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Addressing Changing Gender Roles in Wealth Management

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February 10, 2016
Wealth management and gender: better preparing women for their roles in personal finance

Gender differences are a hot topic for wealth management firms nationwide, especially as the financial services industry steps up its “women and wealth management” departments to finally do more about a few long-known facts: women generally outlive men, tend to earn less than men, may take bigger chunks of time off in their careers than men, and are likely to be managing large sums of money—sometimes alone—late in their lives.

Let’s start with the really old news: the male counterparts of opposite-sex marriages have typically long ruled the roost on the financial front. Sure, women now tend to handle the household finances of paying the bills, buying household supplies, and balancing the checking account, but the heavy lifting of creating and preserving wealth is still considered a “man’s job.” Why? Because men have made the most money, found the investment advisors to steer the family portfolios, and maintained the relationships with those advisors. Read what men and women traders can learn from each other.

Get Personal?

Sallie Krawcheck is owner and chair of Ellevate Network, a women’s network. She previously ran wealth management at Merrill Lynch and Smith Barney, and she says that the satisfaction rate of male clients with their financial advisors was 90% or more. “That was better than how they felt about their doctors,” she said at a late-2015 Morningstar conference.

“However, when he passes away first, which is what happens most often, the widow leaves their joint financial advisor over the next year 70% of the time,” she said. “And often, she puts that money in the bank. What is clear is that the primary [advisor] relationship is with the husband, not with the wife.

“Yet women have more money and wealth and are on their way to controlling the majority of wealth in the country—and more wealth than most of us recognize,” she said.

How much more? Trillions. Yes, with a T.

Women—remember they live longer—are on track to hold the reins of about 70% of the $40 trillion generational wealth transfer in the coming 30 to 40 years, Krawcheck says. Do the math: that’s $28 trillion.

But despite recent advances, today’s woman’s role in the family finances is still not a whole lot different from what we imagined June Cleaver’s was more than 50 years ago, according to a spate of studies.

A fresh look by NerdWallet, the personal finance site, found that 49% of women said they would not be able to make mortgage payments, save for college tuition, and pay bills if their spouse died before them. Only 37% of men felt the same way. Undoubtedly, some of that could be because women’s paychecks are smaller, they depend more on the higher income, and they may have taken long breaks from their career path.

But the NerdWallet study also found that some 43% of women admit they don’t know the terms of their spouse’s life insurance policy, compared with only 31% of men who didn’t. And women outnumber men 32% to 21% on being unable to find family financial documents in an emergency.

“This is an area where the longevity gap collides with the pay gap, where men earn more,” says John Kuo, senior strategy analyst at NerdWallet. “The result is that women are often more financially vulnerable when their spouse dies.”

Jump in Feet First

Let’s take this a step further into retirement. A Prudential research study found that “women are taking control of the household finances but are unprepared to meet long-term financial goals.”

For example, some 75% of women believe that having enough money to maintain their lifestyle in retirement is a very important goal, but a mere 14% think it’s achievable. “This gap is virtually unchanged from 10 years ago,” the study says.

To be sure, this financial literacy gap is changing, but by many accounts, not fast enough. What should women do to break this pattern?

Participate. Don’t let your spouse make financial decisions on anything—checking/savings accounts, mortgages, mutual funds, stock portfolios, insurance, college savings, and so on—without your full involvement.

Learn the jargon. This isn’t trucks versus dolls. This is gender-neutral intelligence that leads to better decision-making and financial security.

Make lists. Get organized. We’re not talking about grocery lists on stationery, but spreadsheets with bank accounts, credit card accounts, and brokerage accounts you both hold jointly and individually. What are your yearly credits—meaning salaries, bonuses, deferred compensation, other sources of income? What about debits, or expenses for housing, food, education, insurance, and so on? What’s the remaining balance on your mortgage or vacation home? What kind of stock portfolio do you have, and who handles rebalancing it? Stock options? Restricted stock? And what about those life insurance policies, not to mention home, auto, and health? What other liabilities, or outstanding debt, is hanging out there? And don’t forget to keep a safe list of all the sites, logins, passwords, and even challenge questions safely in hand in the event of the death of the person who created them.

Plan. For today, tomorrow, and all the tomorrows ahead of you that will call for the right insurance, education savings, vacation savings, household needs, wills and trusts, estate planning, funeral planning, and any other little thing that your family deems important.

Straight talk. Jezebel.com, which bills itself as the “feminist blog,” has this very pointed advice for women: “Tonight, ask your spouse, point blank, out of nowhere, if he would like to be cremated or not. And then demand that he triple his life insurance policy for you. And then give you the login for it. And then make a list of all your bills, logins, and passwords and put it in a fireproof box.

“Don’t even make this fun by throwing in some wine and snacks or whatever. Just get it done,” the site stresses.

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