Crying Over Spilled Milk

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Women Gone Missing

There was style. Governor Romney is generally judged to have won on performance. President Obama was said to not really showed up. But it was substance that in fact took the night off.  Among the innumerable topics either glossed over, grossly distorted or outright ignored were, for instance, the vital economic issues that affect American women.  Bryce Covert of the Nation writes that Women Went Missing in Last Night’s Presidential Debate:

Twice as many women over the age of 65 live in poverty as compared to men. Social Security is basically the only source of income for about a third of women over the age of 65, compared to less than a quarter of men. Without it, half of female beneficiaries would live in poverty. Same story with Medicare: the majority of beneficiaries are women.

Romney talked up his plan to overturn the Affordable Care Act as fast as he can. That includes the mandate that insurance cover contraception as a preventative care service without a co-pay, a provision that Ryan has said his team would undo on “day one.” That means women will go back to shelling out nearly $12,000 over their lifetimes for hormonal birth control. But the ACA also undoes gender rating, saving women $1 billion a year in paying more for the same services. Obama could have easily brought up either to demonstrate how anti-woman the pledge to repeal the ACA really is. He could have also mentioned the first bill he signed into law, the Lilly Ledbetter Act, which Romney has struggled with.

Immigration Reform

As I wrote in my article, Immigration Reform Would Create Millions of Jobs and Revitalize the Economy, the US needs the labor and purchasing power of productive immigrants. They are a leading driver of entrepreneurship and a major job creator. In a debate that was supposedly about domestic economics, how did this not come up?

Healthcare Reform

There was no substantive discussion of what’s really at stake in reversing the ACA, and debunking the myths about the ACA including which economic interests are behind the agenda to repeal it. There was no detailed analysis of the drivers of healthcare costs and how either candidate would begin to address those cost drivers.

Housing Issues

Jed Kolko, chief economist for the real estate analysis firm Trulia, expressed surprise that the housing crisis wasn’t mentioned considering about 31% of Americans with a home loan owe more on their mortgage than their home is worth. He concludes that housing isn’t a winning issue for either candidate:

For Obama to score points on housing, he would have to point to clear policy victories, which is a challenge for him. Romney would have to point to fresh ideas, which is also a challenge.

The List Goes On and On

Social programs, deficit deduction, tax policies, energy policy – you name it – no substantive discussion, if any at all was heard, just empty, and falsifiable rhetoric. Regarding tax policy, beyond what called Romney’s “impossible tax promise,” no realistic alternatives or substantive measures were outlined, discussed and scrutinized.

Where’s the Beef?

If you noticed that through all the zingers and distortions, few real facts ever got mentioned, and what was passed off as fact was in fact vapid political rhetoric, you’re not alone. There’s a growing body of commentary beginning to point this out. Of course, you won’t get it from either the mainstream corporate media or the partisan media enterprises. You have to rely on outlyers to get a whiff of the lack of will to really democratize economics. As I wrote here, sadly, it took the perspective of someone as far outside the mainstream as you can get, socialist Marc Luzietti to call this out:

‎”Tonight a pair of actors will recite rehearsed talking points to prearranged questions. They will be judged on the quality of their ability to remember scripted answers and act appropriately.

Sadly, some people think this is important.”

China Has a 5-Year Plan

China has released its 12th Five-Year Plan for National Strategic Emerging Industries. Yet, a polarized U.S. political system can’t even get its two political parties to get past vapid rhetorical zingers, misrepresentations and spin and agree on some way to put their heads together and come up with a working plan to put the U.S. economy on a competitive footing.


 Who Are the Mass Affluent?

‘Mass affluent’ investors are those who have liquid investable assets of $100,000 to $1.5 million, and a net worth between $500,000 and $2.5 million.  In the United States there are roughly 33 million mass affluent households, and they own roughly 37% of America’s liquid financial assets. Among family households, approximately thirty percent could be described as being mass affluent.

The mass affluent have been characterized as those who:

  • Save more than they spend and invest for their future.
  • Worry about funding their children’s college education, but are not opposed to their children paying some part of their educational costs.
  • Worry about replacing their paycheck in retirement.
  • Often wish to leave an inheritance to their children.
  • Spend between $4,000 and $10,000 (USD) per month in retirement.

What Are Their Preferred Investment Vehicles?

Investment Vehicles used by mass-affluent

September 2010 study conducted by MetLife surveyed nearly 1,900 consumers over the age of 45 including 500 individuals with at least $200,000 in investable assets.  The study found that this group invests a significant portion of their liquid holdings in bank products:

2005 Wealth Distribution of Mass Affluent Households
Asset Class Percentage
Principal Residence 23%
Investment Real Estate 14%
Liquid Financial Assets 22%
Pension and Employee Retirement Plans 16%
Insurance and Annuities 9%
Privately Held Business 16%

Why They’re Hard to Upsell

Half of those surveyed consider both banks and financial professionals trustworthy, which lines up reasonably well with the results of this Chicago Booth/Kellogg School Financial Trust index chart.

