Imagine that a CEO tells his top executives that he will identify the next CEO based on how well they do with one assignment: breastfeeding. While all the men still put their hands up saying “pick me,” the women are thinking, “well, I’m not sure, it’s been about 10 years….”
This hypothetical was presented by Rachel Schnoll, managing director and head of personal financial management solutions at Goldman Sachs, to illustrate the self-doubt that even highly competent women often feel.
Women are a financial force today, but they are less confident investors than men, according to a private roundtable discussion last week by three female Goldman Sachs leaders.
Leading the discussion was Kara Murphy, Goldman managing director and chief investment officer, who pointed out these facts:
- With 1.75 billion women participating in the workforce worldwide today, they control close to $40 trillion of consumer spending globally, and by the end of 2020, should control more than $72 trillion in global wealth.
- In the United States, they have decision-making control over $11.2 trillion, and 57% identify themselves as the primary investment decision maker in the household.
- Women will earn $20 trillion worldwide in 2020 and are to inherit $28 trillion in wealth in the next 40 years.
“This is remarkable when you consider where [women] were at two generations ago,” Murphy said.
Joining her on the virtual panel discussion was Candice Tse, managing director and U.S. head of market strategy for Goldman Sachs Asset Management, and Schnoll, managing director and head of personal financial management solutions at Goldman Sachs.
Tse noted that studies show women live at least five years longer on average than men, meaning women need to gain confidence to invest for themselves or work with someone.
There are ways to improve the confidence factor, the panel said. One is by asking for help and getting an advisor. Even Murphy said she and her husband, both in the financial services business and experienced in investing, just recently got a financial advisor because they “didn’t have the discipline” to manage their retirement funds.
Schnoll added that a lot of women are afraid to invest because they think of it as having “to know everything about stocks and bonds and the markets” and get overwhelmed. “But really the most important part of managing finances is doing something which women are so good at: planning.”
Tse has traveled the country with her EMPOWER education program, which promotes investment education to women of all backgrounds.
Not Being Heard
One frustration stated by women with advisors: “They don’t feel spoken to and they don’t feel heard,” Murphy said.
“This comes up more often than it should,” Schnoll said. She added that couples also “find it hard to get on the same page,” meaning understanding what’s important to both of them. “That can be the hardest part.”
One of the first things her team does is go through a number of behavioral finance questions, she explained. “It’s not about stocks and bonds, it’s about what you want to do with your money,” she said.
It’s critical that both partners are together in this conversation, she added. When asked what they valued, “The number one response we get is: spending more time with the people they care about,” she said.
With all the ways to invest, from robo-advisors to financial advisors, Murphy stated, the single most important thing that women need to do is just “start to invest.”
Tse thought “there is room for” both tech and human help, but as people get older and finances get more complicated, more help is needed, and “financial advisors aren’t going anywhere.”
Schnoll said a good first step is to get their “financial hygiene in place,” which can mean paying off credit cards or saving $50 a month.
The panel also pointed out the importance of environmental, social and governance investing, which women have gravitated to, especially during the pandemic. Firms that have cared for employees more have performed better during COVID-19, they stated. Further, climate change has grown in importance to investors, as has governance and diversity.
In fact, they also discussed the importance of the Black community as an underserved investment group, and if that “racial wealth gap” could be closed, “billions [of dollars] could be added to the U.S. economy,” Tse said.
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