminster. 

The title of my talk was:

The Rise of The Sheconomist: Why Women are a Wise Investment,

in which I  discussed the financial capabailities of women.

It boiled down to this.

Women are as good with money as men. In some cases they’re even better. They get higher returns on investment, for example. And companies with women leaders have a 35% higher return on equity.

But men tend to over-rate their own capabilities. And women under-rate theirs! 

Little wonder then, with all the other societal factors that come into play, women have been marginalised when it comes to money.

However, we're soon to see a shift in financial responsibility from the state to the individual and women will need to be more financially self-reliant and assume greater financial responsibility. It’s vital to ensure they rise to the challenge and not become second-class financial citizens. That’s what Sheconomics is all about.

Pine, 2010, The Rise of The Sheconomist

When women’s skills are harnessed at an organisational level for example, it improves a company’s bottom line and gives them a competitive advantage. There’s lots of evidence for this, but one study by Pepperdine University found:

When a company had at least 3 women on the board of directors it outperformed the competition on all measures by at least 40%.

Norway saw the sense in this years ago, other countries are catching on more slowly.

Legislation in Norway in 2003 made it mandatory for every state-owned company to fill 40% of board seats with women by 2006, and for public companies to do so by 2008.

I wonder if there’s a link between Norway’s decision and the fact that the coutnry enjoyed 3% economic growth in 2009 and an 11% budget surplus, while much of Europe was  in economic decline?

Could a recipe for the success of corporates be:

Add three females and watch profits rise?

If you want to read my full report on this download it from the Recent Talks section on our website.

The 30% Club

With perfect timing, the 30% Club was announed on the same day. This is a fantastic new inititative encouraging UK companies to aim for at least 30% female representation on their boards by 2015. 

The initiative was founded by Helena Morrissey, CEO at Newton Investment Management and comprises a group of senior businesswomen. Go girls!

Read more about their progressive and impressive move here

Guest post from Sarah Pennells

We're thrilled to have this guest post from top financial journalist Sarah Pennells. Sarah has a fabulous finance website www.savvywoman.co.uk and gives us her expert views on managing money here:

I’ll let you into a secret: I wasn’t born with a ‘money gene’ and I didn’t find money inherently fascinating at a young age. In fact, I wasn’t really interested in finance until I started working for a programme called Moneybox on Radio 4. Previously, I used to avoid programmes about money and bin the personal finance sections of the papers (sacrilege, I know!). 

But something clicked when I saw for myself how financial companies behaved and discovered the far reaching consequences of a particular course of action.

It amazed me then – and still does – that financial companies would happily give their customers the brush off but would often move heaven and earth to offer speedy compensation once a journalist was on the trail. Unearthing big financial scams and stories was undoubtedly rewarding, but so was giving people information that would help them to make better decisions about their own financial situation.

Over the last few years there’s no doubt that life – certainly in terms of the financial choices we face - has become much more complicated.  I almost ran out of fingers recently when I was trying to keep track of the various government announcements about pensions!  And – like many areas of finance – the changes to state and workplace pensions will affect women and men differently. 

So, this leads rather neatly onto why I started my finance website for women called SavvyWoman.co.uk. Apart from sites such as Sheconomics there really hasn’t been that much information about money that’s aimed at women.  Sure, you’d get a smattering of articles about subjects such as women’s shopping habits or childcare costs (especially if there was a change in the rules), but there was – and is - very little that acknowledges that women and men can have different ideas about money.

We often have to make different financial choices – either because we earn less than men, because we have career breaks to bring up children or because we take on a caring role. But even if we start from the same point we may not follow the same path. One example is that women may have a different way of assessing risk in relation to investments and can be more cautious about what we do with our money.  Research shows we tend to be more put off by financial jargon than men are. 

It’s not that men particularly like jargon but it seems that they accept it as something that goes with the territory. 

