Investing for Women: Is It Really Any Different?
Several years ago, there was an online uproar over a simple pen. Some may remember the countless articles and news segments diving into the controversy Bic had fallen into over an arguably ignorant marketing decision. Bic for Her, a line of “fashion” pens made specifically for women, had no innovative features or differentiating factors that would appeal to its target audience.
The lady-pens, as one Forbes contributor called them, were simply petite and pastel. Apparently, that’s what was missing from the bevy of writing utensil options for women. Pretty in pink and nothing else. The pens caused such a visceral reaction because why, oh why, would a well-known, arguably successful brand go what seemed like decades back in time to unnecessarily gender an everyday product? The answer is still unclear years later.
While I don’t think about pens or marketing failures all that often, the start of Women’s History Month this March brought the memory of the debacle to the forefront of my mind. During this time of year, some companies share historical accounts of prominent women throughout the ages. Other brands focus on what women need or want – or at least, what they perceive those notions to be – and share tips and tricks for achieving those things. The financial industry is no different in these efforts.
As a woman, I appreciate the focus on women, given the ongoing fight to resolve and improve issues like pay inequality, board and leadership under-representation, and broad discrimination. However, every year around this time, I brace myself for another gendered article about women and money. Although the intention of these articles may come from a good place, I end up disappointed at the outcome. It is Bic for Her all over again, except it influences more than just a tool for writing. Gendering finances is a slippery slope of assumptions, misinformation, and a focus on the wrong issues.
Let’s take a look at the areas where investing as a woman should be no different, and a few where there may be some differences to consider.
Foundational Investing and Planning Principles
First, what may be helpful is a breakdown of the fundamental differences between men and women in managing their financial lives. This may come as a surprise to some, but there are none. To be clear, the principles of investing and financial planning are the same regardless of gender. Men and women alike need to understand some foundational tenets to be successful in their financial management. Women don’t need a flowery financial plan or an easier-to-understand investment strategy to be as successful as their male counterparts. Instead, we need actionable, efficient money management without the stereotypes, just like men. Here’s what I suggest.
The risk-versus-reward conversation is a must when broadening one’s investment
understanding. Many people, men and women alike, view investments as an exciting way to make their money work harder for them, without having to put in extra hours at work or build a business empire to create or maintain wealth. While there is some truth to this concept, the potential reward that comes with investing also carries risk.
Investments exist on a spectrum, from ultra-conservative to incredibly aggressive. The risk assumed with an investment correlates to where it falls on that spectrum. Lower-risk investments that fall into a conservative category usually offer a lower potential for reward. Think of a CD or savings account that offers a steady rate of return, albeit low compared to other investment options. On the other hand, higher-risk investments that are considered aggressive in their approach can come with the potential for a higher reward over time.
It is imperative to understand this risk-reward concept when selecting or adjusting investments, no matter your gender. It is equally important to know how much risk you can stomach when putting your money to work.
Identifying and Adjusting Goals
Another foundational principle of financial management revolves around identifying what we are trying to achieve with our money. Clearly defining goals lays the groundwork for an actionable financial plan.
For instance, setting a goal of retiring at age 60 with $1 million in retirement savings is a common objective, as is building an emergency fund for unexpected expenses in the future. Other goals may include paying for college, paying off debt, purchasing a home, growing a business, or taking care of a parent.
Everyone has different goals they want to achieve, so these should be specific to your needs and wants in life. Regardless of those goals, identifying them and adjusting them over time is integral to financial planning.
Creating Actionable Plans
Although some goals seem specific, it is often helpful to look deeper into what we hope to accomplish with each. For example, if retirement is on the horizon, understand your unique vision of leaving the workforce and what that entails. Does that include traveling, spending time with family, working in a different field, or pursuing your passions? Those intangible aspects of your goals help determine how much you’ll need to fund that specific objective. Traveling the world is likely going to cost more than volunteering; knowing that helps us create actionable plans.
Developing a realistic, comprehensive financial plan brings together those more specific goals with steps you can take now to achieve them over time. For some, that means setting up or increasing automatic savings to retirement accounts. Others may focus on paying down debt in an efficient way. Others still may focus on realigning their investments with what they hope to achieve. In any of these cases, ensuring the steps you take are both focused on the outcome and achievable is necessary.
Holding Yourself Accountable
Whether on the investment front or a financial planning journey, both men and women may find it helpful to have some level of accountability in place. Some prefer an outside accountability partner, like a friend, colleague, or professional advisor. Others may be diligent enough to hold themselves accountable when working toward their goals. No matter which camp you fall into, accountability has to be part of the mix. Without checking in on progress, it is easy to get off track, let emotions drive decision-making rather than logic, or forget why a plan was put in place to begin with.
What May Truly Be Different When Investing as a Woman
Believe it or not, the foundational aspects of investing and financial planning differ between men and women. Understanding risk, identifying goals, creating a realistic plan, and maintaining accountability lend a necessary hand in financial management, but some specific factors that impact women can create some challenges. These are worth identifying, even if they may not apply to all women in their financial journeys.
For years, women have earned less than men within the same positions with similar education, skills, and job-related experience. The Pew Research Center reports that in 2020, women earned 84% of what men did. This represents a reduction in the gender pay gap from previous years, but still, the disparity remains. The research suggests that pay inequality exists for several reasons, including fewer opportunities for higher-paying positions for women and an overrepresentation of women in lower-paying jobs. Gender discrimination also persists, although it is challenging to quantify.
A gender pay gap that negatively impacts women has far-reaching implications. As it relates to financial planning and investment management, women may find it harder to find the dollars to put toward savings or investing. Similarly, a lower lifetime of earnings results in lower earnings-related benefits, including retirement plan matching through an employer, pension benefits, and Social Security benefits. These are real obstacles some women may face when creating and implementing their financial plans.
In addition to pay inequity, women have traditionally taken on the role of caretaker during their prime working years. This is not limited to parenting minor children; it also includes handling the care of parents or elderly relatives. With either scenario, women may find it more difficult to find or manage a work-life balance that allows for a full-time position with a full-time income.
Even for a period of time, a lower income has a similar negative effect as pay inequality over one’s lifetime. Also, women may need to plan for an earlier-than-expected retirement to help care for parents or loved ones. An early departure from the workforce means fewer years to save and invest, not to mention a longer period of time those funds must last in retirement. These issues surrounding caretaking and forgoing earning potential do not impact all women. However, they are worth considering when developing a financial plan and long-term investment strategies.
Lack of Representation in Financial Services
Finally, women may find it difficult to find a financial services professional who recognizes—and appreciates—these planning challenges. Women make up a much smaller portion of the financial services industry than men, and women of color an even more minute percentage.
Although some firms are making headway in bringing more women and women of color into the fold as financial advisors, wealth managers, and planners, the underrepresentation of women in these roles persists. As a result, women who want professional guidance with financial planning or investment management may feel less inclined to seek it out in the current male-dominated field.
Women and Investing—the Bottom Line
Women don’t need uniquely branded or targeted advice or strategies to build or manage their wealth. No one wants to see a Bic for Her, lady-pen approach to financial services. We firmly believe that regardless of gender, sound financial planning and realistic wealth management come down to fundamental principles. However, having an advisor or planner who recognizes the challenges women may face in their lives on the financial front is critical.