From the May 2004 issue of Investment Advisor • Subscribe!

Impersonal Finance

Think gender distinctions don't matter anymore in financial planning? Sorry, many of your clients beg to differ

In this brave new world of 2004, it's generally assumed that catering to gender differences around money is pass?. Worse yet, it's not PC. Everyone is equal now; there is no more need for affirmative action to educate women about finance, and no point in male financial advisors learning "female ways of thinking" or vice versa.

But my 30 years as a psychotherapist tells me that it ain't necessarily so. Not only are there still strong emotional and cultural differences between the sexes, but neither gender is quite as oblivious to the role of money in relationships as we like to think.

Two years ago, for example, my co-author Sherry Christie and I surveyed two groups of women from Mount Holyoke College: one group from the Class of 1968 and the other from the Class of 1996, young enough to be their daughters. Among these graduates who were in intimate relationships, a remarkable 50% earned more than their partners. We asked whether they or their partners had any problem with this reversal of traditional roles, expecting to find higher comfort levels in the younger group.

The first surprise was that only two-thirds of the younger women said they were comfortable outearning their partner, compared to four-fifths of the older group. Among those who were not okay with the situation, a startling 37% of the younger women admitted that both they and their partner were uneasy with the income disparity. Another 50% told us their partner was bothered about it, but they themselves weren't. By contrast, being the high earner concerned 76% of the women in the older "uncomfortable outearners" group. However, they all insisted that the income imbalance didn't bother their partner.

We might conclude that older men, at least, are fine with being outearned by a woman. But I was reminded of some of the interviews I'd done in 2001 for a book I was writing. During these conversations, several well-known women told me, "I make more money than my husband does, but he's fine with it. He doesn't feel threatened at all. But would you mind not mentioning it in the book?" So possibly, older men aren't really as comfortable with being outearned as their wives like to think!

In matters of mores, change often happens much more slowly than the mass media would have us believe. In societal terms, the 28 years between two college classes is the blink of an eye. Should it surprise us to learn that a woman is still not free to outearn a man without risking their relationship?

Journalist and TV producer Linda Ellerbee has an interesting take on this slow-to-change societal bias. She told me that when a woman dates a man who is richer and better known than she is, people are happy for her: "Congratulations! What a great catch!" But when a man dates a woman who is wealthier and more famous than he is, people say to him in a tone of concern, "Are you okay dealing with this? How are you handling it?" So even if he starts out feeling fine about the money differential, he often ends up feeling weird about it.

Money Still Equals Power

Men and women tend to view the same landscape from different vantage points. Generally speaking, both views are valid. But as the preceding examples indicate, there is one area where the difference in perspective is unbalanced: money and power.

While generalizations can mislead when applied to individuals, they are a useful way to sum up gender differences. In my experience, women typically want to share financial power with their intimate partner, regardless of who earns more. But when a man makes more money than his partner, he usually believes he should have primary authority in making the financial decisions.

As Georgetown University linguist Deborah Tannen points out, men are socialized to succeed by defeating their opponents (win-lose), unlike women, who are trained to be accommodating and cooperative (win-win). In addition to viewing relationships hierarchically, men are more self-contained, in contrast to women's desire to be connected with other people.

These two points of difference explain why a man may come home with a new big-screen TV and say proudly, "Look what I got us!" When his dazed and hurt wife protests, "How could you have done this without consulting me?" he's apt to respond with anger and equal hurt, "Do I have to ask your permission? What are you, my mother?" In his one-up, one-down view, he has gone out in the world, battled store clerks and fellow customers, and returned victorious with his prey. In his wife's view, such an important decision should have been made together after a collaborative discussion.

As financial professionals who are "therapeutic educators," you have an opportunity to help couples learn to make decisions as a team, no matter who earns most of the money. If you can encourage them with sensitivity and patience to share power equally, they will be better able to move forward as partners, with their goals aligned to the fullest extent.

Urge them to talk about it with each other and with you, so they can strategize ways to become more comfortable with jointly sharing financial power. It may be useful to discuss the different contributions each of them makes to the relationship and the family's well-being. Perhaps they would be less conscious of their income disparity if each of them contributes to a joint household account in proportion to his or her earnings.

I'm not saying this is easy. Men, whether younger or older, may view sharing financial power as weakening their masculinity. Women who have been single a long time, or have grown up in a family where developing independence was a survival technique, may be no better at sharing decisions than many men are. I recently received an e-mail from a woman like this, the chief earner in her family. For the sake of her career, her husband had moved across the country more than once without apparent resentment. Now he wanted to use $15,000 of their savings to start his own business. Fearing that his lack of business skills meant the money would be wasted, the wife wrote me in search of support for her "rational" position to deny his request.

Although I empathized with both of them, I told her that in the long run, what they did about the money would be less important than how they did it. Unless she and her spouse could share power and decision-making equally, their relationship would suffer from a lack of mutual respect. I advised her that it was vital to build a bridge of communication, empathy, and esteem, so that her husband could come to feel good about himself and his contributions, both in his work and at home.

