by Kathleen Burns Kingsbury
As a financial planner, you've probably had a lot of experience advising men. After all, the financial services industry was founded by men for the male wealth creator. But today, women are a growing economic force. Women currently control the majority of wealth in the U.S. and are estimated to receive 70 percent of the $41 trillion in intergenerational wealth transfers over the next several decades.1
A huge market exists for financial advisers who know what women want. Take the first step to being a female-friendly adviser and tackle some common preconceptions. You've probably heard these myths before-maybe you even believe some of them, but the best way to attract and keep your female clients is to know the facts about women and money.
Myth: Women Are Not Good at Math
In 1992, Mattel released a talking Barbie Doll that uttered the words, "Math is tough." This doll was promptly attacked by the American Association of University Women for perpetuating the myth that girls were less proficient at math and science than boys.2
More than a decade later in 2005, Lawrence H. Summers, then president of Harvard University, made a controversial statement at an academic conference suggesting that there was an innate difference between the sexes that caused fewer women to succeed in math and science careers than men. His comments were splashed all over the media and, a year later, Summers resigned.3
Both of these events speak to how ingrained the belief is that women are not good with numbers. However, research disproves this fallacy. One interesting study out of the University of California-San Diego, reported nurture not nature accounts for the gap in math skills. The researchers compared two rural tribes in India. The first tribe did not allow women to own land or attend school for as long as men did; the second allowed both sexes to own land and attend school for an equal amount of time. In the tribe with equal rights, women were equally proficient in math skills as the men. In the male-dominated tribe, men outperformed the women in this area. The researchers concluded that environment, not gender, determines a person's math abilities.4
A growing movement exists to expose more women to learning and mentoring opportunities in the fields of math, engineering, finance and science. Time will tell if this exposure increases the number of females entering these professions. But either way, it is important to know that females can do math and are just as good with numbers as males.
Myth: Women Are Impulsive Spenders
Most, if not all, of the media coverage on overspending tells the same tale of a lonely, wealthy woman at the mall buying clothes and shoes she will never wear. Despite this image, over-shopping is an equal opportunity problem.
According to April Lane Benson, Ph.D., a nationally known psychologist who specializes in the treatment of compulsive buying disorder and author of the book To Buy or Not to Buy: Why We Overshop and How to Stop, "Money is an equal-opportunity, all-purpose mood changer."
She has discovered that just as many men impulsively spend and over-shop as women, although men generally adopt a work frame and women a leisure frame to the activity.
"One major difference is how society labels it," Benson writes in her book. "Women over-shop; men collect, a term that gives the activity a highbrow, slightly refined cast. But the underlying impulsive behavior is the same."
Overspending is a behavior used, often unconsciously, as a coping strategy for difficult feelings such as anxiety, depression and low self-worth. While women are statistically more prone to suffer from anxiety and depression than men, our consumer-driven society is fertile ground for any individual, regardless of gender, to shop and acquire material possessions to temporarily boost self-esteem, cover insecurities and distract oneself from life's struggles.
Because women make 80 percent of the household purchases in this country, a woman is more likely to be seen as the impulsive shopper because she shops more.5 But you only need to look at history for some examples of men with the same problem. The first president of the U.S., George Washington, was a classic compulsive shopper and more recently, Michael Jackson, the king of pop, died with millions of dollars of debt because of his overspending habits.6 So remember, anyone can impulsively shop.
Myth: Women Are Too Emotional to Invest Wisely
This myth began in 1817 when the New York Stock Exchange came into existence and banned women from participating in trading activities. It was not until 63 years later in 1880 that women got involved in the market, much to the chagrin of the male brokers.7
In the book Women and Their Money 1700-1950: Essays on Women and Finance, a story is told of a trader named Henry Clews. He claimed Wall Street should be off limits to women since they were too impulsive and impressionable. He went further to say women should turn over the management of their funds to male advisers. Time and behavioral finance proved Clews wrong. Several behavioral research studies have found women investors to outperform men in the long term.8
The reason for this is that men try to compete with the market and chase returns, leading to more frequent trading and high transaction costs. Conversely, women take a long time to make an initial investment decision, but once they do, they are committed for the long run. Women are less reactive to short-term changes in the market, trade less frequently than men, and realize better long-term investment performance as a result.