A Bank of America nationwide survey of 1,000 mass affluent consumers finds that many of these customers aren’t keeping their investable assets invested, which could complicate efforts to push more advice and financial planning services to this segment. BofA said:

  • 29% of those surveyed tapped into their long-term savings last year to pay bills or buy groceries.
  • That is consistent with a Fidelity survey that found nearly a third of parents had tapped into their kids’ college funds to pay daily expenses.
  • 41% of BofA respondents report expecting to retire later than they did a year ago.
  • 63% expect it to be harder to save in five years than it is now. took place over three weeks in the fall.

Although about half of those surveyed consider both banks and financial professionals trustworthy, financial products are not an easy sell to them at a time of tightening purse strings.

BofA says its results show that show half of mass affluent customers lack a written financial plan now and almost a third have never had one. Sallie Krawcheck, who runs the global wealth business for BofA, says they are targeting customers who “haven’t shown a fondness for financial planning.”

It sounds like an uphill struggle.

Why You Risk Losing Them To Online Brokerage Firms

A  report from Aite Group examines North American banks’ strategies for deepening relationships with their mass-affluent clients based on Q4 2010 Aite Group interviews with more than 20 executives across 19 of the top 100 North American banks and bank-affiliated broker/dealers.

The study finds that U.S. banks have experienced limited success with deepening their mass-affluent client relationships by cross-selling investment solutions. Overall, their brokerage arms have suffered from weak brand recognition in the investment world and challenging client-acquisition practices through the branch channel.

In addition to these traditional roadblocks, banks must now contend with their clients’ increasing preference for viewing and managing their investments online and are therefore losing assets to online brokerage firms since self-directed investment services provided by banks are not on par with those of online brokerages. By comparison, Canada’s bank brokerages have largely accepted the online channel and, in general, have been more successful in cross-selling investment solutions to their mass-affluent clients than U.S. banks.

“U.S. banks must consider re-evaluating their mass-affluent offer in order to retain assets in the short term and position themselves to grow market share in this segment over the long term,” says Sophie Schmitt, senior analyst with Aite Group and author of this report. “Banks have an opportunity to differentiate themselves in the mass-affluent space–only they can provide clients with a full set of tools for managing short-term cash needs and planning for long-term goals.

Financial Planning Roadblocks

According to Spectrum Group:

  • Only 59% of them have a financial plan.
  • 75% own some type of life insurance, with the largest proportion owning term insurance.
  • Only 21% own a variable annuity produc.
  • Only 24% own a fixed annuity product.

Thus, even for those with insurance products, it is not clear that a formal planning process has been completed or updated.  And as far as including life insurance as part of a broader estate plan, only 16% hold any assets in trust.  Clearly there are opportunities for advisers to assist these households with greater planning opportunities.

So What Do They Want From A Financial Advisor?

A recent survey conducted by HNW, Inc., a marketing and technology firm serving financial services institutions, researched what  financial advisory services mass affluent investors want from their retail banks. The survey, titled “The Elephant in the Branch: Retail Banking and the Mass Affluent Opportunity” is based on responses from over 400 individuals from this segment taken in August, 2012.  Life Health Pro  believes the results have marketing lessons that can also be useful to independent advisors trying to target this growing segment.

According to HNW this segment is an important one because:

  • It is the fastest growing wealth segment in the country.
  • It currently accounts for one-third of all retail investment assets.

Study: Their Attitudes and Behaviors

Here are some of the attitudes and behaviors that the HNW study reveals:

They Don’t Consider Themselves Wealthy: Stacey Haefele, president and CEO of HNW, said the mass affluent “don’t want to be identified with that group.” This isn’t unrealistic, as the definition for rich and high net worth is steadily moving up. Most instead consider themselves “savers.”

  • 45% say they are “conservative investors.”

They Want More For Their Money: A majority said that the more they place in the bank, the more service they feel they should receive. Haefele concludes that to entice them to invest more money with them financial institutions need to provide differentiated service commensurate with their bank balances in a profitable manner.

  • Just waiving banking fees is probably not enough.

They Dislike a Product Push: Like most clients, the mass affluent don’t want an advisor who is only interested in selling them products:

  • Nearly half said that bank-based financial advisors only contact them “to sell or push something.”

Trust is a major factor when choosing a financial advisor.

  • 3 in 10 respondents “don’t trust using the investor advisor at my primary bank.”
  • 38% characterized the relationship with their primary banks as an acquaintance, or “somebody I might acknowledge but not spend any real time with.”

