There was a some grumbling in the financial media world recently (which I pay attention to so you don’t have to) about a New York Times op-ed by investment advisor and blogger Blair duQuesnay, titled “Consider Firing Your Male Broker”. Provocative headline notwithstanding (duQuesnay says it was the Times‘ creation), the main message of the piece is that women are being denied (or driven away from) opportunities in the financial industry despite evidence that they meet their clients’ needs at least as well as, or better than, the men who run it as a boys’ club.
I didn’t find anything particularly controversial about the article. Both the evidence (the piece states that fewer than 20% of all investment advisors are women) and my own experience in the industry have shown me that women need more and better career opportunities here. Financial advisors affect the well-being of millions of lives, yet I wouldn’t trust most of them to take care of my houseplants over a long weekend, much less my savings for retirement. Bringing in more of the best women to replace the worst of the men will raise the bar for everyone.
Unfortunately, because this was a woman writing about sexism in a national publication, plenty of men were eager to point out to duQuesnay all of the ways in which she was wrong. Many shared anecdotes of awful experiences with a female broker. Others, perhaps triggered by the headline, accused her of being just as sexist as the industry she was describing. Some criticism from people who actually read the article fixated on research duQuesnay cited suggesting female investors outperform their male peers simply by trading less and incurring fewer costs. While it’s true that a handful of studies doesn’t prove conclusively that women are better investors than men, to make that argument is to completely miss the point of the article and in a way it validates duQuesnay’s message about the state of the financial industry today.
The history of financial advice is indisputably male. This is baked into the term “financial advisor” itself: for decades, financial advisors sold financial products (usually mutual funds, life insurance, or annuities) and were paid on commission. Imagine a car salesman calling himself a “transportation advisor” and you get an idea of how ridiculous that is. Pressure from corporate overlords, competition from other salesmen, and plain old greed led to aggressive sales practices that ignored what the customer needed in favor of what they could be convinced to buy. Unlike law and medicine, two other historically male-dominated professions that nevertheless enforce uniform standards of duty to their clients, finance kicked hard against any efforts to protect the people it served. As a result it became the bastion of the alpha male: loud, overconfident, and single-mindedly obsessed with winning.
Plenty of people in the financial industry – particularly those who have worked in it for over 10 years – still view it through the lens of the old model. But ever so slowly, the model is changing.
One of the first people to crack open the door to a different kind of financial advice was John C. Bogle, who died at age 89. Bogle dispensed with the notion that mutual fund managers were worth the high fees they brazenly commanded, and developed the low-cost index funds that anchor many investors’ portfolios today. His company, Vanguard, also allowed investors to buy shares of its funds directly, eliminating the need for a commission-seeking broker as a middle man.
The door opened a little wider as advisors began offering fee-only financial advice, free of the conflicts of interest that entangle commission-based salesmen. Industry regulators have proposed enforcing higher standards of duty on people who call themselves financial advisors, though that effort has stalled under the Trump administration. The powerful dudes on Wall Street will continue to fight it, but the industry is slowly progressing away from the alpha-males toward a fiduciary model, where the clients’ interests come before all others.
Just as finance’s alpha-male problem was self-reinforcing – the atmosphere was so toxic that women who might have overcome the obstacles to getting hired chose other careers instead – the shift away from that model could also have cascading effects. A career of helping people become financially secure or reach their long-term goals is more attractive for some people than one taking vulnerable marks for all they’re worth. Those people aren’t all women – I count myself among them – but I’d be willing to bet that group is much more representative of the general population than the industry’s historical makeup.
The shift I’m talking about isn’t going to automatically make life better for women in the financial industry. Despite the industry’s changes in the last two decades, the ratio of female advisors still hovers around 1 in 5, and the gender pay gap for financial advisors is one of the worst of all professions. As duQuesnay wrote in her piece, “women need institutional advocacy, not just someone who is willing to grab a cup of coffee and chat.” But women and men who can deliver real financial advice will be more in demand, and they’ll be the ones who pull the industry out the alpha-male swamp it’s been wallowing in.
If you think that picking a financial advisor is about who has gaudier investment statistics or who can sell you a better investment product, know that there’s a different way to get financial advice that’s about what your needs are. Look at NAPFA or XY Planning Network to find an advisor who puts your interests first. And if you do decide – after all this – to fire your male broker, don’t feel too bad about it. As long as we’re in America, there will always be a job for another car salesman.
Ever heard of the “pink tax”? It’s a tactic some companies use to charge women a premium for “pink” versions of products or services. But razors, pens, and other unisex items colored pink and labeled “made for women” do not apply here. When it comes to financial planning, every approach should be specific and unique to individual needs, regardless of gender. But women do need to keep a few things in mind when planning their financial futures — and I’m not talking about “pink” financial plans.
