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Guess what happened last Friday? The S&P 500 hit another all-time high – the tenth such occurrence this year. Guess who's missing out? Women.
It's not a chauvinistic or misogynistic comment. Data bear it out. In fact, the inspiration for this piece is a Carol Ryan's excellent Feb. 12 Wall Street Journal article confirming that many women are missing out on this rally in stocks. From Ryan's article:
“Less than one-quarter of deposits into U.S. brokerage accounts were made by women in January, according to consumer-spending data analytics firm Cardify. Globally, the situation may be even worse: Israel-based brokerage eToro said that female investors make up just 14% of its registered users, most of whom are in the U.S. and Europe.”
This is notable for myriad reasons, plenty of which are relevant to advisors. The Journal article highlights something many advisors – regardless of gender – already know: Women are more conservative investors than men. Credit Suisse polled a smattering of its clients, discovering that half of the women surveyed allocate a staggering 90% of their assets cash, fixed income instruments and real estate, according to the Journal.
With 10-year Treasury yields at 1.20% as of Feb. 12 and it's nearly impossible to find a saving account yielding 1%, advisors have plenty of opportunity to discuss the merits of equities with female clients.
Starting the Conversation
Undoubtedly, there are complexities, particularly for male advisors, when it comes to encouraging female clients to embrace more equity risk. Obviously, a male advisor doesn't want to get anywhere near mansplaining.
“The finance industry also has a longstanding image problem with women. For some, investment jargon is the turnoff; for others it is the sometimes patronizing financial products targeted at them,” according to the Journal.
Then there's the need to realize that Corporate America still has much work to do on the gender pay gap. Many women still earn less than men and those salary gaps play a role in why many women are conservative investors. Additionally, women still leave the workforce to raise children, which crimps contributions to retirement plans.
Those are sensitive topics, but there are other ways to broach the subject with women. Even if an advisor opts to not mention to a female client that the S&P 500 beat the ICE U.S. Treasury 20+ Year Bond Index by a margin better than 5-to-1 from the March 9, 2009 market bottom through the end of last year, it is worth discussing life expectancy and inheritance.
On average, women out live men and those that are married are likely to inherit some financial assets from their partners. Advisors should illustrate to the client that if the family is going from to two to one or one to no income, heavy allocations to bonds and cash won't cut it.
Positive Reinforcement
Clearly, there's a difference between patrinization and positive reinforcement. Advsisors can present pensive female clients with hard evidence that they're likely to be better investors than their male counterparts.
A 2017 Fidelity study found that women are better savers than men and that's true across brokerage accounts, IRAs and employer-sponsored plans. Additionally, the study found that of the eight million portfolios evaluated, women beat men by an average of 0.40% a year. Over time, that results in sizable out-performance. For a 22-year old women, that yearly advantage over male counterparts results in $250,000 over their working lives. That advantage isn't realized by being heavily allocated to bonds.
Bottom line: Advisors have a lot of positive tools at their disposal to prove to female clients that their financial wellness will be enhanced by more substantial equity allocations.