Thoughts on Engaging Them in Financial Planning

How can you effectively assist the mass affluent with their wealth and estate planning needs? Here are some factors to keep in mind:

  • Many put little faith in a financial plan because it is presented simply in a manner that leads to insurance sales.  It is critical for an advisor to establish a holistic relationship that factors in other investment and financial needs to gain their confidence and acceptance of the plan.
  • One of the biggest fears of the mass affluent is outliving their assets.  Any planning should include discussion of these concerns and how to protect against them.
  • Make sure that your discussions are not just a product push.  This is a major turn off for investors.
  • These individuals are well educated and increasingly comfortable using the internet to gain information.  An advisor must be just as knowledgeable about the markets and various options as they are.  Be ready to answer their questions regarding multiple subjects.  Although no one can be the expert on every topic, have access to various experts in the estate planning and investment fields.  Be ready to refer them to a local attorney or even an investment manager (if that is not your own expertise.)  Be sure to work together effectively with these experts in the future on behalf of the client.
  • Proactively reach out to them with information, not just product sales.  Sending a client a copy of an article that he or she might find interesting shows that you have an ongoing interest in them.
  • Make sure you provide them a strong understanding of the various tax implications and related benefits of any products that you present to them, since taxes are becoming a larger concern for these households.

The most effective advisors will be able to position themselves as an advocate for these 30 million mass affluent investors and not just a “sales guy.” They must be pushed to take action, but the approach must be one in which trust is carefully cultivated, and real value provided. They’re high maintenance and require dedicated cultivation. There is an enormous opportunity to assist these investors with a thoughtful well-informed approach.

See also:

China Will Get Old Before It Gets Rich

Jonathan Low’s post on “The Lowdown” titled “China Will Get Old Before It Gets Rich draws attention to the issue that I highlighted here: China’s Economic Time Bomb: The Approaching Crisis and here: Slowing Chinese Economy Impacts Multinationals.
In it, he discusses how China’s one child policy, originally developed to address the economic and health issues after its revolution in 1948 (“too many people and insufficient resources”) has led to the problem of an ageing population with too few working age citizens to support the economy.He provides some telling excerpts of Leith van Onselen’s book “Naked Capitalism.” Here are a few of van Onselen’s key points:

Origins of the Problem

  • China’s ageing problem stems from its ‘one child policy’brought into effect in 1979 that prevented around 400 million births between 1979 to 2010.
  • This policy initially produced a population pyramid optimal to economic growth – that is, where the largest segments of the population were neither young nor old, but in the middle (i.e. working age).
  • China’s fertility rate (the number of births per woman) is now close to 1.2 – well below Japan’s 1.4.

Unintended Consequences:

  • The United Nations forecasts that the number of working aged people to dependents is set to almost halve over the 50 years from a peak of 1.9 workers to dependents in 2015 to only 1.0 by 2065.
  • One of China’s top demographers and National People’s Congress standing committee member Cai Fang has warned that a slump in the country’s birth rate to Japanese-style lows or worse threatens to slash the supply of new workers and undercut the nation’s rapid economic growth.
  • Fang predicted that China’s dependency ratio (children and elderly to the working-age population) would equalize next year (2013) – the fastest such change in modern history.

But Isn’t This Happening Everywhere?

Not nearly to the extent that is is in China.

  • Professor Cai, director of the Chinese Institute of Population and Labour Economics, said China has been taking only 9 years to reach the the equalization of its dependency ratio next year (since the so-called “Lewis point” at which the supply of cheap agricultural labor for city factories started to decline in 2004.
  • The same demographic process has taken 30 years in Japan and 40 years in South Korea.
  • China will hit the point where there are more dependants than workers next year, 3 to 4 times faster than during the economic development of Japan and South Korea
  • This imposes major economic modernization challenges while “our potential long-term growth rate will decline,” according to Professor Cai.

It Will Be Much Worse than Elsewhere

  • The well-known likelihood of China facing an aging population before becomes a middle-income country will be accentuated by the faster-than-expected decline in its fer­tility.
  • “When Japan faced the end of the demographic dividend (when there are a rising number of workers to dependants) it was already rich and had 30 years to adjust,” according to Cai.
  • Just as the Japanese economy hit the wall in 1991 with the collapse of a property and stock market bubble just as its working population began to shrink, China faces an equally huge property bubble and very similar demographics as Japan’s at that time.
  • Japan’s dependency ratio in the 1990s – i.e. the ratio of the non-working population, both children (< 20 years old) and the elderly (> 65 years old), to the working population – is very similar to China’s in 2010. The profiles of the number of working age people per dependent is very similar in the two countries.
  • However, Japan was a very wealthy country when its demographic time bomb exploded, with per capita incomes exceeding that of most other Western nations, while China’s per capita income is well below the West.

“Interesting Times” Ahead

The future that Leith van Onselen’s facts point to are sobering. While China achieved in 50 years what it took most European countries a century to accomplish – increasing life expectancy from the 40s to over 70 – its 60+ population will now increase dramatically – from 200 million in 2015 to over 300 million by 2030.

