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Women tend to be better investors, but face challenges

Dorie Fain

Dorie Fain

Research has found that women often out-perform men when it comes to investment returns. But the events and challenges they may face in life can sometimes make that difficult.

An analysis of more than 8 million clients in 2016 by Fidelity Investments concluded women investors exceeded men by .4 percent in returns. Other sources have found that women’s returns were about a percentage point higher.

The explanation? Women are more willing to think long-term and will make educated decisions.

But while women may have success investing their money, even in today’s world they aren’t always the ones holding the purse strings. And they often won’t discuss it with friends at a girls night or take time away from the family to participate in financial planning. All of which could compound into a wealth gap brought on by decades of missed investment chances.

That’s something that Dorie Fain, Founder & CEO of &Wealth, a boutique financial advisory firm dedicated to working with women experiencing significant life changes, is hoping to prevent.

“We’re really working to help women build the skills and tools around financial decision making,” Fain said. “To me it’s a critical life skill to know how to take care of yourself, and to know how to take care of yourself financially is a critical part of that.”

More information, greater return

Women will often communicate their concerns and fears about losing money, and as a result are pegged as more conservative investors, she said.

“In my experience, women simply need to be educated about what it means to have this kind of risk,” she said. “Once they are educated, they embrace the concept of growth over time to provide greater longevity of their assets to sustain them.”

Take the example of a client of hers who had just inherited money when her parents died.

She went to a male financial advisor and told him she couldn’t afford to lose it. He recommended a 100 percent portfolio of bonds.

That was completely inappropriate for the 52-year-old, said Fain, who was able to work with the client by explaining the risks of a different portfolio and what it means to have growth over the long term and is now invested 70 percent in stocks and 30 percent in bonds. Her projected return went from about 2 percent to 6 percent, Fain said.

Women taking a seat at the table

krosin-bonnieBonnie L. Krosin, financial advisor and vice president at Morgan Stanley, said she has noticed women investors are more inquisitive and ask more questions. Since she started in the industry more than 20 years ago, she has seen women become increasingly involved in financial planning.

“The more questions a client asks, I think the more successful they become,” said Krosin.

In particular, women who are in their 50s and have worked for many years are now making more decisions when they come to the table with their spouse, she said. Women investors also include divorced clients or people who are taking over their aging parents’ finances and need to have a solid financial plan.

Another investment decision she has noticed women will make more than men is holding onto a position simply because the woman has inherited it from an older family member. Krosin said she has a client that never wants to sell something she inherited from her grandparents, and Krosin has to articulate the risks of keeping a position that doesn’t fit into the rest of the portfolio and long-term plan. Yet younger women are less likely to do this, she said.

Wealth built over decades

Leksi Kovalerchik

Leksi Kovalerchik

Real wealth is built by families and individuals and takes decades, said Leksi Kovalerchik, Senior Financial Associate and Retirement Income Certified Professional® with The Rosenwald Team, a multigenerational wealth management practice.

Women tend to be more research-based, with more long-term vision, which can help them, she said.

“What I’ve seen is women are not necessarily less risky, but they just don’t feel the need to make off-the-wall sort of calls and make snap judgments and decisions that I’ve seen a lot of men willing to do,” said Kovalerchik. “They’re more calculating, they rely more on expert advice, I think.”

In particular, she has noticed more young women are now seeking to take an active role in financial planning. Since The Rosenwald Team specializes in a multi-generational approach that serves whole families, she will often meet with young women still in college or graduate school who want to learn more about long-term investing, budgeting and retirement savings.

But she urges those women to maintain their interest, especially as they have children and take on more household responsibilities. Many times at that point those women will take a backseat to their husbands. Kovalerchik recommends at least an annual meeting to discuss long-term plans.

“Women need to remember to keep their finger on the pulse and still participate and still be involved with all of the family’s investing and finances,” Kovalerchik said.

She has noticed more women are developing “side gig” businesses where they are able to maintain some income while having a family, such as a woman who takes on editing or fitness coaching. Those women should not be afraid to take business opportunities and try newer and bigger things, Kovalerchik said.

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