Women have made incredible strides over the decades when it comes to making money, but when it comes to investing they tend to differ greatly from their male counterparts.
My company, CAIM, in partnership with WomanTrend, polled 515 adult women across the United States to get a glimpse of how demographic trends are shaping women’s investing and spending habits, and what women look for in a financial advisor.
There are some broad ways in which women and men differ when it comes to financial decision making; women’s goals for saving and investing tend to take the longer view and value the bigger picture. Women generally associate money with security, independence, and the quality of their and their families’ lives; they think of their spouse, children, grandchildren, and even unborn members of their family line. They also consider philanthropic outcomes when investing for the future. Men, on the other hand, tend to focus on investment returns as a short-term solution and prefer to trade more frequently, while women look to invest as a means of providing financial security.
According to survey responses, the most common reasons for investing include saving for college (30 percent), saving for retirement (27 percent), and preparing for life changes (25 percent). In terms of gaining financial education, the most prevalent topics for women were retirement planning (35 percent), college funding (26 percent), debt reduction (18 percent), and estate planning (18 percent).
These women would likely be motivated to seek professional financial planning help in the following areas: saving enough for a comfortable retirement (27 percent) and preparing themselves and their family for life changes (25 percent). Adequately saving for their children’s college funds topped the responses (30 percent). Most advisors would agree that you should take advantage of special retirement accounts before funding a college savings account, but it is clear that parents, specifically mothers, are even more concerned about having someone to help plan and manage a college savings account.
This does not mean that women are poor investors. In fact, on average, women trade less frequently and prefer less volatile portfolios than men; they simply have more risk-averse investing strategies. Our survey also found that while women investors expect lower returns, they find the intrinsic value of them to be long term.
One-third of our investor respondents were informed about dividend-paying stocks, yet most women shy away from them simply because they are unaware of proper diversified investing strategies. Women with a household income of $50,000 or more reaped the benefits of a diversified portfolio more often than those making under $50,000 annually, by a ratio of nearly three-to-one. Twenty-nine percent of women found a low-risk investment desirable.
Women are not interested in accumulating money just for the sake of amassing wealth. Women, much more so than men, are interested in wealth from a standpoint of stability. Those in lower-income households were driven by attaining the “basics” for their families, sufficient insurance coverage, and preparation for life changes. High-income women were focused on saving for retirement and enjoying high returns from financial investments. The common denominator here is that these respondents view money as a way to care for themselves and their family and improve their lives. Therefore, women want a financial advisor that can help them accomplish very specific goals.
The ideal financial advisor, according to respondents, has a proven track record of success (35 percent) and is someone who can make investing easy to understand (35 percent). Personalized attention is also a consideration (29 percent). Only 5 percent of respondents prefer that the professional be female.
As a group, women display certain characteristics that help them make sound decisions about their finances. Household income is an indicator of how savvy women are about investing; those with a household income greater than $50,000 value a diverse investment strategy and are also more aware of types of investments available.
Women tend to be holistic thinkers: aware of all aspects of an issue and equally aware of the importance of balance. They are intuitive, discerning, and perceptive in their worldview. And, they tend to be more concerned with quality rather than quantity, which can translate into better decision making in the complex world of investing.
Catherine Avery is a member of the DailyWorth Connect program. Read more about the program here.