But the question of how to meet the rising demand for health care services and retirement benefits remains unsolved.  With a virtually non-existent government pension and social welfare systems, Chinese leaders will need to shift resources away from investment and production in the coming decades.

Today, China’s 65+ population is only around 8%, which is a lot lower than that of the US, Germany, or Japan (around 20% for all three). But they’ll catch up in about 30 years, when they may face the same problems that have led to Japan’s current economic stagnation: a declining labor supply, aging population, and increased public spending obligations.

Making matters worse, China’s elderly population won’t be able to rely on the traditional Chinese retirement plan: Having many children to look after them in their old age.

In addition to this problem, the gender imbalance and ratio of females in the labor force is also likely to create additional challenges for a society which traditionally has left elder care to its women (especially daughters-in-law).

The new census data show that little progress is being made to counter this troubling trend. Among newborns, there were more than 118 boys for every 100 girls in 2010. This marks a slight increase over the 2000 level, and implies that, in about 20 or 25 years’ time, there will not even be enough brides for almost a fifth of today’s baby boys—with potentially vast destabilising consequences.

The Brookings Institute report summarizes the outlook on China’s looming demographic crisis:

China’s slow recognition and inaction in the face of its impending demographic crisis….reflect policy makers’ lack of understanding of the changing demographic reality. Inertia also results from the resistance of the country’s birth-control bureaucracy, which formally employs half a million people….The looming demographic crisis will largely define China in the twenty-first century. Given that demographic changes take time to develop, and that their ramifications are not only massive but also long-lasting, China’s inaction has already proved costly—and will only grow more so the longer it persists.

The famous expression,”May you live in interesting times“, often referred to as the Chinese curse, is reputed to be the English translation of an ancient Chinese proverb, although it may have originated among the English themselves. No known user of the English phrase has supplied the purported Chinese language original, and the Chinese language origin of the phrase, if it exists, has not been found, making its authenticity, at least in its present form, very doubtful.

However, in this case, the curse of one child per household is one that the Chinese authorities have brought upon themselves, and its consequences could well be “interesting times” for China and the rest of the world.

Mastercard Measures Women’s Financial Literacy

Chart1 B

In view of recent studies showing U.S. women to still lag men in financial literacy, an assessment of financial literacy conducted among women in the Asia-Pacific region has also turned up surprising results.  Intuitively it would seem that women in the most developed economies such as Japan, Korea, Australia or Singapore would have the highest level of financial savvy would be found in. But MasterCard Worldwide’s inaugural Index of Financial Literacy among women in the Asia-Pacific region shows this not to be the case.

The Thais Have It

The most financially savvy women were, in fact, found by MasterCard to be in Thailand, with an overall index score of 73.9 out of 100.

MasterCard’s overall index is made up of three components:

  • Basic money management weighted at 50%. This is to determine the level of basic money management skills in terms of budgeting, savings, and responsibility of credit usage;
  • Financial planning weighted 30%. This is to assess the level of knowledge of financial products, services, and concepts and the ability to plan for long-term financial needs; and
  • Investment weighted 20%. This to determine basic understanding of the various risks associated with investment, different investment products and skills required.

Notably, Thai women also had the highest scores in financial planning (87) and investments (69.3), outshining their peers in the other 12 Asia-Pacific markets surveyed by MasterCard.

Of the three components that make up MasterCard’s survey, women across the 13 Asia-Pacific countries as a whole scored the best in financial planning (average score 74.6), followed by basic money management (63.9) and investment (56.7). The overall average score across the 13 markets was 66.3.

Vietnamese Do Well Too: Also of significance was that women in another early-development stage market, Vietnam, also performed well to take sixth place with an overall index score of 70.1. Women in three other developing markets surveyed were also in the MasterCard’s index’s top-10: The Philippines (overall score 68.2), Indonesia (66.5) and Malaysia (66).

Georgette Tan, vice-president, communications for MasterCard, Asia-Pacific, Middle East and Africa, said of the strong performance of Thai and Vietnamese women in the rankings:

These are markets where rapid socio-economic advancement has given women vital and valuable first-hand entrepreneurial experience and exposure to financial planning and money management concepts.

Women in Singapore were in third overall place with a score of 72.4, thanks to good scores on basic money management (70) and financial planning (80.4). But they fell short in terms of investment skills and knowledge, scoring of 51.5, well below the regional average.

Women in Key Developed Markets Surprisingly Lag

Bringing up the rear in the survey were women in the developed markets of Korea, with the lowest overall index score of 55.9, and in Japan with the third-lowest overall index score of 59.9. Women in Korea and Japan were also the only ones in the region with financial literacy index scores of below 60.

Women In Other Developed Markets Excel

Women in New Zealand had the second highest overall index score (73.8) followed in fourth position (71.6) by Australian women, leading the field in basic money management with scores of 76.7 and 75.8 respectively. However, they both fared poorly on financial planning – coming in under the overall survey average – and on investments with scores of 58.3 and 55.2, respectively.

