Why Financial Literacy for Women Is a Bad Idea

Feb 18, 2015 / By Ellen Rogin, CPA, CFP
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What if the way financial advisors and our industry talk about women and investing is doing more harm than good?

You’ve heard the statistics about women and money—such as:

  • 42% of all women lack financial security.
  • Three out of five women over 65 cannot afford to cover their basic needs.
  • Only 18% of families headed by single mothers have financial security.
  • The number of older women living in poverty is 50% higher than that of older men.
  • Only 35% of women use a professional financial advisor.

How about the studies showing women are financially less confident than their male counterparts, or the ones saying they are more risk averse and that this hurts their ability to grow assets?

Ever notice how much time our industry spends telling women how bad things are for them—about how they aren’t doing things right? Why do we do this? Do we in some way think this is motivating and will scare women into saving for retirement? That would be like your tennis coach telling you, “You know, your backhand is really weak and you can’t serve as well as the guys can. And you’re a really slow runner. Now go out there and win the match!”

No wonder a Boston Consulting Group study of more than 12,000 women from 21 countries found that of all industries affecting their daily lives, they ranked financial services as the one they were most dissatisfied with in terms of products and service.

Is it possible that these scary stats about women’s economic situation are in part our own fault as advisors? Yes, people need to take personal financial responsibility—I’m not saying, for instance, overspending and as a result, running into financial issues are not the consumer’s own doing. What I am suggesting is that individual outcomes are often impacted by the expectations of others. Are the expectations we as an industry have about women affecting their success?

To explain this question, I need to start with rats. Yes, rats. A psychology study in 1963 by Rosenthal and Fode tested the “expectancy effect” by telling students that they were to train rats in learning to navigate a maze. Half the students were told they were working with rats bred for high intelligence and the other half were told they were working with rats bred for dullness. In actuality all the rats were the same. The half working with “maze-bright” rats were able to train their rats to navigate the maze significantly faster than the half working with “maze-dull” rats. These results were found to be based solely on the trainer’s expectations.

This research was then carried on in classrooms, where teachers being given the results of an intelligence test received the names of certain children who had allegedly scored in the top 20% and were academic bloomers. What the teachers didn’t know was that the names on the list were randomly assigned. At the end of the year, when the children were tested again, those who were on the teachers’ top 20% lists scored significantly higher than the other children. According to Rosenthal: “When teachers expected that certain children would show greater intellectual development, those children did show greater intellectual development.”

So what are we actually expecting for women when we talk about “financial literacy?”

I think financial literacy for women is a bad idea. Before you freak out on me and say “Hey! Women need to know about money!”—Of course, I agree they do. What I’m talking about here is expectations. Seriously, is financially literate all you want women to be? Don’t you think that bar is a bit low? Not only is it low but it’s condescending.

Expectations matter. And if all we, as an industry, expect is for our female clients to know basic terminology and understand compound interest, we are doing them a disservice. Why don’t more women know, for example, that studies have shown that they are, on the whole, better investors than men? In a focus group I helped lead while developing a workshop for women investors, one 20-something woman actually told the rest of the young women in the room, “You know, men are just better at investing than women.” The other young women in the group nodded their heads in agreement and shared how they consistently turned to men in their lives for guidance on their 401(k) plans and investing. So if you think it’s just older women who think they “don’t have a head for money” you’re wrong.

The financial services industry is awake to the fact that women are controlling more and more wealth. Recruiting more female advisors is a goal of most financial services companies. Is perhaps the reason that even now only 23% of CFP professionals and only about 31% of financial advisors are women because we’ve unconsciously told women they aren’t very good at money?

What if, instead of talking about all of the ways that women are behind the curve when it comes to money, we focused on their collective economic might? How about we focus on these types of facts:

  • The number of wealthy women in the U.S. is growing twice as fast as the number of wealthy men.
  • Women represent more than 40% of all Americans with gross investable assets above $600,000.
  • 45% of American millionaires are women.
  • 48% of estates worth more than $5 million are controlled by women, compared with 35% controlled by men.
  • 60% of high-net-worth women have earned their own fortunes.
  • Some estimate that by 2030 women will control as much as two-thirds of the nation’s wealth.