However, although we may not know our allocation rate from our exit fee, we’re perfectly capable of getting to grip with our finances and making good money decisions. 

But some of us (men as well as women) have convinced ourselves that we don’t need to worry about money or that that it’s simply too dull to think about.

From where I’m standing, it’s too important to ignore. While I don’t actually believe that having pots of money is a sure fire route to happiness, knowing how to make sound financial decisions can certainly help.

Thanks, Sarah. 

Don't forget to visit her site for lots of tips and information.

Presents – are experiences valued more than material goods?

As you browse through all the experience days offered online your eyes alight on a paint-balling morning. 

You ask yourself, “Would Tim prefer a morning squirting paint at a group of businessmen in Berkshire, or a pair of designer cuff-links?” then, further on, “What about Sarah- a spa day or a cashmere scarf?” 
and before long you find yourself thinking, 
"Surely it's time Gran tried sky-diving?"

In a paper entitled ‘To Do or To Have: That Is the Question’ US psychologists Van Boven and Gilovich* show that we value experiences over goods when we’re spending our own hard-earned cash. So does the same apply to presents that we’re given by others?

The researchers stress that experiences contribute to social relationships. And choosing the right gift for someone is critical for a relationship. As my own research shows, the more our gift shows empathy for the other person, the more successful it will be. 

So don’t just pick any experience for your loved one this Christmas, pick one that shows you have real empathy for them as an individual, that you understand their needs, passions and desires. 

And if that means a spa day for Tim and paintballing for Sarah, go for it!

(although I've a sneaky feeling Gran might prefer a sky box to sky diving)


READ MORE ABOUT THE PSYCHOLOGY OF GIFT-EXCHANGE ON MY WEBSITE.

*

Here’s the abstract from the Van Boven and Gilovich paper:

Do experiences make people happier than material possessions? In two surveys, respondents from various demographic groups indicated that experiential purchases—those made with the primary intention of acquiring a life experience—made them happier than material purchases. In a follow-up laboratory experiment, participants experienced more positive feelings after pondering an experiential purchase than after pondering a material purchase. In another experiment, participants were more likely

to anticipate that experiences would make them happier than material possessions after adopting a temporally distant, versus a temporally proximate, perspective. The discussion focuses on evidence that experiences make people happier because they are more open to positive reinterpretations, are a more meaningful part of one’s identity, and contribute more to successful social relationships.

Photocopied picture of eyes makes people more honest

 

Have you heard about the bagel man?

Every morning, Paul F delivered some bagels and a cash box to a company's staff room. 

Then he went back later to pick up the money and the leftovers. 

It was an honour-system, people took a bagel and left a dollar, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst. He had left  corporate life behind. And he was happy.

As well as coming up with a great business model Paul F had also - inadvertently – created an elegant economic experiment. 

Comparing the takings with the number of bagels taken told him, down to the penny, just how honest people had been. And he noted that the most honest offices were those where people liked their boss and their work! He also got a higher payment rate (over 90%) from smaller offices than larger ones.

Now recent research tells us if he'd stuck a photocopied picture of a pair of eyes onto his cash box, people would have coughed up more.

Psychologists at the Univerity of Newcastle noticed that donations into an honesty box for coffee always fell short of the amount of coffee consumed. So one week they stuck a picture of a pair of eyes on the box. The following week they changed the image to pictures of flowers, then eyes and so on. 

People paid nearly three times as much for their drinks when eyes were displayed rather than a flower picture. The figure below shows how the donations fluctuated according to the image displayed. Read their paper here.

 People weren’t actually being watched, of course, but even a pair of photo-copied eyes was enough to prick their conscience. You might like to  see if this works with your children by sticking a pair of eyes onto their money boxes, if they're tempted to raid them a bit too often. Or, if you have a chocolate hob-nob habit, test it on yourself with a pair on the biscuit tin!

Hard Wired For Luxury

What does this new ‘age of austerity’ spell for luxury purchases like champagne?