Myth: Women Would Rather Let Men Manage the Family Finances
Women are the chief financial officers of their households in 66 out of 100 homes, according to the 2010 Women and Affluence Study by Women & Co.9 This trend is on the rise; in 2008, the percentage was 63 percent. This number rose to 88 percent with increased wealth, and women in the ultra-high net worth market reported they play a high to moderate role in the management of the family's assets.10 And when it comes to retirement, 90 percent of women participate in decisions that affect their household's retirement and investment accounts.11 The truth is women want to be involved, and many more are actively involved in managing family finances.
Myth: Women Are Not Interested in Wealth Management
Historically, wealth management has been a boys' club. However, the gender gap in finance is shrinking as more women enter the field. The U.S. Bureau of Labor reported in 2010 that 31 percent of personal financial advisers were women.12
Advising clients lends itself to a woman's strengths in relationship building and communication, allowing some of these female advisers to outperform men.
Organizations such as Directions for Women, The Female Affect, Women Advisors Forum and FPA, through its Women and Finance community on FPA Connect, are offering networking opportunities to facilitate the advancement of women in financial services. When I speak at these forums and organizations, I see how women are interested in wealth management and are working hard to level the playing field going forward.
Fact: Women Are Good for Business
As you can see, women are good at math; are not too emotional to spend, invest and manage money; and want to be players in the field of financial services and wealth management. Female clients are especially intuitive and good at detecting those financial advisers who give the advancement of women lip service versus those who really believe in equality for women. Be part of the group of advisers that educates clients and colleagues about the facts about women and money and dispels the myths. Believe me, she will notice.
Kathleen Burns Kingsbury is the author of How to Give Financial Advice to Women: Attracting and Retaining High-Net-Worth Female Clients, recently released from McGraw-Hill. She is the founder of KBK Wealth Connection (www.kbkwealthconnection.com) and a wealth psychology expert and behavioral change specialist. She teaches financial services professionals how to connect, communicate and collaborate more effectively with their clients to increase client retention and improve profitability.
1. K. Wojnar, and C. Meek, "Women's Views of Wealth and the Planning Process: It's Their Values that Matter, not Just Their Value," Advisor Perspectives, March 1, 2011.
2. Anonymous, "Mattel Says It Erred; Teen Talk Barbie Turns Silent on Math," New York Times, October 21, 1992, www.nytimes.com/1992/10/21/business/company-news-mattel-says-it-erred-teen-talk-barbie-turns-silent-on-math.html.
3. M. Bombardieri, "Summers' Remarks on Women Draw Fire," Boston Globe, January 17, 2005, www.boston.com/news/local/articles/2005/01/17/summers_remarks_on_women_draw_fire/.
4. M. Szalavitz, "The Math Gender Gap: Nurture Trumps Nature," Time Healthland, August 30, 2011, http://healthland.time.com/2011/08/30/the-math-gender-gap-nurture-can-trump-nature/.
5. B. Brennan, Why She Buys: The New Strategy for Reaching the World's Most Powerful Consumers, New York: Crown Business, 2009, p. 4.
6. A. Benson, Personal Interview, October 28, 2011.
7. A. Laurence, J. Maltby, and J. Rutterford, Women and Their Money 1700-1950: Essays on Women and Finance, New York: Routledge, 2009.
8. B. Barber and T. Odean, "Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment," The Quarterly Journal of Economics, vol. 116, issue 1, February 2001, p. 261-292.
9. Women & Co., Women and Affluence, 2010.
10. "Research Reveals Affluent Women Taking Control of Their Wealth," Trusts & Estates, May 5, 2009, http://trustsandestates.com/press_release/aflluent-women-taking-wealth-control-0505/.
11. Prudential Research Group, Financial Experience & Behaviors Around Women, Newark, NJ: Prudential, 2010.
12. "Women in Financial Services" (Fact Sheet), Catalyst, April 2012, www.catalyst.org/file/592/qt_women_in_financial_services.pdf.