When it comes to advising, there are distinct differences between female and male investors. Women investors have unique perspectives and experiences. They also face specific challenges—and opportunities.
As a Financial Advisor, how can you effectively engage and support this growing demographic?
Aging women retire with fewer assets—and many lack a plan. According to FinanceBuzz, about 39% of women don’t have a retirement strategy, compared with 25% of men. And only 19% of women have a written retirement plan.
Apella Wealth Financial Advisor Diana Bacon, CFP® begins by breaking down the components of a retirement plan. “What do you have to do to have a retirement plan?” she asks. “You have to save, you have to invest, and you have to be thoughtful of yourself. Make sure you either have an income stream or the assets to support you.”
Changing your client’s money mindset is key. Women need to put themselves first.
“Women need to use the ‘s word,’” underscores Diana. “We need to be selfish. And we need to get away from the ‘sh word,’ shame.”
Admittedly, for many women, prioritizing themselves is challenging. Particularly when they’re faced with situations like raising children and helping them plan for their futures—while simultaneously planning for their own.
Often women experience shame when it comes to things like credit card debt or paying too much on a car loan, which can ultimately spiral into mismanagement of finances. Others experience guilt about putting money into a 401 (k) because they feel it’s taking away from money coming into the family—not realizing it really helps in the long run.
For many women, entering or reentering the workforce is another challenge that affects their finances. They can experience guilt and shame about not working and not contributing financially, working and taking time away from the family, or being underemployed to better support the family. Single working mothers have added challenges, of course.
Divorce and widowhood are two life changes that impact women’s financial standing. A woman who was married and now either divorced or widowed may have relied on her husband to take care of the finances. In this case, she’s likely wondering: Where do I start over with all of this?
In terms of divorce, some women have never heard of a Certified Divorce Financial Advisor (CDFA), nor do they understand how much a CDFA can help them through this important life change.
Diana’s tip for divorcing women?
“The first thing I advise women who are thinking about getting divorced to do is to get a job or get a better job,” she urges. “Don’t wait. Do it right now.”
Apella Wealth Financial Advisor Joyce Bloomquist, CDFA®, agrees with that advice, stressing the importance of securing employment. “We want that to be the ultimate goal for a woman going through a divorce,” she says.
The problem is, employed women may not think they’re taking home much of their earnings, particularly if they have daycare costs. However, they’re still participating in social security, a 401 (k), and getting their own healthcare benefits.
“Women need to start accumulating those things for themselves when they go from ‘we’ to ‘me,’" adds Joyce.
This guideline applies to widowhood, too.
“A majority of women, at some point, will be their family’s primary financial decision-makers. We live longer. Many times we’ll outlive our husbands and be alone. So, the ‘we to me’ concept isn’t just about divorce. These are important things to talk about,” she notes.
Despite attempts to narrow the gender pay gap, issues with inequality are still prevalent. Planning ahead is paramount, especially since the gender pay gap can have a significant impact on a woman’s retirement.
In fact, women contribute 30% less than men to their retirement accounts and, on average, women receive 20% less than men in Social Security benefits. In addition, on average, women experience an $80,000 lifetime pay gap, compared with men, when controlled for various factors.
How can advisors address some of these gender-specific issues? It depends.
“If you're working with any marginalized group—and in some areas, women are marginalized—you need to address specific issues with that group,” explains Diana. “I’m a strong believer that, as an advisor, you don’t deal with generalities, but you deal with that client.”
“So, if you’re working with a queer woman, now that pay gap has expanded. What if it’s a woman of color? Again, that gap has expanded to fewer opportunities,” she continues. “We can put on our rose-colored glasses and pretend like that doesn't happen, but it absolutely does. And we know because we hear it from our friends, and we see it with our clients. It’s happening in real-time.”
The key is to examine the decreased salary (and likely decreased raises) and adjust for that in any long-term cash flow. Mothers are more likely to help their adult children financially. They’re also more likely to spend more time and resources caring for aging parents, which means less time they can work, less flexibility, and sometimes increased expenditures.
How can advisors educate women to help them be well-informed about their own finances? Do they need to take a different approach as opposed to when they’re working with male investors?
According to Diana, the first step is getting female investors to understand the basics. Encourage your female clients to do their research on the internet, find podcasts, and visit financial websites like NerdWallet and Investopedia.
“You have to just jump in. It’s like learning a new language. There’s a certain lingo you need to pick up,” she says.
Diana also encourages women to get involved in their finances, starting with looking at their tax returns. Lastly, she advises women to work with a financial planner as early as they can find one that suits them.
Are you ready to assist these women?
“If you’re a female advisor, get involved with some community groups—even if you’re a male advisor and you want to reach out to a women’s group and help out,” advises Joyce. “Also, it doesn't have to necessarily be a women’s group. Plenty of women participate in community groups. Branch out in your community and see what kind of groups are related to investments.”
She also recommends attending webinars, like the Financial Independence for Women series created by Apella Wealth.
“If you’re spreading the word, you may be casting a wide net to both groups. But everyone’s listening. So, maybe it’s not just a niche of just women, but they’re part of that group that can see there’s some understanding and they don’t feel intimidated to talk to you,” suggests Joyce.
“What’s most important is making potential women clients feel comfortable,” she emphasizes.
A tip for making women feel at ease? Don’t be patronizing.
“Many women have found that financial services providers can be a little condescending. It’s a real struggle,” admits Diana. “Make sure you’re talking with them and not at them.”
You can determine an investor’s knowledge level by walking her through her account statements and tax returns, listening closely, and having a true conversation.
Authenticity plays an important role, too. It helps clients connect with you.
“People love stories. They love to know that you’ve been through the same things they have. It makes you real,” says Joyce. “When you share something relatable, they know you’ve had that real-life experience, so they can relate to that situation and maybe open up a little bit more.”
With some tips and tools from seasoned Financial Advisors, you can better serve women investors, which can ultimately lead to their financial success and empowerment.
Interested in learning more about how to work with women investors. Watch a replay of our webinar Empowering Women Investors: Navigating Financial Success Together, which was featured during Symmetry AdvisorFest 2023.
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