Liz Laprade: Hi, and welcome to AdviseHer, a special episode of The Adviser You Can Talk To Podcast. There’s an old stereotype that the money world is a man’s world, but more and more women are taking the reins of their own and their family’s finances. We’re here to shine a light on some of the issues and concerns that impact women when it comes to investing.
Liz Laprade: My name is Liz Laprade. I’m a research analyst here at Adviser Investments and to help me tackle some of these topics today I have Diana Linn, an account manager who helps aid clients with financial planning questions and plans. Welcome, Diana.
Diana Linn: Hi, Liz.
Liz Laprade: …and Sue Irwin, a financial adviser that has been with us for about 24 years. Welcome, Sue.
Sue Irwin: Hi, Liz.
Liz Laprade: Today, we’re going to be talking about the investing differences among men and women.
Diana Linn: I love this initiative.
Liz Laprade: Yeah, I do, too. I’m really excited. I’m really excited about that and I will say before I dive in, this is new. We can think of topics that we think are going to be useful for our listeners to hear, but we really want to hear from our listeners. Tell us what you want to hear. Tell us what you want to talk about, and if you can just send some feedback, some ideas, some suggestions. Please do email us at info@AdviserInvestments.com.
Liz Laprade: So let’s jump in. Diana, let’s start with you. As a client account manager, you’re pretty in tune with clients’ needs and concerns. What would you say are some of the different issues facing female clients today?
Diana Linn: I think two of the biggest obstacles facing women financially today have got to be a lack of confidence and then just not getting involved quite early enough. So when I say lack of confidence, I by no means mean a lack of understanding. It’s just not having that same comfort level. Remember, Liz, you and I were recently talking about the snowstorm we had and how my husband was out of town traveling and I was staring at that snowblower. I know I’m perfectly capable of doing this. I know I can operate this snowblower, but because I hadn’t been a part of it, I just wasn’t as comfortable.
Diana Linn: Then not getting involved early enough. I think we, as women, it’s wonderful that we are traditionally the caregivers, but we tend to put others before ourselves, and so putting other people’s priorities and sometimes our own financial necessities can kind of take the back burner.
Liz Laprade: Right. I love the example of the snowblower. It’s this idea of this ominous thing that we know we can do, but it’s that intimidation of taking those first steps to do it.
Diana Linn: Right.
Liz Laprade: Sue, let’s talk about that first obstacle then: Financial confidence. Can you talk a little bit more about that as well as ways women can feel more comfortable talking about finance?
Sue Irwin: I’m just going to start with an example of a client that I had. I had a couple, a husband and wife. They were clients for many years. Every quarter I gave them a call. I asked them if they had any questions or concerns and also to see if anything had changed in their life, whether they were retiring, they needed money for a house, because I really wouldn’t change the investment strategy.
Sue Irwin: One of the things I realized after he died was that she really had no understanding of anything I had been saying all these years. I really encouraged her to ask one question, just start with one question, and then it eventually led to more questions. Something I’d really like to note also is that men can be really overconfident in their abilities. We all know this.
Diana Linn: Yes.
Sue Irwin: This confidence leads them to trade more often, which actually hurts the results and the transaction fees add up. Studies have also shown that women are much more patient. They stay the course, and women are more likely to hire a professional to help them.
Liz Laprade: Interesting. So Sue, would you say that there really are differences in how men and women invest then?
Sue Irwin: It’s not that there are differences, it’s just that they take different approaches. Here again, I go with another example. I had, years ago, I was out with a guy, we were going to a party. This was before GPS actually existed, so he had directions, but we got completely lost. The party had started, so we were getting there about 15 minutes late. About half an hour late, I actually said to him, can we pull over and get directions? Not a chance would he pull over and get directions. So now it was an hour late. He finally agreed to pull over and ask directions. We got to the party. Needless to say, I never went out with him again.
Liz Laprade: No, no second date there.
Diana Linn: I get it though, right? It’s the idea of, just put pride aside and ask the questions.
Sue Irwin: It definitely is.
Liz Laprade: I actually really love that point of how patient and disciplined we are. I think those are two of the best attributes of the female investor. We always say here at Adviser Investments that it’s about your time in the market and not the market timing. So that patience is key.
Diana Linn: It’s definitely key.
Liz Laprade: Patience and discipline are just good general investment behaviors overall. So, Diana, what are some more specific questions that women should ask if they’re looking for help on their portfolio?
Diana Linn: Absolutely ask, “Are you a fiduciary?”
Liz Laprade: And can you explain what a fiduciary is?
