Financial Planning for Women 

Though the red line is now a little thinner, most financial advisors are still men. Recent research released from The Boston Consulting Group “BCG” survey of 500 affluent women around the globe indicates that women perceive that male advisors:

• Provide fewer investment options and reporting choices for women
• Believe that women are more risk adverse than men
• May be uncomfortable with talking to women about personal matters
• Assume husbands are the decision maker

Most people enter into a planning relationship because they are going through a transition. Some transitions are joyful steps to the next life stage: marriage, children and sudden wealth. Other shifts are accompanied by loss and ensuing grief: divorce, death and often retirement. Transitions accompanied by loss are often so stressful that the client’s cognitive functions are temporarily impaired. Advisors who are successful at maintaining long term relationships have an instinct for evaluating and evolving to support the client’s needs and abilities. Clients in transition often navigate through several phases:

• Lost (sometimes reflected in depression, anger as well as manic behaviors)
• Reliant (this can feel really good as an advisor, but it can also become overwhelming)
• Inquisitive (can feel challenging or combative until you earn the client’s trust)
• Contemplative (beware: sometimes the client may actually be “lost”)
• Collaborative (you are a trusted advisor in a mature relationship with your client)

The woman you meet today may strike you as someone who you need to protect and guide through a dark time in her life. However, when the crisis begins to lift, she is going to want to regain control of aspects of her life. She will naturally become inquisitive; she may need to take time to think through her options.

Often, we advisors assume a prospect is in one stage when she’s really in another. You may be under a misconception that she’s looking for your protection when she really wants a more collaborative partner. Listen, probe, don’t assume.

The BCG study pointedly showed that female investors seek “empathy” from their financial advisor. Empathy is a powerful tool that may be easily abused. CPA financial advisors, especially those with the Personal Financial Specialist credential, have the specific training, framework and ethics to assure that clients’ interests always come first. The CPA advisor has a distinct advantage where trust, as well as empathy, is the primary currency of relationships.

“The differences among women and the differences among men are much greater than the differences between men and women,” according to Professor Brad M. Barber, UC Davis in a March 13, 2010 New York Times article entitled “How Men’s Overconfidence Hurts Them as Investor.” However, your practice will still benefit from understanding gender related issues including the following from a November 1, 2010 BlackRock/iShares press release “Study Shows Women Investors Are More Concerned About Retirement than Men,” and the New York Times article:

• 70 percent of women fire their financial professionals within one year of widowhood
• 90 percent of women feel financially insecure
• Men during the 2008/2009 financial crisis were more likely than women to sell during market lows

Consider the case of a client who walks into their advisor’s office after taking the family business, inherited from the client’s father, public making a small fortune into a large one. The client is surprisingly somber and tells the advisor that, at the time of the client’s marriage, the client’s spouse agreed to take care of the kids. Sixteen years later, it turns out that a nanny has done the lion’s share of child rearing leaving the spouse to a leisurely life while client has been hard at work. Now that client’s hard work has paid off, the client’s spouse feels entitled to a piece of the windfall. The client feels the burdens of wealth more than the joys, and asks the advisor what to do. What are your initial reactions, thoughts and preconceptions? Are you feeling empathy for either the client or the spouse? Should client give some of the windfall to the spouse? The catch here is that the client is the wife, and it is her husband who has been lunching on the nanny’s time. 

This real-life set of facts illustrates how societal pressures impact our judgment and play into our misconceptions. Please join us in January at the Advanced Personal Financial Planning Conference as we explore this topic and other issues that will enhance your practice.

Nadine Gordon Lee, CPA/PFS, CFP®, MS, is president of Prosper Advisers, LLC in NY. She specializes in personal wealth management for high net worth families. Dina’s planning expertise incorporates investment management techniques with philanthropic, estate and income tax strategies to optimize family wealth while controlling risk. 

The PFS credential is exclusively available for CPAs. Prepare for the November/December 2010 PFS Exam with a 32.5 hour CPE self-study course covering estate, retirement, tax, investment, and insurance planning. Discounts are available. Order at CPA2Biz website. More in-depth education on the same topics is available as well. For more information, go to aicpa.org/pfp/pfs.

All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter apply to become a PFS Credential holder.