Will people stop buying it and switch to a cheaper tipple? The government and economists would have us think so, but they’re forgetting one thing.

The human brain is hard-wired for luxury.

Yes, pleasure seeking is a key motivator when it comes to human behaviour. And hedonism doesn’t give a toss about the state of the economy.

This was the topic of a talk I gave today at a wonderful Champagne Assembly organised by G.H. Mumm and Perrier Jouet. The reason we’ll always love a bit of luxury lies deep in the emotional part of our brain. Neuoscience has revealed the subconscious roots of consumer behaviour. It shows us that luxury brands excite the emotional, feeling part of the brain that ordinary brands simply leave cold.

Recently in Germany a couple of neuroscientists (Schaefer & Rotte, 2007) scanned people’s brains as they studied logos of brands of cars. When looking at everyday brands, there was activity in the thinking part of the brain – (the dorsolateral pre-frontal cortex) – but when they saw luxury brands there was frantic activity in the feeling part of the brain (the ventral striatum).

The researchers say this brain area is where our ‘hot buttons’ are located. It’s where we feel pleasure, desire, passion and happiness. There may be an evoluntionary imperative for this, since people who feel happy are more likely to find a mate. And happier people even live longer, according to Dutch psychologist Veenhoven.

So our thinking brain may be telling us to cut back. But, because we’re hard wired for luxury, those top brands will continue to press our hot buttons every time.

A warning from Simonne about Payment Protection Insurance

Taken out a credit card, loan or mortgage recently?

Then there's a chance you've been sold payment protection insurance (PPI).

The insurance is designed to cover payments for a year or two if you're unable to work due to accident, sickness or unemployment. But it was widely mis-sold over the past 6 years. 

In fact there have been over a million mis-sellling complaints to date.

If you've bought a policy directly from your lender, at best you've paid an over-the-top-price for the insurance. At worst, it's possible they won't even pay out on a claim (for example, if you're self-employed).

Think you may be been mis-sold? Then act now. Because new rules about the way banks deal with PPI are being challenged by the courts. Like the ability to reclaim unfair bank charges, the courts may decide to put claims on hold.

 But for now it's still possible to claim compensation - so make sure you get your complaint in quickly.

The Consumer Association, Which?, tell you all you need to know on how to claim your PPI money back. Just click here  for more information. 

Simonne Gnessen

Note to self: Make a list

Are you a list-lover? 

My life seems to be organised around a scattering of post-it notes reminding me of what I have to do, get or even think about. 

I love the sense of control that writing a list gives me. And the euphoria of sheer smugness I feel every time I tick something off.

So I was intrigued to read that writing a shopping list can save me £520 per year. Of course that assumes I take the list to the supermarket with me (or slavishly follow it when placing my online grocery order) and make a concerted effort not to go ‘off-list’ when tempting offers pop up on my radar.

The £520 a year saving statistic comes from the Tesco Greener Living campaign website. It shows you how much money you can save by going greener, including:

• An estimated £365 a year if your home is well insulated
• £30 a year if you remember NOT to leave appliances on stand-by
• £55 a year if you turn your heating thermostst down by just 1degree C
• £200 from recycling your old mobile phone with Tesco 

Have a go at Tesco’s online quiz and test your own green money-saving credentials. 

Or at least put it on your list as something you should get round to.

P.S. Making a list is just one way to help you keep to a budget. If you need more tips download our Tip Sheet "How to Curb the Urge to Splurge" here.

Do you have a high tolerance for low pay?

Simonne tackles the low-earners:

Are you someone who doesn't live up to your earning potential? Try our quiz to find out. 

As women, we often undervalue our worth and dread asking for pay rises or increasing our rates. We happily give away our time and skills at bargain prices because we don't trust that we're worth more. 