So what’s another term we can use to replace financial literacy? “Financial empowerment” is so 1990. “Financial fluency” is pretty vague. “Financial education” is a snooze. What ideas do you have?

Ellen Rogin, CPA, CFP®, is the co-author of N.Y. Times best seller, Picture Your Prosperity: Smart Money Moves to Turn Your Vision Into Reality. As a former top producing financial advisor, Ellen is an internationally known expert on building wealth. She consults and speaks to the financial services industry on growing business and working in the women’s market. Ellen is also a host of Horsesmouth AdvisorRadio. To learn more and to sign up for Prosperity Tips, visit ellenrogin.com.


How about Financial Mastery?
Focus on solutions to specific concerns vs. a vague notion of literacy. Women want tangible "to-dos" that relate to what they're dealing with NOW.
The title of this article is just begging for an inflammatory response, and is inappropriately worded even though the article is trying to make a point in support of our industry becoming a more effective service to women. Being written by apparently a woman is confounding, given the author should understand the significance of first impressions, which start with the title...
First of all, thank you for taking time to read the article and share your opinion. I am indeed a woman and I strongly believe for all of the reasons I mentioned in the article that talking about financial literacy is a bad idea. It's time for our industry to show respect in all ways to our female clients including their intelligence and wisdom in money matters. I might not have worded the title this way if there was equal talk about financial literacy for men. I wasn't looking for an inflammatory response when I came up with this title - perhaps just looking to get people's attention and start an important discussion.
The article title, and the article, is totally spot on. Whether it elicits an inflammatory response rests with the reader.
I like to talk about financial fortitude. You're a strong earner and let's use that muscle to be a strong investor.
I'm so glad this was helpful Nancy. It took me a while to get clear on this too.
Financial Confidence?
There's been something about the direction in which this focus on "helping" women was moving that left me uneasy. You've given voice to that concern with this and it'll help me enormously in redirecting my own efforts for the cause. Thanks so much for your keen insights!
I've never liked the term "financial literacy." It implies a "bonehead" or "dummies" approach to learning about percents, ratios, etc. I can, however, get behind workshops or services "for women" as long as they address the life events women face, such as widowhood, divorce, caregiving, and longer life expectancies. Money is only relevant as it relates to a woman's life.
You are right on - It often backfires to label programs, books, processes "for women." Women don't typically like being called out as separate - it's like giving them a pink hammer. Having said that they do communicate differently and think differently than men. It's a fine line to walk.
I guess I'm reading different articles. My reading supports women's "economic might" versus their supposed shortcomings. I prefer the term "fiscally or financially fit".
I'm so glad this is what you are seeing! Fiscal and financial fitness are so much more positive and expansive terms.
Financial accountability
The only point of "financial literacy for women" is to create a "niche market", as if half the population was a niche. Financial literacy should be taught in grade school. Everyone nowadays is a financial manager trading in complex financial arrangements with multiple layers of debts and various investment pools each of which are now their responsibility. If you need a term, just call it "financial planning for women". Like most things in our industry, we get too cute with the packaging and forget what it is we are doing. In this case, we are helping women plan for the issues that are unique to their gender. by and large the issues aren't much more (lor less) complicated than women tend to live longer than men. The healthcare and income needs fall out from that.
I would also add that our research has shown that women tend to think about their money more holistically than their male counterparts. They want to know how their money fits into their entire life. In our focus groups we learned that they want to know how their money fits into their entire life. They want to work with advisors who care about them and their goals and not just their money. (Actually everyone would probably agree with that!).
I also think that "for women" stuff ghetto-izes the situation. How about financial literacy/education/empowerment "for you". Shouldn't it always be about the client, understanding their expectations and needs? An half-informed client can be a pain, a well-informed client is a joy to work with.
financial freedom is a better term and means more to a woman

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