By Maria Cornelius
NEW YORK (AdviceIQ) — Anyone familiar with John Gray's Men Are from Mars, Women Are from Venus knows the premise that men and women communicate very differently. Perhaps this explains why most female investors prefer to work with a female adviser and most married women leave a male adviser after the husband dies. Starting with the first conversation, women want, need and deserve distinct treatment in financial advice.
Old-fashioned gender roles designate the man of the house as responsible for personal finances. That changed over the past few decades but, if you're a woman, your adviser must understand the role money played in your early life. Another concern: Women constitute more than half of financial planning or investment clients, yet less than a quarter of certified financial planners are women.
As a wealth manager with a large female client base, I notice four differences in how men and women approach financial decisions:
Communication and learning styles. Eleanor Blayney's Women's Worth: Finding Your Financial Confidence points out that women and men absorb and process information differently. Fundamentally, women learn through interaction with others, neurologically wired to be social and seek out relationships.
Especially if you're a woman, find an adviser you connect with on a personal level. Talking openly about what matters most to you helps your adviser create a plan to prioritize and achieve your financial goals.
I also find that even highly accomplished and intelligent women (with expertise outside finance) can feel uneasy amid complex projections and financial jargon. Most prefer an adviser who can find a way to communicate in plain English.
While male clients may be more interested in charts and graphs that illustrate a point, women may take to an adviser who can connect financial advice with real-life examples. Competitive terms possibly motivating to men, such as "beating the market," may not persuade women as deeply.
Confidence. Although this is shifting slowly, women's greatest financial challenge remains lack of confidence in decision-making. The 2013-14 Financial Experience and Behaviors Among Women Prudential Financial survey, for instance, finds that "while women are taking control of household finances, they are no more prepared to meet long-term financial goals than they were a decade ago."
The previous year's survey also found only 23% of female breadwinners describing themselves as "very well prepared" to make financial decisions (compared with 45% of male counterparts) and that women are twice as likely to describe themselves as financial beginners (15% of women, 7% of men).
Due to this lack of confidence or experience in financial matters, many women want education from an adviser — and asking professional advice from a man may actually intimidate them.
Risk. Women's generally lower tolerance to financial risk often reflects this lack of confidence. Many women lean toward more-conservative investing since greater risk might lead to failure. Women are also more likely to view money in terms of security.
I see this in female clients holding large amounts of cash in money markets or bank accounts. Although intuitively they know that in the long run investing is far more beneficial, fear of making a bad decision and losing the money influences them more. Find an adviser to explain the effects of not keeping up with inflation and that you can invest conservatively for long-term goals in many ways.
Life expectancy. Conservative investing isn't bad, but if you take too little risk early you may barely keep up with inflation and won't accumulate as much over your lifetime — which will likely be longer than a man's. Research shows that in the U.S. women live, on average, almost five years longer than men; more than 975,000 American women are widowed annually, according to the latest U.S. Census data. Widows are also more likely than widowers to suffer a drop in income after the death of a spouse; almost half (more than 48%) of poor elderly in the U.S. are widows. (Women are also more likely than men to take career breaks or work part time for a variety of reasons.)
Median age for new widowhood is 59, which, combined with a high divorce rate, means that most women bear sole responsibility for finances at some point.
Identifying an adviser who wants to do more than just manage your investment, one who listens to and understands your goals and priorities, educates you on important concepts and encourages you to ask questions can lead you to a greater security and focus on your own long-term goals.
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Maria Cornelius is a financial adviser and executive vice president of Burt Wealth Advisors in Rockville, Md. She works with a diverse client base, including owners of privately held businesses, doctors in private practice, charitable trusts and family foundations, as well as with individuals and couples. Over the years, she has gained significant experience in the issues faced by widowed and divorced women.
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