Women tend to live long lives. The average life expectancy for people in the U.S. is 78.6 years — so their money needs to last. For example, based on that average life expectancy, a person planning to retire at 65 will need funds to last nearly 14 years — but that money needs to last a 65-year-old woman retiring today much longer. According to the U.S. Social Security Administration, “A woman turning age 65 today can expect to live, on average, until age 86.7.” That’s a 21.7-year retirement — and I’ve only touched on averages. Early retirees as well as centenarian outliers could be looking at 40-plus-year or even longer retirements!
“Homemaker” and “caregiver” stereotypes for women are changing. Still, women may take time away from work to have children, raise their families, or be primary caregivers for family members or loved ones. And although the U.S. fertility rate is at a 30-year low, according to the national Family Caregiver Alliance, “An estimated 66% of caregivers are female.” This time away from work — whether planned or unplanned — can pose unique financial challenges for women.
Even in 2019, many women suffer from the gender pay gap, earning $0.82 for every $1 men earn. Therefore, they often end up with less money to save and less saved for retirement.
These facts alone make it clear that women have some special considerations to make when it comes to their financial planning. But you might still be wondering why I — a man — am the one telling you this.
While I’m obviously not a woman, I’ve enjoyed helping women with their financial planning needs for 15 years. This experience has allowed me to better understand the money complexities women face as we work through them together. In fact, I’ve likely worked with other women in situations similar to yours in some ways, helping them live their ideal lives on the paths to their comfortable futures. But not every woman has access to a financial planner, and that’s why I’d like to share some tips with you.
1. Save. With the possibility of a longer lifespan giving way to an extended retirement — as well as the higher costs associated with both — to consider, the earlier you start saving, the better. Starting to save at the beginning of your career tends to be the best time because of the potential for years of growth. That’s the beauty of compounding interest! But no matter where you’re at in life, there’s no time like the present to save for the future. In fact, many retirement accounts and plans allow investors aged 50 and better to make extra “catch-up” contributions to their accounts. Put simply, chances are the more you save for retirement, the more you’ll have in retirement.
2. Plan. If you plan — or foresee a potential future need — to leave work to start or nurture your family, care for a loved one, practice self-care, travel, focus on a passion project, or for another reason, include it in your financial plan. While it’s impossible to plan for the unknown, keep in mind that the Social Security Administration “calculates your average indexed monthly earnings during the 35 years in which you earned the most” when determining your benefit, if eligible. In addition, plan for the potential of that longer-than-average lifespan to better guide your savings goals.
3. Benefit and insure. If your employer offers benefits, take them! They can be great vehicles to start or add to retirement savings. This is especially true for employees who receive employer matches in their qualified retirement accounts, but it doesn’t end there. Consider employer-offered insurance options as well, which can act as buffers to incurring out-of-pocket expenses. Think of the difference health insurance can make in the event of a medical emergency or what disability insurance could do for a person unable to work. If your employer does not offer such perks, opportunities may exist for starting and adding to an individual retirement arrangement (IRA) or purchasing individual insurance plans. By protecting yourself in advance, you’re also protecting your finances and, in turn, your future.
4. Control. We can’t control everything that happens in life — but we can prepare for the worst and hope for the best. With that in mind, focus on controlling financial aspects you can control and try not to waste precious time and energy on what you can’t.
5. Pass it on. Whether you inspire friends, colleagues, neighbors, family, or someone else with your savings skills, don’t stop there. After all, knowledge is best shared.
6. Share responsibilities. On a similar note, if you have a spouse or significant other, don’t take it upon yourself — or put it on your partner — to manage your finances. Instead, make financial planning something you do together. The unfortunate truth is that one of you is likely to outlive the other. Understanding joint finances can reduce burden on the living member of the couple when the other passes.
7. Pay yourself first — and put yourself first. Some women tend to put others’ needs before their own, whether those others are dependents, friends, spouses, employers, or family members. Paying yourself first — including making your savings a priority by funding those accounts first — can help you amplify your savings. Plus, putting yourself first means you stay true to your financial plan, reaching toward the life goals you set. This doesn’t mean you can’t or shouldn’t help others — just that you come first, according to plan.
3. can help you adjust your plan as necessary to compensate for life changes.
While planning for the future is important for everyone, women have special considerations to make. But those looking to make the most of their financial futures shouldn’t let the challenges they face hold them back from getting on track toward their best lives. Financial planning—whether solo or with the assistance of a professional—can help.
Ben Henry-Moreland is a CERTIFIED FINANCIAL PLANNER™ professional in Omaha, Nebraska and the founder of Freelance Financial Planning. A former professional opera singer, he now works to help freelancers, contractors, and entrepreneurs take the next step toward building financial security. He writes about financial planning matters for self-employed professionals and the future of the independent workforce.
Jason Speciner is a CERTIFIED FINANCIAL PLANNER™ professional, an Enrolled Agent, and the founder of fee-only firm Financial Planning Fort Collins. He is also a member of the National Association of Personal Financial Advisors (NAPFA), Financial Planning Association® (FPA®), and XY Planning Network. Since 2004, he has served clients of all ages and backgrounds with unique experience working with members of generations X and Y.
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