Establishing a balance of power is also crucial when one partner is the breadwinner and the other stays home to care for the kids. I often recommend that the stay-at-home parent receive regular pay for this job, which is essential to the family's well-being. It's sad that these parents often feel they have no "right" to ask for money for themselves or their children, or must justify to their wage-earner partner just why they need every nickel. We should value raising children enough to award caregivers the recognition and dignity of an appropriate salary.

Separate but Equal?

The fight goes like this. He says: "Why do you want money of your own?" (He thinks: "She's planning to leave me!") She says: "Why do you insist on putting all our money together?" (She thinks: "He wants to control me!")

Aside from whatever grains of truth may inhabit their more paranoid imaginings, there are often unconscious, positive reasons why men may want to merge their money while women prefer to keep at least some funds separate. Men's greatest challenge in intimate relationships is learning to get connected and stay connected. Merging money is one way they can do that. Women's greatest challenge is not losing themselves in the relationship. For them, having money of their own is a way to maintain a healthy, autonomous self.

When both partners understand these differences, the battle is over. They can forge a truce by choosing a financial solution that works for them both. Totally separate money; partly separate and partly joint: either arrangement is fine if it meets their needs. However, totally merged money makes me uncomfortable. At some point in their lives, most women will be alone. That's no time to have to hunt for the checkbook, or to discover that one's spouse has hocked the investment portfolio to secure a margin loan.

Another common area of misunderstanding arises from men's and women's different relationship responsibilities. Even when a man makes less money than his wife, he usually feels the "provider burden." If she tells him, "Would you stop obsessing about the mortgage? You know my paycheck will take care of it!" she truly doesn't understand his world or his worries. No matter how little he earns, or how much he might secretly want to quit his job and write song lyrics, he has probably been brought up to be the provider.

Most women don't feel similar misgivings about downshifting or quitting work to pursue a personal passion. However, that doesn't mean they have an easier time of it. Women's primary burden centers around what has been called "the second shift" or the "Superwoman syndrome"--the responsibility to be all things to all people. They are the ones who clean, cook, wash, shop, chauffeur, wrap birthday presents, look after aging parents, stay in touch with relatives, return items that don't fit, volunteer at school, supervise home repairs, and much more, usually while holding down a job.

As a therapist, I feel it's vital for both women and men to come to understand each other's burdens and empathize with their partner's struggles. Thankfully, more husbands are willing to help around the house these days, although their assistance usually doesn't come close to covering the variety of roles and tasks that women juggle, or the many priorities they mentally reorganize from moment to moment. For their part, women need to understand that a some men focus so intensely on their provider responsibilities that they may neglect to consult with their wives on major financial decisions.

Advisors, too, should be cognizant of these responsibilities. First of all, even if a husband is less vocal in a consultation than his higher-paid wife, take care to talk to both of them equally and address both spouses' needs. From the husband's provider viewpoint, an understanding of financial matters is important, and his wife most likely expects that they will make any key decisions jointly.

Second, time is an immensely valuable commodity to women because they have so little of it to themselves. (When asked what kept them from managing their money better, "lack of time" was the single most important reason given by two-thirds of 1968 Mount Holyoke graduates. Among the Class of 1996, it ranked second only to "Not enough money to do anything with.") Help your women clients strategize ways to save time, or use it more productively.

Men and women have different primal fears that correspond to their different burdens. Men tend to fear failing in their provider responsibility by losing their job or dying prematurely and leaving their family poorly provided for.

Women, whose burden is to take care of so many people, are haunted by "bag lady" nightmares in which there is no one to take care of them. They see themselves out on the street alone and impoverished, with their few remaining possessions in a garbage bag stuffed into an old shopping cart. The prevalence of this fear may be rooted in centuries of dependency on men for economic survival. Worldwide, women earn 90% or less of men's pay for similar work, according to a recent International Labor Organization study. In the U.S., the comparable figure for years has been a meager 75%.

Gender differences around risk add another dimension to the picture. Men tend to be more willing to risk their money, partly due to an upbringing that gives them confidence (rightly or wrongly) about their financial expertise. If they lose money, they're prepared to get up, dust themselves off, and start all over again. Women, who not only earn less but spend less time in the workforce because of childbearing and other factors, are not as sure of being able to replace any money they lose. They may also have been raised to believe that they won't be any good at "money stuff," and if they're lucky, some man will take care of it for them.

When fears of this kind prevent clients from taking action that is in their best interest, you can help by asking them to write down what they are fearful or anxious about and how they would cope with these bugaboos. This process can rob old fears of much of their power to intimidate.

Many of these gender differences have persisted for centuries, if not millennia. They are unlikely to disappear in our lifetime, which means you can't realistically practice "impersonal finance" that takes no notice of a client's gender. Instead, you need to understand the differences in social conditioning between men and women, while helping your clients learn to share financial power and communicate openly and compassionately with each other.

Olivia Mellan, a money coach and money therapist, is the author with Sherry Christie of The Advisor's Guide to Money Psychology, available through the IA bookstore at www.investmentadvisor.com. E-mail Olivia at om@moneyharmony.com.

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