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?