Indian and Chinese Women Lag

In the most populous developing markets, India and China, women had overall index scores of 62.5 and 60.1, respectively. This ranked Indian women fourth lowest and Chinese women second lowest. MasterCard found that Indian and Chinese women are particularly weak in basic money management, scoring 58.8 and 54.4, respectively.

Counter Intuitive Findings on Korean Women Yield Cultural Insights

Women are the Household Financial Decision Makers: Mastercard found that the majority of Korean women polled were the household financial decision makers. This was certainly true during my 15 years in Korea. I spent some years serving as General Manager of Marketing at Samsung Life, Korea’s leading insurer, where the traditional Financial Consultant channel was  female.

Yet Financial Literacy Remains Low: Ironically, Korean women had the lowest financial literacy scores:

  • Lowest financial literacy score (55.9)
  • Lowest in basic money management (51.1)
  • Lowest in financial planning (65.7).
  • In investing, only 22% of Korean women had a basic understanding of inflation and its impact on the future value of money.
  • Only 40% said they understood the concept of compound interest rates.
    • 36% did not understand the concept; 24% were unsure or did not know.

Japanese women had the lowest investment score (38.4).

Why? Traditional Societies Have Strong Cultural Differences

1. Little Experience With Equities Based Products: It is important to note that there are strong cultural differences that can largely account for these findings. Korea doesn’t have a long history with equities-based products. Traditionally,  investor clubs, called kae are used to raise seed money for businesses. The first recipients cede some of their cumulative periodic investment for the privilege of being the first to have access to a lump sum for investment. Later recipients receive back earnings as a result. But the pool is based entirely on monthly contributions of the members and there is no actual appreciation or interest on that pool.

2. Fixed Investments and Real Estate Are King: A second important Asian trend is a traditional emphasis on fixed income investments vs. equities. As highlighted in my article, The Declining Role of Equities, while investors in Europe, the United States, and wealthier parts of Asia, such as Hong Kong, hold 30% to 40% of their financial assets in equities, new investors in emerging economies keep 75% in deposit accounts.

General Observations and Conclusions

Women Need to Round Out Their Financial Skills: As an overall observation, while it is a broad generalization, women from traditional societies where they are the household decision makers tend to excel in money management, yet fall short in  investment skills and knowledge.

By contrast, research on U.S. women shows them still lacking confidence in money management skills, although their long-term family-oriented focus equips them to do better than U.S. men in long-term planning.  In comparison, the more transactional quantitative decisions such as budgeting or investing are typically more appealing to U.S. men who enjoy the “game” of it, than to U.S. women.

Financial Literacy Education Is Invaluable: The high scores of the women of Thailand, New Zealand, Singapore, Australia and Taiwan show that, regardless of cultural differences,  empowered women anywhere are a force to be reconed with.

One finding of the MasterCard research that can be generalized to all women was a close correlation between financial knowledge and planning – women who exhibited higher levels of financial literacy were more likely to be proactive in planning for their future. This shows that financial literacy training can be a potent tool for women financial consumers.

At Samsung Life, we invested heavily in educating the Financial Consultants in principles of financial planning that they could pass on to their clients, while introducing variable life, annuities and mutual funds to the product mix. The results were highly successful. This shows that an investment in female financial literacy is an invaluable investment for financial firms.

Financial planners have a receptive market with U.S. women, who have an advantage over U.S. men in long-term planning skills, and one way to reach them is to recruit and develop more female financial planners.  Helping women to round out their money management and investment knowledge will make them more confident consumers for investment products. In particular, women’s lower risk tolerance would make them a natural market for today’s Equity Indexed life insurance and annuity products, as well as Variable Annuities with living benefit guarantees that lock in gains and guarantee an income base for future annuitization.

Related Articles

Study: Gender Gap In Financial Literacy Grows

Seven Steps to Overcome Women’s Top Money Fears

The Declining Role of Equities

Equity Indexed Universal Life Insurance: Enticing New Alternative

Indexed Annuity Sales Excel in Low Interest Rate Environment

More Wealth, More Challenges

Prudential Financial’s latest biennial study of women and money released this month shows that women are becoming a greater economic force:

  • 53% of women are now financial breadwinners.
  • Womens’ median income has grown 63% in the last three decades.
  • They are expected to control $22 trillion in wealth by 2020.

Special Financial Challenges

However, women face a specific set of financial disadvantages that make it increasingly important for them to be responsible for their own long-term financial health:

  • Women are more concerned than men about household expenses, debt and their ability to save for retirement.
  • Women are more afraid of becoming burdens to their families.
  • With an average widowhood age of 56, but an 80.8 year life expectancy, women need to plan for their long-term futures.
  • Women are more risk-averse when it comes to investing.

Takeaway: Women need to do more to plan for their economic well being.

