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Tuesday, July 28, 2015

Women’s Unique Financial Struggles: Finding Effective Strategies

As women age, understanding and being in control of their financial landscape can be daunting, whether married or single. A trusted financial advisor can make all the difference.

The old adage that men won’t stop and ask for directions while women will quickly engage the directional advice of a stranger, is one of the most clichéd examples of gender differences. Yet, as indicated in the research below, those differing approaches are not surprising when our brain chemistry and divergent life circumstances are taken into account. The effects are particularly salient when examining the financial approaches of aging women. To serve this growing population, professionals in the financial industry
should review the most common circumstances women face:

• Women live, on average, five years longer than men. These extra years carry significant financial burdens as women have more “old age” in which to incur medical costs, and a longer period of retirement without work. Women are more likely to die alone than as part of a couple.

• Women are more likely to enter a nursing home and incur the significant annual expense: $87,600 for a private room and $77,380 to share a room (Genworth 2014). The population of assisted living residents is 80 percent women (Chamberlain 2013). In the unfortunate realm of financial elder abuse, women are twice as likely to be victims
(Metlife 2011).

• Women are more likely to have insufficient savings for retirement, putting them in a position of economic insecurity (Waid 2013). Income disparity over a woman’s career will lead to a smaller retirementnest egg, and this will be further complicated if a woman chooses to reduce her workforce participation in favor of caregiving. These factors
translate into a 25-30 percent shortfall compared to men’s retirement savings (Insured Retirement Institute 2011).

How do we handle these discouraging statistics? Potential solutions require careful consideration of women’s most common tendencies. 

The Confidence Gap
Confidence is a benefit in moderation. Our best decisions are usually made with confidence. But too much can be problematic. For example, in a 2015 study from (Morgan 2015) data showed men are 25 percent more likely to lose money in the stock market than women, and men are also 1.5 times as likely as women to say that they expect to beat the market in the next year. So the confidence that men bring into their financial decisions is not paying off in long-term returns.

Women are more likely to stick with a buy-and-hold strategy as opposed to a method focused on frequent trading. In the end, studies show the buy-and-hold approach garners higher long-term returns. Yet despite their superior investment predispositions, women in retirement are still more likely to be economically insecure (Waid 2013). A number of factors are at play (wage gap, fewer years in the workforce due to caretaking of multiple generations), but is it possible for aging women to reverse the tide?

The act of becoming familiar with one’s money late in life can usher in a new attitude of peace. Unfortunately, women of all ages generally lag behind men in the crucial realm of financial confidence. A recent Prudential (2014) survey demonstrated 75 percent of women consider it very important to have enough money to sustain their lifestyle through retirement. But only 14 percent were very confident they would meet that goal. The 61 percent difference between the 75 percent who want to be financially independent
and the 14 percent who have the confidence they can be financially independent, represents a confidence gap. Ten years ago, the confidence gap was 62 percent. Despite the financial industry’s recent focus on women, the gap has only decreased by 1 percent.

Upon examination of this gap, the aspects of finance on which women gave themselves the lowest grades were the long-term activities of investing and generating an income stream in retirement. What can be done to address this gap? 

Create Confidence before Trying to Educate
Directions for Women (2015) is an organization created to address women’s dearth of financial confidence. It uses the following tagline to indicate the most helpful order of services when working with women: Empower, Educate, Engage. When asked, “What does financial empowerment look like?” founder Eleanor Blayney suggests a willingness to
talk about money with loved ones, spending in a way that honors values and responsibilities, learning from past mistakes, having the courage to speak up to get the support and answers she needs, and recognizing the choice to delegate—not abdicate—responsibility for managing financial affairs. An empowered woman will be a more effective student when she gets to the education phase because the context of her financial decisions will be clearer. 

