Alright, so some liberties were taken with that headline. This isn’t a good news/bad news article. Consider more a good news and items for advisors to be mindful of when with female clients-type of piece. With that, let’s dive into the good news.
Advisors and experienced market participants have heard this before, but it remains true: Women are better investors than men. BOK Financial quantifies the gap, noting women outperform men by 0.4%. The financial services doesn’t say if that’s on annualized basis, but if it is, women’s portfolios are beating the male equivalents by significant margins over the long-term.
Women’s advantage isn’t surprising. It’s actually well-documented as numerous studies confirm women are more risk-averse than men and men are more given to impulse. An alternative perspective is that if a man and a woman each build investment portfolios, it’s likely the man’s will suffer the bigger drawdowns.
That’s something for advisors to ponder, particularly as more women want to add financial independence to their list of accomplishments, but there’s much more to the story.
Climbing the Wall of Worry
Amid the Great Wealth Transfer, more advisors are developing services and strategies specific to women, but the foundations of those approaches start with understanding an important point: women worry more about money than do men.
A McKinsey survey indicates 46.4% of women are worried about outliving their assets compared to just 35.7% of men that feel the same way. That’s not to say men are cavalier about their retirement perspectives, but it is indicative of women worrying. Fortunately, these are exactly the type of concerns that are ameliorated through communicative, productive relationships with advisors.
Of course, advisors need to meet female clients halfway and understand their goals and motivations. For a lot of men, investing boils down to accumulating wealth or getting to be “rich.” Broadly speaking, it’s different and deeper for women. They want to be financially independent, make sure their children are provided for and leave legacies.
“According to the McKinsey research, women use different criteria to choose an advisor and are much more likely than men to place a high value on establishing a personal relationship. This stronger preference for trust and connection could change the face of investing, the report suggests,” adds BOK.
Another Step to Take
Today’s women, particularly those in those younger demographics, are making progress on this front, but there’s still work to be done when it comes to dispelling the notion that married female/male couples shift financial responsibilities, including investing, to the husband.
BOK points out that the “non-financial” spouse is the wife 75% of the time. That’s an astoundingly high percentage for at least three reasons. First, we’re nearly three full decades into the 21st century. This isn’t the 1950s. Second, as noted above, women are bettor investors than men. Third, more and more women want to learn about investing and thrive when they gain that aptitude.
BOK’s Vickie Sandve “suggests women educate themselves by accessing free resources like financial media and then asking questions. There are also financial advisors that serve every level of wealth management—she suggests the best place to start is to be curious,” according to the money manager.
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