June 28, 2012

How Advisors Can End the Real ‘War Against Women’

Women have recently become the focus of debate between the two primary political parties, with  Democrats claiming that Republicans are taking positions on issues that are attacking women’s rights, and therefore waging a “war against women,” while the Republicans are accusing the Democrats of focusing on the wrong issues.

Yet the war against women has nothing to do with women’s rights or a politician’s frenzy to get into the White House. The real war against women is an economic war that has huge consequences for women and our society overall if it doesn’t end soon. The reason is that there is a significant gap between men and women’s financial literacy that is causing more risk for women than ever before since other factors make it even more difficult for women to retire and support themselves financially throughout their lives. When I wrote about the issue last year, I shared that there was a significant gap between the genders.  This year Financial Finesse’s research found that not only do women continue to lag behind men when it comes to their financial literacy and knowledge, but the gap between the genders appears to be growing.

Here’s what we found:

Women continue to lack basic money management skills—the foundation of all financial planning.

  • Only 43% of women reported having an emergency fund in place to cover unexpected expenses or to pay bills for a few months compared to 63% of men.
  • 52% of women said they were comfortable with the amount of (non-mortgage) debt they had compared to 71% of men who felt comfortable about their debt loads.

Women are growing less confident in their investing knowledge, which is crucial to their ability to build their wealth.

  • Only 25% of women reported that they rebalance their investment accounts to keep their asset allocation plans on track compared to 49% of men.
  • 57% of men said they have taken a risk tolerance assessment and were aware of their investment risk strategy compared to only 37% of women.

Let’s think for a moment about why this is so frightening. Women tend to live on average up to five years longer than men; they typically receive lower benefits in retirement because they earn less than men (nearly 18% less based on recent Bureau of Labor Statistics data), and they spend on average 12 fewer years in the workforce.  In addition, women are more likely to spend part of their retirement years alone, as nearly 90% will be solely responsible for their finances at some point in their lives, whether due to the death of a spouse or divorce, according to the National Center for Women and Retirement Research (NCWRR).

Why Does This Gap Matter to Advisors?

Not only is it widely known that women are a missed client market, but it’s also known that they control $8 trillion in assets in the U.S. according to TD Ameritrade Institutional. Other studies show that women are most likely to control much of the assets owned by their husbands at some point in retirement (remember that 90% number earlier).

So what should advisors do to help narrow the gap? For starters, treat wives like they matter, even when they’re not directly making the decisions. A 2010 study by The Boston Consulting Group found that most women feel that wealth managers could do a better job of meeting their financial needs. You may think that you are meeting your client’s financial needs already, but take a closer look. Even if you are working primarily with the man of the household, spend an equal amount of time communicating and working with his spouse to build a relationship since it could ultimately be her you end up working with down the road.

Create a community of female clients to attract new ones. I recently read a study from the Family Wealth Advisors Council (FWAC) that said women are dissatisfied with the financial services industry, and many are convinced that “their gender is a key factor in the disrespect and condescension” they encounter. If your female prospects have a predisposed feeling that their relationship with you will be difficult due to their gender, that’s a huge issue, especially when you consider that every woman in this particular study were known or perceived to be affluent (as defined by having a net worth of over $1 million). Ask female clients that are satisfied with your working relationship to become references for new and potential clients. Women are community oriented, and knowing you have clients already happy with your services who are similar to them can make a big impact on their decision to work with you.

Communicate differently with women than you do with men. Financial professionals have a tough role: they must be chameleons, mirroring their clients’ communication styles. When I ran a hedge fund years ago, I offered investing workshops specifically for women. It was an eye-opening experience in that it taught me how women respond to a different message than men. According to Ruth Hayden, author of For Richer, Not Poorer: The Money Book for Couples, women tend to be more concerned about things that relate to their family’s wellbeing and comfort on a day-to-day level, whereas men tend to make purchases that are investments that have the potential to appreciate over time. When communicating with your female clients, be sure to talk about what matters to them. One advisor shared with me how she would ask her female clients about important memories that could be tied to their financial goals and money. These non-tangible experiences tend to matter more to women than the chase of a higher return.

The economic war currently affecting women is one in which you can play a critical role. By reaching out to women, you can effectively improve your relationships with them, which can ultimately lead to growth in your business. More than that, however, by choosing to work with women, you are helping to stop the problem from growing, thus helping to close the gender gap. By doing so, you are creating better clients who will have more assets to invest. You are also changing the way women approach financial planning so that they are more likely to seek guidance and a better understanding of their investments. 

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.