Targeting Female Investors and Retirement Plan Officers: Why and How

what would the impact of women taking more seats on corporate boards and moving into plan administrator and plan trustee roles for corporate 401k accounts have on a financial advisor’s communications strategy?

For years, Wall Street analysts held the common wisdom that women invested too conservatively, starting investing too late, and routinely saved too little.  If that is true, then working with female investors would require a different or at least distinct approach to working with men, right? And, if that common wisdom were true, what would the impact of women taking more seats on corporate boards and moving into plan administrator and plan trustee roles for corporate 401k accounts have on a financial advisor’s communications strategy?

There is a definite rise in financial investment platforms aimed directly at women. But, there is also good reason to question some of that common wisdom.

In 2009, few in the financial industry would invest in the brainchild of Amanda Steinberg: a website aimed at educating women about personal finance and investing, with the aim of helping those women increase their overall capital. Steinberg did fine without the financing and that website, DailyWorth, became so successful that Steinberg was able to create a successful book deal from it with Worth It: Your Life, Your Money, Your Terms, published in February of 2017. DailyWorth’s current online readership tops one million subscribers. However, what’s more interesting is that Steinberg launched a financial management company allowing women to invest through savvy computer programming and robo-advising.

Her new investment platform, Philadelphia-based WorthFM, launched in late 2016, currently has two million in initial equity seed funding. It describes itself as “a digital investing platform designed to engage and educate women as their investments grow.” WorthFM is designed to focus on volume; it uses technology to capture as much information about its investors as possible, individualizing the experience but is aimed at those with capital amounts below the focus of most financial advisors. WorthFM works in partnership with Source Financial, an independent wealth management firm specializing in high net worth women.

WorthFM isn’t the only game in town when it comes to targeting female investors. ElleVest , headquartered in New York, predates WorthFM by just a few months, and boasts a roster of Wall Street elites with decades of experience. Its chair is Sallie Krawcheck, former head of Bank of America’s Merrill Lynch division and chair of Ellevate Network, which owns ElleVest. ElleVest currently has nineteen million in equity funding making WorthFM look like the little engine that could (except there’s that one million subscriber base to consider). The website touts itself as “redefining investing for women.” Similar to WorthFM, ElleVest distinguishes itself from other investment platforms by arguing that it allows for greater individuality in investment planning. “We factor women’s risk preferences and longer lifespans into your plan.” [1]

The success of these two companies raises a major question: Does the conventional wisdom that women invest differently, and need to be coaxed into investing, more heavily still hold? Stated a different way, do financial advisors have to change their marketing approach for women?

A special independent report by Kiplinger in April of 2016 showed that women actually do better in rough financial markets than men, because they weather financial storms better (because they research their investments more deeply).  For example, a 2013 study by Fidelity Investments found that men were much more likely than women to hold 100% of their assets in stocks. Another example: men trade more frequently than women. In the 1990s, Brad Barber and Terrance Odean, then both professors at University of California–Davis tracked the trading patterns and results of households and found that men traded almost 50% more than women, dinging their average earnings by almost a full percentage point. Interestingly, women also react less emotionally to market swings (or panics) than men. According to a study by Vanguard of its own customers during the 2008 market correction, women were 10% less likely to sell their stock holdings than men.

So if women do more research, stay steadier during market swings, and invest more diversely, wouldn’t that make them the kind of clients financial advisors would clamor over? This may explain the rise in women-centered financial platforms and wealth management groups. It might not be about whether women have special needs in terms of understanding financial information, but rather, that women’s investments are the kind those wealth management groups want to work on.

But, if the rise in women-centered financial platforms is based on something else, and women and men think differently about money, or more importantly for working with individual investors, have different needs concerning investment, then it might be crucial to examine how best to tailor your advice to women.

On the individual investor level, Janet Bodnar, editor of Kiplinger’s Financial and author of Think Single! The Woman’s Guide to Financial Security at Every Stage of Life makes several suggestions. One of those suggestions is to not adopt the attitude that financial information needs to be softened or watered down for women. Instead, she urges, think about how women’s needs are different from men. As Steinberg has noted, women live longer than men, meaning, women have to set aside more to live on in retirement. Bodnar also notes that women often are caregivers to children and aging adults at the same time, meaning they may end up spending portions of their own retirement on out of pocket health care costs for others.

On the plan administrator or plan trustee level, women now make up 14.7% of the boards of larger corporations, [2] an increase of 18% since the 1980s. If women are better investors individually, then it stands to reason that they could look for the same traits in financial advisors and fiduciaries as they themselves have. Interestingly, InvestNews, working with Kiplinger, conducted a study of its readers in 2016 and found that women use financial advisors differently than men. Specifically, they found that: “women are more likely than men to ask questions of a financial adviser (26% to 20%)…  and among women, 39% currently use a financial adviser, compared with 35% of men. And women are more likely than men to value the adviser’s ser­vices in planning retirement income (64% versus 59%).” Given those statistics, it’s reasonable to think that plan administrators or plan trustees that are women might want more access and more frequent communication with a financial advisor or fiduciary than their male counterparts.



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