By Chris Taylor
NEW YORK, July 10 When Rachel Smith met with her
first financial adviser, he talked to her like she was five
"Whenever I had questions, he would just say, 'Forget that
and listen to me,'" says Smith, a 35-year-old New York real
estate agent. "He was an older guy who was very condescending,
and saw me as a young, inexperienced woman who didn't know
The relationship didn't last long.
Fortunately, that kind of treatment is becoming less common,
as financial advisers wake up to the fact that women control a
lot of money and make good clients.
Women already are the primary financial decision-makers in
most American households, according to a new survey by
personal-finance site DailyWorth in which 76 percent of women
reported being their household's primary retirement planner.
Moreover, women already have accumulated significant wealth
- some $8 trillion in assets, according to a study by TD
Ameritrade Institutional, which provides brokerages services to
investment advisers. It expects that number to balloon to $22
trillion by 2020, as baby boomer women inherit assets from their
parents and their husbands, whom they typically outlive.
Not only that, but women have also proven better investors
than men, winning higher returns with longer-term vision and
less inclination to trade frequently, according to new research.
It is no wonder financial institutions are practically
frothing at the mouth. All that cash is low-hanging fruit for
financial planners, says Maddy Dychtwald, co-founder of
consulting firm Age Wave and author of "Influence: How Women's
Soaring Economic Power Will Transform Our World for the Better."
But women are wary of the boys-club atmosphere that has long
epitomized the financial-planning world. Many, like Smith, find
"When women are asked which industries do the best job of
addressing their needs, financial services comes out at the
bottom," says Eleanor Blayney, consumer advocate for the
Certified Financial Planner Board of Standards and president of
McLean, Virginia, consulting firm Directions for Women.
"Financial advisers need to forge better partnerships with women
and figure out how to win their trust."
MARS AND VENUS
While stereotyping is a dangerous game, financial
professionals report that certain gender-specific behaviors tend
Women generally take more time to make big financial
decisions and want more information and explanations, says
Blayney. They're more willing to accept lower returns if it
means less risk, reports a new study from Milwaukee-based
Women also tend to frame discussions in terms of the end
goal: That might be putting the kids through college, or caring
for an aging parent, or achieving financial peace of mind. That
compares with percentage annual gain, which is what
data-obsessed male investors often focus on.
"That's a big 'Aha moment' for many advisers," says
Dychtwald. "It's not always about the returns. For women, their
frustration comes into play when they show up and feel they're
getting ignored or not listened to. Communicating with them
properly, in a way they understand and appreciate, ranks as even
more important than getting those high returns."
Another common finding is that women report a lack of
confidence in retirement planning. Fewer than two in 10 women
say they feel "very prepared" to make the right financial
decisions, according to the Prudential study "Financial
Experience & Behaviors Among Women." And women are much more
likely than men to admit that their financial planning needs
improvement, according to Northwestern Mutual.
But while all of those industry-generated stats are very
consistent, they measure attitude, and not acuity. They may not
actually say much about how well men and women understand
retirement planning. It may be, for instance, that women are
just answering the question more modestly. Men, in contrast,
often have a blithe certainty that everything's under control -
the same characteristic that has them refusing to ask for
directions while driving the family car.
So what's the end result of these diverging approaches to
money? One is that women often pepper their financial advisers
with questions, to the point that planners want to "tear their
hair out," laughs Dychtwald.
But as an investing strategy, such a deliberative approach
is usually the superior one. Men, in comparison, are much more
likely to act on a buddy's stock tip, or to move in and out of
positions they just saw touted on television, Blayney says.
Over the long term, such frequent trading - and all the fees
associated with it - could sap a portfolio's growth potential.
Indeed, in a paper titled "Boys Will Be Boys," academics
Brad Barber of UC Davis and Terrance Odean of UC Berkeley found
exactly that. The authors reported: "Models of investor
overconfidence predict that men will trade more and perform
worse than women ... we document that men trade 45 percent more
than women, and earn annual risk-adjusted net returns that are
1.4 percent less than those earned by women."
"Women investors usually think more about the long-term,"
agrees Linda Descano, president and chief of Citi's
personal-finance site Women & Co. "That's why there's data
suggesting women-run investment clubs outperform male
counterparts. Men are more apt to use up their profits through
taxes and trading costs."
That's something else for the advisers now targeting women -
and the women being targeted - to consider. Raising the level of
respectful conversation is just step one. Planners still will
have to deliver the goods. Advisers will earn the trust and the
portfolios of women like Smith when they talk the talk and
deliver solid results.