Women’s Top Money Fears

Michelle Matson, author of Rich Chick and vice president of Matson Money, an investment advisory firm managing over $3.1 billion, was interviewed by Jenna Goudreau in Forbes about women’s top money fears and how to overcome them
She  says that women’s biggest fear of failure due to not knowing enough. She says that women often become overwhelmed by the information proliferation, and feel they have to be smarter than everyone else to succeed.
Bearing in mind that, while men may be motivated by the thrill and challenge of investing, women are typically more concerned with the long-term results, Matson recommends 7 small changes that can make a big impact in helping women becoming more confident about their finances planners.

7 Small Steps to Confidence

1.Start Today

“Bag lady syndrome” is Matson’s term for the fear women often suffer of being penniless, homeless and alone. This fear may escalate small money concerns into visions of total destitution:

It can paralyze you. You don’t know what to do, so you don’t do anything.

To conquer the fear, face it. Express to your partner that you’d like to learn more about your finances, or schedule time to review where you currently stand.

2. Wade In Slowly

Instead of trying to do too much right away, Matson suggests moving slowly to learn and understand your finances and consider a financial plan. Locate and read all of your financial statements to get a snapshot of your current accounts. A good place to start is with financial books written specifically for women like Matson’s Rich Chick, or Women & Money by Suze Orman pr Does This Make My Assets Look Fat? by Susan Hirshman.

3. Identify Goals

Establishing a vision of the future helps to set realistic goals to achieve it. Perhaps your goal is to buy a home or own your home outright. Once you understand where you are and identify where you want to be, you are ready to create a plan for getting there.

4. Learn And Understand Your Strategy

Matson finds that many women get comfortable once there’s a strategy in place and fail to take the time and effort to understand and review it.  But the more you understand it, the better you can make it work long term. More understanding leads to more confidence and generally better results. She points out that men don’t necessarily make better investing decisions, but are more likely to seek out the information that will guide their decisions.


5. Keep Interviewing Your Financial Advisor

The Prudential survey finds that 35% of women use a financial advisor and a significant portion also would consider doing so. This is a good trend, but  women must also take responsibility for this relationship and ensure they understand all actions and communications. Since a good advisor will act as a coach and take the time to explain and answer questions, consistently ask questions and know the reasons for recommendations.

6. Take A Financial Class With A Friend

Woman can feel like they’re not alone and turn learning about money from a chore into something fun by joining a program with a friend. Discussing the knowledge with your companion can help you reinforce it and give you incentive to stick with it.

7. Teach Money Basics To Your Kids

Learning through teaching is a powerful way to reinforce your knowledge and confidence. Discussing the basics of money, your financial philosophy and your long-term plan with your children not only provides them these tools, but can help you clarify the concepts for yourself. These conversations can occur seamlessly in your daily life— for instance,at the register  or at home when paying the bills.

Considering that the Society for Human Resource Management‘s report 2012 Gender Gap in Financial Literacy Research shows women still lagging men in in key areas of financial planning with the gap between the genders widening in nearly every area of financial planning, simplifying and reinforcing can be an important means of boosting women’s financial understanding and confidence.

Significantly, women have an important advantage over men as well, since the report showed that woment tend to do better with long-term planning, taking small steps can go a long way to helping women secure their family’s and their own financial future. In fact, while short-term, more transactional quantitative decisions such as budgeting or investing appear to be more appealing to men who enjoy the “game” of it, women bring a long-term focus to the process that men often lack.

Related Article

Study: Gender Gap In Financial Literacy Grows

Financial Literacy Gender Gap

According to the Society for Human Resource Management, a report by workplace financial education provider Financial Finesse, 2012 Gender Gap in Financial Literacy Research, shows women still lagging in in key areas of financial planning. The report identified that the gap between the genders is widening in nearly every area of financial planning.

The data was compiled by tracking the use of Financial Finesse’s online financial wellness assessment and learning center by employees located across the U.S. in similar proportion to the demographics of the national population.

2 Areas of Concern

According to the findings, the gender gap is most pervasive in two areas that are critical to achieving financial security.

Basic money management:

• 43% of women reported having an emergency fund to cover unexpected expenses, vs. 63% of men.

• 52% percent of women said they were comfortable with the amount of nonmortgage debt they had, vs. 71% of men.

Investing knowledge and confidence:

• 37% of women said they have taken a risk tolerance assessment and were aware of their conservative, moderate or aggressive investment strategy, vs. 57% of men.

• 25% of women reported rebalancing their investment accounts to keep their asset allocation plans on track, vs. 49%  of men.

Area of Parity: Planning

However, in two areas that tend to be proactive in nature,  women showed virtual equality with men – participation in:

  • Retirement planning
  • Estate planning.

Area of Advantage: Long-Term Planning

Women “tended to do better with long-term planning, which is about securing their family’s future. Short-term, more transactional quantitative decisions such as budgeting or investing, however, appear to be more appealing to men who enjoy the “game” of it.