Different Learning Preferences
While it may not be true for every woman, there are commonalities among women when it comes to the ways they learn best. One study shows women prefer to learn in a collaborative environment rather than in typical pedagogical formats (Cabrera 2001). But classroom collaboration is not the only environment where cooperation gives women an advantage. In The Soccer Mom Myth by Michelle Miller and Holly Buchanan (2007), the authors comment on research data indicating men have a fight or flight response, while women would tend and befriend.” They write: 

“We’ve seen brain differences that give women advantage in verbal skills. This combined with their innate sense of community and sharing, leads them to place greater value on relationships. Men are competitive and hierarchical. Women look for similarities and value cooperation.” In the field of finance, where rank and status are heavily valued, is it any wonder women are lacking confidence?

Another common learning characteristic among women is the desire to master a topic rather than learning it incompletely. In the meta-analysis, “Gender Differences in Scholastic Achievement” (Voyer 2014), researchers conclude: “Previous research has shown girls tend to study in order to understand the materials, whereas boys emphasize performance, which indicates a focus on the final grades. … Mastery of the subject
matter generally produces better marks than performance emphasis, so this could account in part for males’ lower marks (report card grades) than females.” This mastery strategy often leads to decision avoidance in topics that are difficult to master. In the financial
world of confusing jargon and strategies, avoidance often seems like the easiest way to deal. As a result, many women face their aging years without any sort of contingency plans for the most likely scenarios.

Knowing the learning preferences of many women, how can we maximize the value of our services to aging women?

Circles as a conversation technology. Financial advisors may want to consider referring clients to the Circles process to help them clarify and understand finances.

The Circle process stands apart from other financial events because it incorporates collaborative learning in a non-hierarchical environment. Originally created by Christina Baldwin and Ann Linnea of, Circle conversations are an ideal way to create a safe space for women to talk about money.

Directions for Women suggests some Circle conversation topics to get women talking as excerpted from Women’s Worth: Finding Your Financial ConfidenceEleanor Blayney (2010): childhood money memories and how they affect you now, your values and how they are reflected in your checkbook, setting S.M.A.R.T. financial goals, and creative ways to live on a budget. 

Use Unorthodox Teaching Methods. Women are open to learning about finance and would love to master it, but many of the educational resources available are presented in the seemingly secret language of learning about their own finances. With a background
in psychology and art, Luna Jaffe became an unlikely author for financial matters, but her Wild Money lends an artistic, creative feel to improving your financial position. The book’s exercises address both emotional and practical financial work. Paired with questions that require real introspection, the financial teachings Jaffe offers fit into the larger context of how money fits in our lives.

Another imaginative method of educating women on financial matters is to suggest women study certain books in a group where they can talk about their discoveries. A conversation starter is the story of Geneen Roth. In her book, Lost and Found, she tells the story of losing everything—she had selected Bernie Madoff as her only advisor—while gaining a profound sense of appreciation for all she still had. Roth’s humble self-awareness provides realizations that apply to many women. Roth addresses the best method of financial transformation: “Without deeply understanding the roots of our discomfort…we will revert to the same behaviors over and over again…” 

Different Approaches to Advice
To effectively help aging women navigate their financial journeys, it is important to adjust the way we provide recommendations to maximize their financial success. Going back to our ancestral roots, consider the hunter/gatherer comparison of our male and female ancestors. Women surveyed the land to gather the best food, while men focused in on a kill. Due in part to brain chemistry and a woman’s superior paths of connectivity
between the analytical right and intuitive left lobes, many women still prefer to gather many pieces of data before they feel comfortable making a decision. 

Relevant data that is gathered may include the emotional state of those around her. The benefit of this trait was measured in a study of the effectiveness of group decision-making. One key finding was the importance of emotion reading for groups to be successful (Engel 2014). The women in these groups demonstrated greater “Theory of Mind” abilities, allowing them to consider and keep track of other group members’ feelings, knowledge, and beliefs. This advantage trumped the influence of group characteristics that might seem more important: the group’s collective intelligence, the presence of an extroverted leader, and the factor of motivation towards the group’s success. The presence of women in a group led to the group’s success because of their increased ability to balance the dynamic of information, emotion, and the overall wellness of the group.

