MARKET COMMENTARY

Women and Wealth: Changing the Conversation

12.10.2018 - Linda Krouner

Women Are Taking a Holistic View of Their Financial Lives

Women now control more than half of the total wealth in the US, earn more advanced degrees, and are becoming the primary breadwinners in more households. They are also broadening the conversation about finances by focusing on the bigger picture and on achieving multiple goals. Regional Managing Directors Linda Krouner and Paulina Mejia share how these more direct and multi-faceted conversations are benefitting clients.

Q: How are women changing the conversation about finances?

LINDA: I find that women I’ve helped over the years are seeking a deeper dialogue about their financial concerns and are asking a broader set of questions, resulting in more thoughtful and comprehensive conversations.

For example, a discussion that comes up often, especially for women who oversee their own finances, stems from a concern about ultimately running out of money. I hear comments like, “I can’t afford to leave my job” or “I feel I shouldn’t take this vacation,” even from women who can afford to do so.

When women feel this type of pressure—even if they are financially secure—it is our job as advisors to give them a realistic assessment of their whole financial picture, so they can feel comfortable making decisions on how they spend money.

PAULINA: Women also tend look at the implications their finances might have for other family members, not only for themselves. This elevates our discussions to address the family, kids, parents, career ambitions, lifestyle, security—not just investments. These are extended conversations that really start to uncover gaps and opportunities that we begin to address holistically.

Q: How can investment risk be put into perspective?

PAULINA: I have found that women tend to be very protective of their wealth. And that attitude is understandable, because women often take time out of the workforce to raise families and they know they have longer average lifespans than men. In some cases, they are also less confident about their finances because their husbands have been handling the family’s finances. So they may not have all the information they need to make decisions about planning and investing.

LINDA: This can translate into a fear of taking ‘too much’ risk. But the real risk comes into play if they don’t take enough risk in their portfolios. For example, they may attempt to protect wealth by investing mainly in bonds or holding a lot of cash. But ten years later, they find their assets haven’t grown as much as they needed to. Sometimes the portfolio hasn’t even kept up with inflation and spending—if they are taking 3% to 4% out of their portfolio each year and only earning 2% on their investments, their net worth will invariably go down.

PAULINA: It’s also important to remember that different risk profiles are appropriate at different stages of life, especially during a transition such as divorce, sending kids to college, or the death of a spouse. Does their plan reflect what their future needs will be? We always encourage women to be forwardthinking and adjust their financial plans as life evolves, while also making the most of current market conditions.

Lastly, I’ll add that collaboration among all advisors is key. When we work with clients, we like to have at least an annual meeting with all their advisors to make sure we are on the same page and everyone’s advice is aligned.

Q: What is the best approach for navigating stressful situations?

LINDA: Stressful events can be paralyzing, especially if they are looked at in isolation. For example, I’ve helped several clients navigate their finances after a divorce. One of those situations happened in 2009, when the market environment was extremely volatile. After discussing investment strategies, this client understood that despite the volatility, the equity market at the time offered low valuations and high dividend yields, presenting her with both the income and growth potential she would need for future years. She is extremely grateful that she’s been able to grow and use that money over time.

In another case, a client was funding a large wedding for her daughter. She called me in a panic feeling that she had overcommitted on the cost. I walked her through what she was spending in context of her net worth and other financial obligations. Reviewing her overall picture showed the relatively small effect this expense would have on her finances in the long run. This understanding gave her the frame of reference she needed—she even called me late that night to thank me for helping to put it into perspective.

Q: What advice can you share about legacy planning?

LINDA: Legacy planning is a high priority for many families we work with. We often discuss when children should be brought into the conversation and how extensively they should be involved. This can come up with women who have outlived their spouses, especially if these conversations had not been started beforehand. We start this discussion by helping them outline their values, goals and what wealth represents to them personally— numbers don’t have to be attached. In the end, it’s important for family members to have the same information and that there are no surprises, good or bad.

PAULINA: I also find that parents often want their children to be financially secure, but they don’t want an inheritance to take away their incentive to become productive members of society. So, we discuss how to make wealth a tool for empowerment versus a source of demotivation.

A good way to facilitate these discussions is through multigenerational family meetings, which can take many forms. On one end of the spectrum, some families naturally have these conversations with one another and they can occur more organically. On the other end, we see families that are not accustomed to talking about their wealth at all, and in these cases, it can be helpful for a wealth advisor or another neutral party to lead the meetings. The important thing is to open a dialogue about the meaning of their family’s wealth beyond the numbers, and to engage all generations in common goals and values.

This analysis is provided for illustration and discussion purposes only and does not guarantee future results. Please speak to your Fiduciary Trust contact if you have questions or would like more information. This communication is intended solely to provide general information. The information and opinions stated are as of December 1, 2018, and may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

CFA and Chartered Financial Analyst are trademarks owned by CFA institute.

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