Women Face Greater Challenges

The findings highlight certain challenges that women face that are not being adequately addressed:

  • Women should be the ones putting more focus on improving their finances because they face more challenges than men in financial planning.
  • Women Have Longer Lives: Women live approximately five years longer than men on average, and 9 out of 10 women will be solely responsible for their finances at some point in their adult lives because of divorce or the death of a spouse, according to the National Center for Women and Retirement Research (NCWRR).
  • Women generally make less throughout their lifetimes than men, making it difficult to become financially secure.
  • Women have lower average Social Security payments and higher health care costs, putting them at a disadvantage financially.

Women Are Open to Improvement

The good news is that women are seeking financial education and information at very high rates:

  • Women typically seek financial education about 2 to 1 compared to men.

As employers continue to deliver financial education programs that effectively reach women, we should start to see this gap narrowing. However, the financial services industry needs to focus on this issue more to help women see the importance of closing the gap to creating financial security for themselves and their families.

Related Articles:

Challenging Retirement Realities for WomenSHRM Online Benefits Discipline, May 2012

Encourage Employees to Defer Adequate Pay to Their 401(k)SHRM OnlineBenefits Discipline, May 2012

Women and Men Differ on Retirement Plan Investments, SHRM OnlineBenefits Discipline, February 2011

Anything You Can Do I Can Do Better?

Marissa Mayer speaks onstage at the FORTUNE Most Powerful Women Dinner New York City at Hudson Room at the Time Warner Center on May 24, 2011 in New York City.

Now that Yahoo has hired Google executive Marissa Mayer to be its next CEO, the subject of feminine leadership is topical.  Maker, 37,  is extraordinary by any standards. She was one of Google’s earliest employees who began her career at Google in 1999 after getting her master’s degree in computer science from Stanford. Fred Amoroso, Yahoo’s chairman, says the board was drawn to Mayer’s “unparalleled track record in technology, design, and product execution.” Among Mayer’s list of talents and accomplishments, she is a math whiz with a photographic memory. In her time at Google, she led teams that produced many of the company’s most recognizable products, including the development of its flagship search product and the iconic Google homepage. She managed the launch of more than 100 features and products including Google News, and Gmail and is credited with overseeing the creation of much of the clean, uncluttered “look and feel” of many Google products.

Do Women Really Make Better Leaders?

Articles over the years have claimed that women make better managers than men, including this article by Forbes. According to Forbes, research shows that “strong market growth among European companies is most likely to occur where there is a higher proportion of women in senior management teams.” It shows that firms with more women on their boards “outperform their rivals with a 42% higher return on sales, 66% higher return on invested capital and 53% higher return on equity.”

Other research cited in Harvard business review found that teams which involve women are more intelligent than teams made up of men alone.  Professors Woolley and Malone, along with Christopher Chabris, Sandy Pentland, and Nada Hashmi, gave subjects aged 18 to 60 standard intelligence tests and assigned them randomly to teams. Each team was asked to complete several tasks—including brainstorming, decision making, and visual puzzles—and to solve one complex problem, and the teams were given intelligence scores based on their performance. Surprisingly, the teams that had members with higher IQs didn’t earn much higher scores, but those that had more women did. According to the researchers:

Malone: It’s a preliminary finding—and not a conventional one. The standard argument is that diversity is good and you should have both men and women in a group. But so far, the data show, the more women, the better.

Woolley: We have early evidence that performance may flatten out at the extreme end—that there should be a little gender diversity rather than all women.

But does this mean that women are inherently better managers than men? I’ll provide the answer to that question at the end of this article.

Smarter Work Groups

The study cited above found that women tend to make a group work better. Here are the key findings:

Smarter Groups Listen and Share Better: The study saw no strong correlation with individual IQs. Although 10 of the smartest people could make the smartest group, it wouldn’t necessarily be the most effective. What great groups share is not that the members are all very smart but that they listen to each other, share criticism constructively, have open minds, and aren’t autocratic. In fact the study showed that  groups that had smart people dominating the conversation were not very intelligent groups.

Smarter Groups Are Moderately Diverse: The research also finds that extremely homogeneous or extremely diverse groups aren’t as intelligent – a moderate level of cognitive diversity is most effective.

Collective Intelligence can be Designed: Although you can change an individual’s intelligence only so much, the study’s authors believe that it’s completely possible to markedly change a group’s intelligence. You could increase it by changing members or incentives for collaboration, for instance. There is evidence to suggest that collective intelligence exists at the organizational level, too. Companies that do well at scanning the environment and setting targets also excel at managing internal operations and mentoring employees—and have better financial performance. Consistent performance across disparate areas of functioning suggests an organizational collective intelligence, which could be used to predict company performance.

5 Feminine Leadership Secrets

So what are the successful qualities that tend to be more highly developed in women? Forbes put together a list of 5. I took 4 of theirs, and added a 5th of my own:

1. Communication: Harvard Business School professor Nitin Nohria, who writes that great leaders “spend the bulk of their time communicating.” Women are thought to be better at verbalizing what they think.