If you can identify with this, here's a trick to help you convince yourself that you’re worth whatever you want to earn:

Take yourself off into a room alone for five minutes. Then, say out loud the amount you want to earn. It’s important to actually speak, rather than just think. Shout out your ideal annual salary, your anticipated profits or your daily or hourly rate. 

Maybe you’re aiming for a salary of £60,000. Start by saying ‘I earn £60,000 a year’. Then double it and say, ‘I earn £120,000 a year’. Then keep doubling it again and again, until you reach a ridiculous salary that even David Beckham wouldn't sniff at.

When you reach that silly figure, practice saying aloud that you earn this whopping amount. Keep it up until you can say it in a neutral way, just as you’d reel off your own phone number. This tricks your subconscious mind into believing what you’re saying. 

Then, when you talk to your manager about a pay rise or quote a higher daily or hourly rate, it’ll seem like peanuts. You’ll come across with real conviction. 

Try it - it works! 

We've also got a great tip sheet -  'How to ask for money'  - for you to download.

By Simonne Gnessen Wise Monkey Financial Coaching 

Pay more into your pension to save your child benefit

Here's a fantastic tip from Simonne if you think you're going to be hit by Cameron's cutting child benefits:

The government's just announced that parents who are higher rate tax payers (currently those earning more than £43,875 a year) will have their child benefit axed from 2013. The benefit will be stopped even if only one parent falls into that tax bracket. This will affect families with only one parent working the most. Hmm... I can see this affecting lots of women.

But ... wait for it, there's some good news.

These higher rate tax bands are based on the amount of income you pay tax on and there are ways to reduce your taxable income.  One brilliant way is to make a contribution into a private, or company, pension scheme. So, let's say you earn £46,000, and you pay £300 a month (or £3,600 a year) into a pension plan before tax, your taxable income would be treated as £42,400 (£46,000 less £3,600) which is below the higher rate tax limit. So, hey presto you still qualify for child benefit. The other great thing is that you'll be putting away money as a gift for your future self (the way Sheconomists think of saving for retirement!). Even better, the pension company would only actually collect £240 a month (£2,880 a year) because you automatically receive 20% tax relief on any pension contributions you make. 

Psychology of the investor

Girls, did you know you have what it takes to be a successful investor? 

That's because there are the three key psychological traits that, when it comes to making the savviest investment decisions, trip men up every time. If you'll excuse some over-generalising and stereotyping, these are

Attitude to risk
Men are less risk averse than women and will back portfolios that are more uncertain. They’re more likely to put all their eggs in one basket instead of opting for a safer, more diverse portfolio. Men’s higher earnings and greater net worth also makes it easier for them to take greater risks than women. A US study by Wang in 1994 also showed that women are more likely to be offered safer options than men, by advisors who expect them to be risk-averse.

Overconfidence
Overconfidence is consistently found in more men than women, research shows. And this is especially true in male-dominated arenas such as finance. They overestimate the returns their investments will bring and the certainty of the return. They also have a misjudged overconfidence in the accuracy of their own knowledge and over-rate their own ability. In a Gallup study, both men and women expected their portfolios to outperform the market but men expected theirs to outperform it by a greater margin.

The herd instinct

Constantly monitoring the market can fuel men’s over-activity and cause them to act irrationally. Men are more likely to get drawn into financial follow-my-leader games and information cascades. They also fall foul of being too well informed, instead of tuning out the endless stream of news and financial information and sticking to an annual portfolio review.

This is where women truly have the edge, We have a healthier attitude to risk, are not ridiculously over-confident and don’t play herd games.

Sadly though, lamentably few women are seriously into investing. Male investors outnumber females by eight to one. A mere 3% of hedge funds are headed by a woman. 

Simonne, who has a predominantly female clientele, says women could do with borrowing some of that male over-confidence. “Many women have exactly what it takes to reach dizzy financial heights,” she says, “the only thing holding them back is knowing that they have it and acting on it.” 

Perhaps it really is time for the Sheconomists to step forward?