Contextualize Your Recommendations.
How do we assimilate this data gathering tendency into our recommendations? When helping a woman make decisions with financial implications, advisors should help her assess the emotions she may feel as a result of a particular course of action. Even in the case of unavoidable unpleasantries, acknowledging the potential downsides helps her grasp the big picture and feel more comfortable moving forward. 

A common characteristic of women is the tendency to equate money with security. Many financial advisors have observed their female client’s reluctance to engage during investment portfolio review meetings. An advisor might interpret her lack of interest as evidence that she doesn’t understand the graphs. In fact, for many women, their lack of interest stems from their perceived irrelevance of those graphs. Comparison of investment performance against a benchmark does not answer the one question that often keeps women up at night: “Is my portfolio on track to provide enough money at the end of my life so I don’t need to live on the street?” 

In the financial industry, this fear of being destitute at the end of life is known as “bag lady syndrome.” It permeates the world of women regardless of their income levels. In fact, 57 percent of women say the thought of running out of money in retirement is what keeps them up at night (Allianz 2013). The only other fear that ranked higher was the possibility of losing a spouse. Since these two fears are interrelated, bag lady syndrome is a natural outcropping of life expectancy statistics.

Focus on Reinvention, not Retirement.
In the coming years, fewer boomer women will be able to retire in the traditional sense of the word. But that doesn’t mean they can’t enjoy this phase of life. There are ways of working that will still fit into an aging woman’s life style, and may even inspire her in new
ways. Focus on those possibilities and help her get creative about her contributions to this world. Women possess a tremendous ability to adapt to new situations, so they should be encouraged to continue working in some way in order to delay the years of retirement portfolio draw-down. When the Social Security program was designed in the 1930s, life expectancy was only fifty-eight for men and sixty-two for women. But the retirement age was set at sixty-five. This program was not designed to cover decades of retirement
years as we have now come to expect. Now is the time to begin reinventing ourselves to create a new era for the golden years.

Highlight Alternative Housing Options
With a growing number of older homeowners unable to afford to maintain their residences on their own, change is on the horizon. The fact is the boomer generation will need to embrace some new housing models, such as the Golden Girls strategy of living with
friends, or the multi-generational housing that is coming into vogue among all age groups. As with everything else that boomers have done, they will lead the way to a new way of looking at aging. 

Criteria for Selecting Financial Advisors 
Many women will be most secure when they have taken charge of their finances and chosen to delegate them to a trusted advisor. But even the process of selecting an advisor is different for women. One study showed 70 percent of widows fire their financial advisors within one year of their husband’s death (Spectrem 2011), suggesting that what was good for the gander may not suffice for the goose.

Women tend to prefer qualitative means when selecting a financial advisor, as 61 percent cite a feeling of trust and respect as the top factor. More affluent women consider it imperative that an advisor take a long-term view of their needs (Insured Retirement Institute 2011). This tendency to focus on qualitative aspects of the hiring decision can cause a woman to lose sight of the more quantitative attributes of candidates. To provide
the best blend of both types of considerations, the Certified Financial Planning (CFP ) Board has created a list of ten interview questions to help consumers make the best selection possible To help a woman in the middle of a selection decision, the advisor should offer to be her sounding board and provide a safe place to ask questions.

In conclusion, women are more than capable of making successful financial decisions, but are often deterred by circumstantial, personal, or economic factors.  In the aging population especially, advisors to women can choose to play an edifying role that helps
to change a woman’s thinking about and behavior toward money. These factors may be just as important as the balance in her accounts when it comes to changing
her financial course. •CSA

Candice McGarvey, CFP® is a client advisor with Lumina Financial Consultants in Richmond, Virginia. By working with women to increase their financial wellness and strengthen their financial position, she guides clients through financial transitions. Her services range from full-scale wealth management to financial coaching. She can be
contacted at, or visit

Women’s Unique Financial Struggles: Finding Effective Strategies was published in the Spring 2015 edition of the CSA Journal. 

Blog posting provided by Society of Certified Senior Advisors