2. Perspective: It is important to have diverse viewpoints, and the best way to do this is to bring in people who understand those viewpoints intimately. Chief executive of the National Skills Academy for Financial Services (NSAFS), Sylvian Perrins, writes in the Financial Times, that she believes that women look at problems differently and provide a complementary point of view:

They are well placed to understand their customers and stakeholders and ensure the industry benefits from fresh perspectives, new ideas and broader experiences. It is always good to see things from different perspectives and if women are not represented on boards their point of view and a large proportion of the general population’s view wouldn’t be heard. Consequently, having different genders and ethnicities brings a tangible added value to the business. The best teams are made up of a different mixture of skills and backgrounds which bring spark and innovation to organisations.

3. Empathy: According to a white paper published by the Center for Creative Leadership, the ability to understand what others are feeling — to detect if they are overworked or struggling — is a skill that “clearly contributes to effective leadership,”

4. Risk Aware, Long-term Thinking 

Halla Tomasdottir and Kristin Petursdottir

The tendency to think long term  has come to be seen as a feminine trait. In particular, according to investment firm CEO Halla Tomadottir: “We [are] very careful, and very risk-aware – risk-aware, not risk-averse. Women are risk-aware, men are risk takers.

Halla Tomasdottir and Kristin Petursdottir, set up investment firm Audur Capital in Iceland in 2007, with Kristin as CEO, believing that the male-female balance matters because each bring different values to the table. Women, in particular, they believe Says Halla, the Audur chairman:

Women tend to bring a lot to the table. They think more long-term, they think about the team, and not only themselves. They think more about people, and they see other business opportunities than men.

There is another, crucial difference, they find: “Women are willing to ask stupid questions. We want to understand. We won’t take risks we don’t understand, so we ask: what is sub-prime? Who’ll pay these loans back?”

Prioritizing Corporate Governance: Part of being risk-aware is greater emphasis on corporate governance. Halla says:

You do need people that put ethics and corporate governance high on the agenda. I have learnt through years in personnel management that women tend to put these values higher on the agenda. They’re also interested in a wider definition of what’s a good return.

Results Speak Louder Than Words: Kristin and Halla are convinced that their results prove them right:

Our values got us through the crisis. We tripled out wealth management business when everyone else was losing business. We achieved this through trust, and the things we stand for. And straight talking. We told our clients things that they would not have been told elsewhere. We believe in being authentic to our clients, that’s in our DNA.

5. Work Life Balance

In my personal experience, organizations where there was a greater representation of women among management placed greater emphasis on work life balance. As women still tend to be the caregivers at the home, these organizations were more open to flexible work arrangements, including flexible work schedules and telecommuting. Undoubtedly, female management has had a positive influence on corporate culture in this area.

“Feminine” Leadership Qualities

study by Bain and Company of female leaders found that female interviewees felt that women were advantaged in six of 10 leadership characteristics identified.  These include the ability to empower others and to be a listener. The women interviewed felt that some of their traditionally feminine traits are an advantage, particularly in forming relationships with clients and colleagues. Examples these women leaders cited include:

  • Building relationships: “Women are generally calm and don’t possess a huge amount of ego upfront, which is helpful for building relationships with Main Street CEOs.”
  • Investing in others: “Women are better at consensus building and care more about people and how they are feeling about their roles.”
  • Reading people: “Women tend to be more empathetic and better listeners than their male counterparts, which makes them better at reading people.”

Bottom Line: Sensibilities, Not Gender, Determine Leadership Style

So are women really better managers than men? Anecdotal claims make for a compelling narrative and an empowering myth, but, in fact, the most reliable research reveals that leadership style is independent of gender:

Those contending that leadership competencies are largely the domain of the female gender are as guilty of stereotyping as those who would equate effective leadership with male characteristics.

Woolley states:

Many studies have shown that women tend to score higher on tests of social sensitivity than men do. So what is really important is to have people who are high in social sensitivity, whether they are men or women.

The fact is, it isn’t accurate to identify the leadership qualities typically enumerated as female leadership qualities as male or female., or engage in gender stereotyping.

The good news for both genders is that the qualities that society traditionally associates with women are  possessed by men as well.

3 Takeaways: The important takeaways are these:

  • Certain qualities that society associates with “the feminine” make for good management skills. These are qualities that leaders of either gender can tap into.
  • Diversity improves organizational effectiveness.
  • Work life balance makes for a better work environment

As leaders, we should be open to new learning. If qualities that are traditionally associated with feminine behavior appear to make for improved leadership, we should be prepared to embrace them. Gender equality and parity is not only a basic human right, but adds perspective, balance and improves organizational results.

Snap! principle of successful “feminine” leadership qualities:

Be as much in touch with “feminine” as “masculine” leadership qualities.