Women now control over half of the nation’s personal wealth, and many predict that percentage will grow to two-thirds by 2030. There are multiple reasons for these growing figures. Women are acquiring wealth through inheritances from parents and spouses, divorce payouts and their own earnings, especially as entrepreneurs. Despite these gains, many advisors fail to fully recognize female investors’ unique challenges and desires.
Their primary motivation
When it comes to investing, women focus on more than the bottom line. They want good returns, but their motivation isn’t financial success as much as it is security for themselves and their families. They invest to accomplish goals, the most prevalent being a comfortable retirement. According to a 2016 TD Ameritrade Institutional report, 69 percent of women who want to hire a financial advisor say retiring with financial security and peace of mind is their top priority.
Their common challenges
Even though the income gap between men and women is narrowing, they still earn less. The difference is amplified by employment lapses due to caregiving. They also face other obstacles in securing their retirement: singlehood and longevity. Because of the financial advantages of marriage, being single can make it more difficult to acquire sufficient retirement savings. And more women face this reality. For the first time in the U.S., single adult women outnumber married adult women.
The median age of the first marriage for women has risen to 27; many remain unmarried well into their 30s.1 Currently, 22 percent of women have been divorced.2 Widowhood is another factor. Women are more likely than men to be widowed because they often marry older men, live longer and are less likely to remarry. Based on the last U.S. Census, nearly 40 percent of women aged 65 and over are widowed, while only 13 percent of men over 65 are widowed. Fifty-seven percent of women aged 75 and older are widowed, in contrast to 21 percent of their male counterparts.3
Compared to an average life expectancy of 76 for a male, women’s average life expectancy is 81, with an increasing number of women living into their 90s. Not only does this mean women often need additional funds for retirement, it increases the likelihood of incurring higher medical costs and requiring long-term care due to age and no longer having a spouse to care for them.
Their other goals
With college costs rising as disproportionately as healthcare costs, many women are deeply concerned about helping their children attain an education. They may be torn between keeping their children from accumulating excessive debt and securing their own retirement.
Commitment to family creates a desire for flexibility through financial breathing room. As nurturers, women commonly absorb the pressures of caring for children and older parents and may take time away from work to do so.
Women want to make a difference for future generations and their communities. According to research by the Women’s Philanthropy Institute, women give more financially than their male peers at virtually all income levels.4 Along with millennial investors, female investors are on the leading edge of socially responsible investing. Surprisingly, despite their desire to improve life for younger family members and those to come, women are less likely to have financial documents and estate planning tools in place. More than three quarters do not have a comprehensive estate plan, and 36 percent do not have a will.5
Highly relational, women are more likely than men to emphasize their advisors’ soft skills. Female investors want their advisor to understand their goals, listen to their needs and answer questions patiently.
Women want to learn. According to the Family Wealth Advisor Council’s study, “Women of Wealth: What Do Breadwinner Women Want?,” 62 percent of women working with an advisor say they are not as knowledgeable about their finances as they would like to be.
Women are more conservative and possess slightly less financial confidence than men. Nearly half of affluent women investors surveyed for the “Rebuilding Investor Trust” study by Sullivan and Northstar Research Partners characterized their households’ risk tolerance as either very or somewhat conservative.6 Although they are more risk-averse than men, they are often more willing to wait patiently for their investments to recoup losses.
What you can do
To ensure your female client gets what she wants and needs, take the time to get to know her and establish rapport before offering solutions. Listen more than you talk. Because women focus on life choices when investing and measure success by how well they can fulfill their purposes, it’s crucial to understand your client’s motivations and concerns. Ask open-ended questions like: “What are your greatest financial priorities?” “What is your number-one nonfinancial fear?” “Describe how much risk you’re willing to take.” “What haven’t I asked that you would like me to know?”
If you have male clients, invite their partners to participate when you meet and engage the partners in your conversations. David Bach, author of “Smart Women Finish Rich,” notes 70 percent of widows leave their husband’s advisors within a year of their husband’s death. Building a connection with both partners from the start is one way to prevent this occurrence.
Respond to women’s relational bent by providing opportunities for them to learn in groups through seminars and lunch ‘n learns. Brainstorming opportunities and small group discussions on financial issues, such as those outlined by the Directions for Women organization, may also appeal to them.
Since women are eager learners, ask what they want to learn. Offer practical information on a variety of topics, such as identity theft, pros and cons of joint accounts, caregiving, considerations when remarrying, estate planning and different types of retirement accounts. Explain investing options thoroughly, using readily understandable terms. Monitor your client’s body language. If it doesn’t appear relaxed, ask if she would like more clarification or if she has any reservations.
Deepen your bond by serving your client in a holistic way. Act as a teacher, coach and counselor as needed. Be thoughtful and kind. Remember her birthday. Congratulate her accomplishments. Refer other professionals when needed – whether it’s a CPA, estate planner, elder law attorney, executive coach or even a housekeeper.
Because women prioritize relationships and primarily view money as a means to an end, they see themselves as mothers, wives and daughters before investors. Build a solid relationship and earn their trust, and they will view you as a friend. Once they do, they will be loyal clients and make referrals twice as often as their male counterparts.