By Michelle A. Fait, MBA, CFP®, EA

With the financial advisory industry turning its focus towards the 51% of the population that is female, many of whom will be directly responsible for an increasingly large portion of the nation’s personal wealth, there has been much discussion about the financial planning needs of women.  There are some obvious differences in demographics, including women’s statistically longer average life spans, the greater likelihood that they will take time out of the work force for care-giving (of children or parents or both), and that they will on average be paid less than men for the work they do outside the home.  But does this really mean financial planning is different for women?

I work with a variety of clients, with different issues that need to be addressed in the financial planning work we do together.  Some clients are over-spenders, many underestimate how long they are likely to live, some are resistant to taking risks, others aren’t good with numbers.  What you might be surprised to learn is that these example clients are all men.

The advisory industry is laboring under a number of misconceptions when it comes to women.  These fallacies mean female clients aren’t getting the advice they need, and advisors aren’t connecting with all the clients they want to serve.  Let’s look at a few of the common beliefs (or misbeliefs) about planning for women:

Women Are Risk Averse
Women have been starting businesses at a higher rate than men for the last 20 years and will create over half the new jobs expected by small businesses by 2018. Forty-three percent of women with children leave a paying job to stay at home with their kids.  When is leaving a job not a risk?  And starting a business a sure thing?  Sometimes at great personal cost, women do take risks with their financial lives.  They take these risks after making decisions about trade-offs, quality of life, and values.

Women Aren’t Good with Numbers
How many calories are in a banana? What is the likelihood you will develop breast cancer? In which percentile does your baby fall on the height/weight growth charts?

How many of these questions did you get right?  All of these questions relate to numerical values, probabilities, and percentages, the same type of information we use in personal finance.  When the general becomes personal, it’s easier to develop knowledge and understanding.  Research has shown there is no biological basis for gender differences in math ability.  Despite what we may believe about girls and math, in 2010, 40% of doctoral degrees in science and engineering were held by women. A 2008 study in Science suggests that a gender gap in math disappears in countries with a more gender-equal culture.

Women Are Emotional
Even if you’re not old enough to have experienced trading in an open-outcry environment, have you seenTrading Places?  Have you ever seen a group of men at any Major League sporting event?  Are you sure you want to argue that women are emotional?  Suggesting that only women are emotional neglects two things:  that each of us as humans has a range of emotions, and that some emotions are more acceptable than others.  All of our clients have emotional baggage that we need to address to help them commit to good financial choices.

A New Framework
Carol Gilligan, in her groundbreaking book, In a Different Voice, was critical of a research framework that failed to capture a different way of thinking with its assessment methods.  She went on to demonstrate that this different type of thinking, or different “voice,” was more common in women but not exclusively female.

We need to consider that financial planning for women is not different, but that our system is biased.  The biological differences that are supposed to place women at a disadvantage in the financial world have been largely dismissed.  What remain are cultural constraints regarding the way we assess, treat and serve women.   Adding women advisors to a firm may not solve the “problem” of attracting and retaining women clients, if those female advisors are working in a culturally biased environment with a predisposed process.

Financial planning is a process of discovery. As outlined by the CFP Board, the financial planning process begins with establishing the client-advisor relationship and gathering data.  This means collecting data specific to the client, capturing their unique goals and circumstances, and developing a plan to help them build the best life they can with the resources available.  While the individual circumstances will differ by client, this process is the same. Confirmation bias, favoring information that confirms your existing beliefs, is a short-cut that can lead to an incorrect conclusion.  Other short-cuts, like positive stereotyping, are also harmful to a client relationship.  A Duke University study argued that positive stereotypes are even more likely to be accepted and can be more pernicious than negative stereotyping. Not all men are cut out for or want the responsibilities of financial management, and may also benefit from advisors who are open to their range of emotion and experience.

Evolving Your Process
When I started focusing my work on women after divorce, the first two prospects who came to me were men.  One was a newly retired professional, the other an early-retiree now looking to retrain and go back to work.  One was an experienced investor, the other wasn’t really comfortable dealing with money.  Each was wandering in the lonely no-person’s-land after divorce, and needed a safe place to talk about what worried them, what they wanted, and how they were going to move on.   A financial planning process that is truly personal respects the diverse interests, experience and circumstances of each client.  To take your process to the next level, consider the following:

• Reconsider your intake process – Are you asking the right questions to understand your clients, how their current situation developed, and to help connect with them on a personal level?
• Review your risk assessment tool – Are you capturing not only the client’s risk profile today, but also their level of investment education and experience?  In discussing risk, are you helping them understand all the trade-offs in their plan?
• Survey your clients – Are your clients faking it?  We all know it happens, it just doesn’t happen to us.  You think your clients understand the information you’re providing, but asking them can help you improve what they take away.  Tagging the survey by gender, making responses anonymous, and asking husbands and wives separately will give you a perspective you may not get from meetings.
• Listen to your clients – Are you really hearing what your clients tell you?  What expectations are you bringing into the meeting with you? Are you asking for involvement of both spouses when dealing with a couple?  I’ve found I’ve needed both mediation and facilitation skills for good meetings between some couples, but the time in an advisor’s office is sometimes the only safe place people have to engage in an honest talk about money.
• Stop with the sports analogies – Male advisors don’t understand why they aren’t attracting women clients to hire them as their “quarterback.”  When I tell this to women, they laugh; men don’t understand why it’s funny.  How many women you know have played football?  Be conscientious about including your prospects and clients in your story, instead of inadvertently excluding them.

We have a huge opportunity to connect with our clients and provide customized wealth management service by listening, opening a dialogue without gender biases, and digging into what really matters to them.

When we do our best work, we help clients achieve their hopes and dreams, and manage both joyous and difficult transitions.  Security, comfort, grief, love, loss:  these experiences and desires are gender-neutral, and the financial planning process needs to be as well.

ABOUT THE AUTHOR

Michelle A. Fait is the founding partner of Satori Financial LLC in San Francisco, California.  Ms. Fait has more than 20 years of finance and consulting experience, is a Certified Financial Planning (CFP®) practitioner and Enrolled Agent.  She holds an MBA in Finance from Yale University and a bachelor’s degree in Economics from U.C. Berkeley.

Ms. Fait’s firm, Satori Financial, is a boutique personal financial management firm that offers objective financial planning and investment management on a fee-only basis.  The firm focuses its work on the planning needs of working professionals and single clients, particularly those beginning again after divorce

You can reach Ms. Fait at (206) 320-9263 or by e-mail at michelle@satorifin.com.