women on stepsWomen Are Better Investors.

The financial services industry is unquestionably male dominated, and often stereotypes women as innocent wanderers. This is a mistake, and it’s one that all advisors and investors should realize.

Just last year, an old friend and new client told me that her prior advisors always “talked down to her” and “made me feel like an outsider.” She said, “They always ignored me when I was with my husband, and treated me like an infant when I was alone.”

This is completely absurd for a couple reasons. First, women actually control more money, which is proof of financial success. Second, carefulness is not a sign of weakness or lack of intelligence.

Women influence or control large amounts of wealth and the rate at which it is expected to increase is remarkable. Women in 2009 controlled $20 trillion of the world’s wealth, according to a Boston Consulting Group study. An article in Investment News shows that they are the sole decision-makers for fully one-third of American households. Also, women are 57% of the undergraduate population of students and 59% of the graduate population. In seven years women are projected to control 67% of wealth in the U.S.

But if this relative success is so, why does the financial services industry still act condescendingly toward women? Boston Consulting Group says 73% of women are more dissatisfied with the financial industry than any other.

And there’s the irony that women actually may make better investors. In general, they take more care in decision-making and aren’t naturally risk seeking. But men, on average, fly more fast and loose with money. They ask fewer questions. They trust more quickly, based on some gut instinct. They more often seek the excitement of potential outperformance. And, if they don’t get it, they also tend to make changes faster. If this advisor doesn’t work out, there will always be another one.

Women are simply more thoughtful, ask more questions, make changes more slowly and seek a relationship with someone they trust to help them implement a lifetime plan. That’s as opposed to searching for an advisor who will discuss “alphas” and “betas” with them.

Lately, though, the financial services industry has moved away from a focus on returns to one of broad planning, which many women prefer. The industry was terrible at serving women because they were far ahead of the curve on this shift. The entire financial industry was in its infancy and it had to grow up to best serve the most powerful block of discerning clients on the planet – women.

The average woman makes 77% of what the average man makes, lives longer and pays more for a lifetime of healthcare. That’s a partial explanation of why women need to be more careful.

This is slowly changing. The younger couples I meet are less apt to display these differences. Both parties are interested in long-term planning. Men were happy to go along with the excitement of an aggressive return orientation from 1982 to about 2000, when markets boomed and the personal finance industry was in its own adolescence. Then came the bear markets of 2000-2002 and 2007-2009, sobering up many people.

As a child, I learned the most important financial lesson from my mother. Today, every time I stray from that lesson, it is my wife that reminds me of its importance. The lesson is about frugality. Spend less, save more. The women in my life have been here all along. When the finance industry told them that investment returns eclipsed a good solid foundation of savings, they remained brilliantly unconvinced.

Women have not been our equals. Women have been our betters all along. And we are finally coming around as a culture and as an industry to this truth.

 

 

 

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