Dear Mr. Market:
Did you remember Mother’s Day and get her something special? As we celebrated Mother’s Day earlier this month we would not be surprised if Mr. Market didn’t do much for his mother or for women in general. The financial services industry has been notorious for overlooking women investors however the ‘tides of change’ are quickly approaching and everyone needs to be aware of it.
Women have become a major power player and are making a huge impact in today’s financial world. The statistics speak for themselves; here are some eye opening facts:
- 67% of college graduates are women as well as more than 70% of the Valedictorians.
- In 2010 women earned 60% of master’s degrees, 52% of doctorate degrees and 48% of medical degrees.
- Women currently run over 10 million businesses with combined annual sales of $1.1 trillion.
- Women drive 80% of consumer buying decisions.
- 50% of women over the age of 65 will outlive their husband by 15 years.
- By the year 2020 American women will control over half ($22 trillion) of U.S. household assets.
*** Stats from: WomenMovingMillions.org, http://www.breitbart. com
These statistics can be a bit alarming particularly when it becomes apparent that most women feel under-educated when it comes to investing and personal finance. According to a recent survey conducted by Prudential, only 23% of women surveyed feel prepared to make financial decisions and only 12% are actively seeking to educate themselves about investing. What is the real problem here? Essentially women’s financial responsibilities are growing at a much faster rate than how they’ve been previously educated with investment matters.
Part of the blame here can definitely go to ‘Mr. Market’ and his ‘good old boy’ network that he has worked closely with for decades. Financial professionals need to realize that the days of gender stereotypes are coming to an abrupt end. The financial industry is no longer dominated strictly by men; women are making an impact and changing how the industry works from within and also how professionals will work with female clients.
“It’s been a male dominated field – the vocabulary, the way we measure it. It’s a language that has been always spoken by men to men,” says Eleanor Blayney, co-founder of a financial education firm. “It misses some fundamental truths about women and the way they think and make decisions.” Women learn and communicate differently than men – they like to learn in groups, consult with their peers more than men do and don’t appreciate the financial jargon that is so often utilized. The average woman will not make investment decisions that are based on past performance or numbers. Women investors tend to be more concerned with comfort and security. Emotions have historically not been a focus in the financial industry but after market sell offs like 2008 (S&P 500 at -37%) and the impact that women will make going forward there is no doubt that emotions will be a driving force in the future.
So where does that leave us now and what can we take away from this conversation?
The financial services industry needs to stop putting women in the back seat and begin to treat them as individuals and truly cater to their needs and wants. Here are five key areas that women need to be aware of and address when making an investment decision or hiring a professional:
- Don’t Assume your Husband or Male Relative is a Good Investor: After sitting with thousands of investors over the years, we can tell you what we’ve seen from the other side of the desk. It’s often clear that the person who speaks the loudest or drives the conversation isn’t necessarily the most savvy. Empower yourself. Take ownership. Be an active teammate and not an observer!
- Trust Your Intuition: Everyone has heard the saying ‘if it is too good to be true it probably is.’ This couldn’t be more true when it comes to investing and the financial industry. Take the time to ask the challenging questions and make sure that every decision is an informed one. Never allow yourself to be pressured into buying anything from anyone! Find someone who listens to you instead of an “advisor” who talks at you…
- Pay Attention to Asset Allocation: There is no need to chase returns or look for the next ‘home run’. Research has proven that over 90% of a portfolio’s performance is based on allocation and not on stock picking or buying the hot fund of the day. Take the time to realize what type of investor you are and how much risk you need to take in order to reach your goals.
- Don’t Try To Time The Market: Actively managed mutual funds have underperformed the market over 75% of the time. Rather being focused on beating the market have a portion of your portfolio invested in the broad markets and then compliment with other positions.
- Ask About Fees: Take the time to ask and research what fees are associated with the investment you are considering. With so many options now available investors can typically find a wide array of investment options at very competitive prices. Why pay 3% to 5% for a fund when the same basic investment is available for less than 1%? Excessive fees eat away at the principal of a portfolio at an alarming rate. Also be aware of how your investment professional is compensated, if they are paid on a commission basis or for selling their companies products we would suggest you run and look for a fee based platform and someone with a fiduciary responsibility.
As we mentioned before the financial landscape is changing and women will be making more and more of a major impact. “If women just start taking that first step to do something, that’s going to put them on the right path,” say Joan Cleveland of Prudential. “When you start, the fear and mystique will go away.” Women need to not be intimidated by the financial industry and realize there are resources available to them. They need to take the time to ask the challenging questions to ensure that they are making the correct decision.
As always we welcome your comments and please feel free to contact us directly with any questions. You can also register to receive notification when we add any posts by signing up on the front page – right hand column with your email address.