Barron’s – December 9, 2020

It has been 40 years since Enjoli perfume proclaimed that women can “Bring home the bacon, fry it up in a pan,” and women haven’t only made big strides in equal pay and opportunity, they control 32% of global wealth and more than half of U.S. personal wealth.

Yet, whether because of deeply-entrenched gender roles, a lack of time, interest, or understanding—or some combination of the above—women of all ages, education levels, and income brackets are still behind the times when it comes to taking control of their big-picture financial decisions.

“As a society, we don’t think it’s very sexy when women talk about money,” says Haleh Moddasser, a senior financial advisor at Stearns Financial Group in Chapel Hill, N.C., and author of several books about women and money. She thought this might have just been the case among her baby boomer peers and clients, but apparently not.

“I had a woman working for me who was in her 20s, and she ended up changing her online dating profile to take out ‘financial advisor.’ ”

Are we generalizing? You bet. But as loathsome as the notion of stereotyping women as being no-good-at-the-money-stuff is, there’s an alarming amount of data demonstrating that women in general simply don’t engage with their finances often, or thoroughly, enough. “This is the really sad part of this whole thing: You’d think we’d make some progress, and we haven’t,” says Valerie Newell, a principal and senior wealth advisor with Mariner Wealth Advisors in Cincinnati. In fact, her affluent millennial clients are among the worst offenders, she says. Many say they just aren’t interested, or don’t see the urgency. “Younger women never think that bad things are going to happen,” she says.

In a recent survey of nearly 3,000 Americans by UBS Global Wealth Management, half of married women, and 54% of married millennial women, said they defer to their husbands when it comes to long-term financial decisions.

“It’s not that women aren’t engaged in their financial well-being, but our research shows they’re more engaged in short-term money matters than the longer-term decisions,” says Paula Polito, divisional vice chairman at UBS Global Wealth Management. But those longer-term decisions, which relate to investments, insurance, and estate planning, have the greatest consequences—particularly for women. Eight out of 10 women end up solely responsible for their fiances at some point in their lives, says Polito.

Women also have less room for error on big financial decisions. “We tend to live longer, get paid less, and go in and out of the workforce,” says Carrie Schwab-Pomeranz, board chair and president of the Charles Schwab Foundation. On average, women have significantly less saved for retirement than men, according to the latest data from the Transamerica Center for Retirement Studies. Nearly a third report having saved less than $10,000 or nothing at all.

What’s holding women back? It isn’t a lack of competency. Multiple studies have shown that when women do take the reins on investment decisions, they outperform men by one to two percentage points a year, on average. Rather, a combination of factors perpetuate the gender gap. Some are societal, some are institutional. But all need to be dismantled. Barron’s spoke with advisors, researchers, and women to better assess the problem and offer some solutions.

Traditional Gender Roles Persist

Women have made significant leaps over the past several decades, but longstanding gender roles continue to influence how they think and talk about money. “It boils down to financial education, which is still not offered or required in most schools,” says Lynn Ballou, a senior wealth advisor and partner with EP Wealth Advisors in Lafayette, Calif. “We say make sure kids learn a foreign language, but we never say let’s teach our kids about money.”

The responsibility then falls on parents, and in many households women are taught, whether explicitly or by example, to not talk about finances. “We still hear about clients who give their sons a thousand dollars to try some stock picking, but don’t have their daughters do the same,” says Kathryn George, a partner and chairwoman of the Brown Brothers Harriman’s Center for Women and Wealth. “When we ask why, they say because she’s not interested. Well, maybe she’s not interested because you’re not talking about it with her.”
The problem becomes self-perpetuating, and can have long-lasting effects. In a survey of people ages 16 to 25, Schwab found that young women aren’t lacking in financial grit. Relative to their male peers, they’re more likely to take on extra work, for example, and follow a financial plan. Yet twice as many men said they would invest spare cash; women were more likely to keep that money in checking and savings accounts.

“There needs to be better communication between parents and the next generation,” says George. “People, and especially people who have money, don’t talk about it. So kids don’t understand savings or compounding, and all of those basic skills that are the underpinning to investing.”

Money was not something Mabe Rodríguez, 52, learned about at home. “Finances were always managed by my dad,” she says. Even so, she got a “deep appreciation for cash flow” when she visited her grandparents in Venezuela, and they trusted her to help them pay bills and balance their checkbook. When she landed a job at Procter & Gamble in her early 20s, she got serious about saving and investing. “I had three goals: One was to buy my own house; two was to pay for my children’s education; and three was to retire by the age of 50.”
Rodríguez retired at 46, and has since held multiple leadership positions at various institutions and nonprofits in Cincinnati.

Wealth Advisors Could Do Better

That women are a key segment isn’t lost on the wealth management industry. Over the past decade, there has been a groundswell of women-specific studies, products, and marketing campaigns. “But these efforts are still too superficial,” says Anna Zakrzewski, a partner and global leader of wealth management at Boston Consulting Group.

In a comprehensive study, BCG concluded that the wealth management industry is still missing the mark when it comes to meeting the needs of female clients.

Among other issues, 30% of women surveyed by BCG said they believe advisors speak with them differently because of their gender. In one blatant example, “a wealthy woman, who is a high earner, told us about an advisor who, during the first meeting, spoke primarily to her husband and then sent follow-up documents addressed only to him. She received a charm bracelet,” says Zakrzewski.

“There are a lot of firms out there that say they cater to women and they basically changed the font to pink, but that’s just not going to cut it,” adds Moddasser.