Diana Linn: A fiduciary means that they are legally required to act in the best interest of the client. It’s that total trust, good faith and honesty. It’s that higher—highest—standard of care. You would think that it’s common sense that you’re hiring an adviser, that they’re going to put your best interest ahead of their own. Unfortunately that’s not always the case, so it’s really important to ask, “Are you a fiduciary?” Because then you’re legally obligated to have that highest standard of care.
Sue Irwin: I think that’s one of the most important questions to ask. And some of the other questions you may want to ask are how is that person being compensated? What fees will you be paying? Also ask them how their money is being invested. Are they investing alongside with you, or are they investing in one thing and having you invest in something else? You don’t want to be working with somebody who’s doing that.
Liz Laprade: Right. I also really love the idea of asking what their investment philosophy is. How often am I going to hear from you? Setting up the expectations for what the relationship is going to be.
Diana Linn: You definitely want to ask how often will they hear from you.
Liz Laprade: I think those are all really great questions and points to conquer the lack of financial confidence. Let’s touch on our second point then: Getting involved early. I want to talk about how important not only getting involved in the financial conversation early is but also getting into the market early. The fact is that women still only make 82 cents to the dollar earned against men. Sue, what do you think about that?
Sue Irwin: Amazing.
Diana Linn: It’s terrible.
Sue Irwin: Yeah.
Diana Linn: In this day and age.
Sue Irwin: To make up for this wage gap, we have to let the market help us. The good news is that women tend to save more. According to a Fidelity study I read, women on average save 9% of their paychecks per year, versus men who saved about 8½% .
Diana Linn: That’s great.
Sue Irwin: Yeah. And it may not sound like a lot, but over time it really adds up. While this is definitely a great characteristic of the female investor, I would almost say it’s necessary, right?
Liz Laprade: Yeah, definitely is.
Diana Linn: It doesn’t surprise me to hear that we are such amazing savers, but maybe we’re almost a little bit too good there. I know I’m guilty of this myself because the reality is that we really only need to have about that three to six months of that emergency savings built up. Unless, of course, we have a large upcoming purchase such as putting a down payment on a house or buying a car. Other than that, if you’re in a dual-income household, that three months is sufficient.
Liz Laprade: I agree, and to that point, that makes me think when you talk about savings. If you do have a big expense coming up and you need to save or even if you just want to get your feet a little wet in investing, Sue, I’ve heard you talk about money markets before. How does that play into that?
Sue Irwin: A money market is just like a savings account only you’ll earn more interest. The best thing there is you can write checks against it too, just like you can in your checking account.
Diana Linn: That’s a really great tip actually, Sue. But, Liz, to circle back to your question about why it’s so important to get involved early. Unfortunately, the reality is that men and women are just not on equal footing when it comes to investing. As you mentioned, we’re only making 82 cents to every dollar that a man is earning. Also, we work fewer years. If anyone’s coming out of the workforce to care for children or elderly loved ones, it’s typically the women, so we really need to invest early. We have to put our money to work for us to help bridge this gap.
Liz Laprade: We need to get our money into the market to make up for this step behind. Sue, so we’ve touched on a lot of different thoughts here, but what would you say are the key takeaways that we want to leave our listeners with today?
Sue Irwin: I think a couple things really to take away here. We’re going to outlive the guy by about five years, so you really need to put money away. And when you’re putting money away and you’re working with somebody, don’t forget to ask questions. This is your money. There’s no stupid or silly question. Be patient. The markets change on a daily basis. Don’t forget this money is for three, five, 10 years down the line. Play on our strengths: Be patient and disciplined and this can help overcome some of that wage gap.
Diana Linn: Absolutely. I couldn’t agree with you more. Sue, I think two of my biggest take-aways here are definitely to invest early to remember that this is your money too. And even if you’re not the primary breadwinner, it’s still half yours—or as Sue just reminded us, typically women are going to outlive men so this is going to be your money. Even just start with a small step such as that money market account that we mentioned, and also to help build confidence, be a part of the conversation. Ask questions. I don’t want you to be like me staring down the face of that snowblower and just not comfortable with how to use it.
Liz Laprade: I want to thank both of you so much for being a part of this conversation today. I think that was all really helpful.
Diana Linn: Thanks for having us, Liz.
Sue Irwin: Thanks for having us, Liz.
Liz Laprade: Of course. So this has been Liz Laprade, and we would all like to thank you for tuning into this edition of the AdviseHer podcast. We hope you found it helpful. If you enjoyed this conversation, please subscribe and review our show. You can also check us out at www.AdviserInvestments.com/podcast. We also really do love your feedback and oftentimes do get suggestions from listeners. As I mentioned earlier in the conversation, we love to hear from you guys. We can talk about investing all day, but we’d really rather talk about what’s valuable to you. So if you do have any questions, comments, feedback, please email us at info@AdviserInvestments.com. Thank you.