SEC’s Lori Schock, director of the Office of Investor Education and Advocacy

At a time of economic, market and other turmoil tied to the coronavirus, many investors are in need of the help of an advisor. 

Some investment specialists suggest advisors look closely at their approach when working with female vs. male investors and consider tweaking it as needed.

To better understand why this is the case, we turned to Lori Schock, director of the Securities and Exchange Commission’s Office of Investor Education and Advocacy for the past decade, and an attorney with a master’s degree in taxation.

Schock explains the precise steps advisors can take when working with female investors and how they can make their influence count at an unprecedented time. 

What are the female investors’ top challenges?

Women have unique financial considerations when it comes to investing, and there are certain realities they must face. 

Many studies show that women often make less money than men. Because of this, they have less money to invest.

As we know, compounding is our best friend in the investment world, so having less money to invest can have a significant impact over time on their earning potential when trying to build a nest egg. 

It’s also important to note that statistically women live longer than men. Since that’s the situation, women have to address the challenge of making sure they have enough money to sustain a longer life.

They have to become familiar with long-term investment products and create a financial plan that will carry them into their later years.

Women tend to buy and hold their investments, an investing approach that is a good way to plan for the long-term. Women are great at asking questions and are less likely to become victims of investment fraud.  

However, even though they ask questions, some women may still be risk averse. Every investor needs to determine their own risk tolerance when making decisions about investment opportunities and returns.

Families may experience life-changing challenges that can derail financial plans. For example, one parent who works outside the home may choose to leave the workforce for long periods of time to care for children or parents. 

Divorce or the death of a spouse can also affect a family’s financial future.  These are challenges that women need to take into account when creating a financial plan.

What can advisors do to help women overcome these challenges?  

Plenty. 

Let me state the obvious. Financial advisors are often the first line of communication when it comes to providing women with the information they need to make smart investment decisions.  It’s an awesome responsibility that everyone should take very seriously.

First, it’s important to be as transparent as possible. Every step of the way, make sure the investor understands the basics of investing. Let them know that every investment has risk. Tell them up front whether you’re a licensed investment professional. 

Help them understand the fees and costs associated with investing. Discuss the various types of investment products. Assess their risk tolerance and help them identify their goals.

Since women face unique challenges, help them create an investment plan that looks for ways to help level the playing field. 

While an investment professional can’t address pay inequality, they can look for investment opportunities to help make a woman’s money work harder for them. It can be very helpful to identify lower cost investment options so more of a woman’s money can be working for them.

While we know that some women may be risk averse, talk to them about the importance of diversification. Explain to them that by investing in a variety of different kinds of investment products it will help reduce the overall risk of an investment portfolio. 

Help them understand that investment needs change over time and that oftentimes portfolios may need to be rebalanced.

Working with women to create a financial strategy that addresses a longer life expectancy is vitally important.  Help them recognize that it’s not only necessary to plan for the short-term but also for the long-term. It can help them become more financially secure in their later years.

I can’t stress enough the importance of women being involved in all aspects of their financial planning. Advisors should encourage and empower women to be a part of the discussion to create an investment plan.  

Prompt them to ask questions and make sure they understand what they’re investing in.  In addition, our Investor.gov website is a valuable resource that provides information and tools all investors can use to take control of their financial future. An informed investor is an empowered investor.

Financial advisors should provide valuable resources to help educate investors. Share your research, knowledge and expertise.

Make sure you’re providing an atmosphere that promotes questions. Explain and explain again to make sure the investor understands what they’re investing in.

Understanding the unique financial considerations women face and providing them with valuable information to create a financial plan that addresses their challenges, can help give them the confidence they need to make wise investment decisions.  

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The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the interviewee’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.