To be fair, there are many male advisors who have terrific rapport with their female clients. Still, the industry is going to be prone to biases and communication misfires if it continues to be dominated by men.

“A big part of the problem is that most advisors are men,” says Julie Knight, an advisor with Janney Montgomery Scott in Allentown, Pa. That isn’t surprising given longstanding gender roles, she says. The problem is persistent: Fewer than 20% of all advisors are women; the same percentage as advisors over 65. In other words, there isn’t an influx of younger women advisors. “We need to get more female advisors in our industry,” she says.

Women don’t want to be patronized, but they do have different needs and communication preferences. A study by Coqual, a global think tank focused on diversity and inclusion, found that women want to work with advisors who are sensitive to their time constraints (for example, no thank you to the golf outing), and who take the time to learn about their clients’ values, aspirations, and family situations—and incorporate all that information into their recommendations.

The impression many women have of financial advice is “men smoking cigars and talking to their brokers,” says Anne Alexander, 56, who began working with Knight after getting a divorce and getting downsized from her publishing job. “What you really want to do is talk to somebody who can help you get your financial life in order and say, ‘Here’s where you are, and this is how you can get where you want to go.’ ”

Women Have a Lot on Their Plates

Lesley Shorr Klein says she’ll never forget the advice she got when she graduated from college and got her first job. “My roommate’s father sat us down and said, ‘Enroll in your 401(k), open an IRA, and invest every month,” says Shorr Klein, 51. She took that advice to heart, saved consistently, and even bought a few individual stocks.
Her enthusiasm for investing continued after she got married. “But then life got crazy. We had kids, and I left my corporate job to start my own recruiting business,” she says. “The one thing that was very easy to slice off were the finances.”

Women face many obstacles when it comes to managing their money, but some of the biggest barriers are self-imposed. Women are juggling more than their share of responsibilities—perhaps now more than ever, given the disproportionate impact of Covid-19—and if they can delegate money management to their spouses, all the better.

It’s one thing to step back from routine money matters, but the stakes are too high to keep key financial issues at arm’s length. “There’s a difference between delegation and abdication,” says Polito. “You don’t have to know everything about the markets or every aspect of financial services, but you do have to have your own road map of your financial life.”

There are myriad reasons women should engage with their finances. For people who are married, equal participation in major financial decisions can have benefits beyond the bank account.

“The more successful couples I know schedule a date, once a month, to sit down to discuss strategies, big purchases coming up, when are they going to retire, and what are they going to do in retirement,” says UBS financial advisor Tracy Byrnes. “In this busy world, that’s really important.”

Couples who are on the same page about money matters tend to fight less, and feel more in sync on their bigger life goals. “One of the main reasons people divorce is because they don’t communicate about money,” says Ballou, who won’t work with couples unless they both participate. “I saw early on in my career that even those with the best intentions couldn’t really know the minds and hearts of their partners. and how their goals and viewpoints might evolve. More than one client has mentioned that I might have saved their marriage.”

The importance of money in relationships is a common refrain. “I don’t know if I would be with my husband today if my relationship to finances was what it was in my early 20s,” says Hannah Carpenter, 35, a film editor who moved to New York after college. Carpenter got serious about budgeting and saving when a co-worker introduced her to her mother, financial advisor Rosemarie Dios at UBS. By the time Carpenter met her now-husband, she was saving and investing regularly. Her husband earns more and came to the marriage with more assets, she says, but it’s a marriage of financial equals because of the steps she took to be independent. “That was important to both of us,” she says.

Whether single, married, divorced, or widowed, knowing where you stand financially is empowering. When Shorr Klien divorced this spring, she realized just how checked out she’d become. “I chose to disengage entirely because I had so much on my plate,” she says. With the help of her financial advisor, and ex-husband, she has become reacquainted with her finances and now knows where things stand “down to the penny,” she says. In the process, she’s ramped up her charitable giving, incorporated environmental, social, and governance values into her portfolio, and gotten more proactive about financial decisions related to her business.

Equal Treatment, Different Approach

So, what do women need that’s different? Advisors say—and studies support this—that when it comes to big money moves, and investing in particular, women tend to consider their decisions in the context of their overall lives, as opposed to looking at investment returns or other key numbers at face value.

“Men are usually more focused on returns, and women are more focused on security,” says Moddasser. “So if you’re talking to a male advisor and he keeps pressing you on how something is undervalued or has a certain standard deviation, they’re speaking completely different languages.”

Sometimes they really are speaking a different language. “One of the problems with the industry is that there’s a vernacular, there are more acronyms than I think in any other industry,” Byrnes says. “And if I start throwing acronyms at you, I’ve lost you.”
What can happen, she says, is women are embarrassed or don’t want to slow down the conversation by asking too many questions. At the same time, they tend to want to get more information before they make big financial decisions.

“Once women have the information needed to make a well-informed decision, and that’s an important thing, their investment profile is relatively similar to that of men,” says Zakrzewski. When women don’t get adequate answers, however, they are likely to hold onto too much cash. In the BCG study, women had 30% of their holdings in slower-growth assets. That can lead to a wealth deficit that is exacerbated by longer life spans.

”Studies show that women are not more risk averse, but rather men are overconfident, which is why women are often better long-term investors,” says Moddasser. “They don’t chase returns, they chase security.”

“With our good friends and partners, we talk about our dreams all the time, but we don’t talk about the money,” says Elizabeth Ortiz, 41, who is an assistant professor of communications and co-owns a restaurant with her husband. “With financial advisors, you traditionally talk about money but not your dreams, and it’s like wait a minute: We should probably talk about those things together for the best future.”

By Sarah Max

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