Independent Thinking^®

Women Creating Wealth

Working women are an economic force that the investment industry is only beginning to recognize, even though the number of American women with incomes in the six figures – or more – is growing at more than three times the rate for men, according to the U.S. Census Bureau.

Almost a quarter of married women with children now outearn their husbands and more than nine million own their own businesses.
 
As a group, women are responsible for $5.1 trillion in personal investable assets, or 39% of the national total, and have decision-making power over twice that amount. Still, fewer than half of these women work with a financial advisor. There are probably quite a few reasons for that low representation, a number of which are the fault of the industry itself. One possibility does seem to stand out, however. Women may be avoiding the subject, at their own expense.
 
Women tend to rate themselves lower in financial literacy when, in reality, their ability and knowledge is similar to that of men. While women now earn 57% of bachelor’s degrees, 60% of master’s degrees and 51% of doctorates, as measured by the U.S. Department of Education, they do not gravitate in equal proportion to math-related fields, a reflection, perhaps, of that distorted perception of their abilities.
 
The opportunity cost of avoiding professional financial advice and portfolio management can be significant. Women without advisors, according to the Boston Consulting Group, typically allocate 20% of their assets to cash, or more than double the proportion of those who engage advisors.
 
A portfolio of, say, $10 million, invested 9% in cash, with the remainder split between equities and bonds, grew to $14.2 million over the past five years. A portfolio with a 20% cash allocation earned $563,000 less. For many women, that difference could represent significant choices in lifestyle, career, or the opportunity to help advance important causes. Past performance is, of course, no guide to the future, but it is worth noting that cash, as an asset class, has underperformed bonds by 4.22% and equities by 11.34% over the past five years.
 
In short, in trying to avoid risk, many women actually take on risk; the risk of not meeting their financial goals. A clear understanding of the risk-return profiles of different investments in the context of those goals enables all investors – male and female – to stick with an investment plan over time and not be distracted by short-term fluctuations in the market.
 
At Evercore Wealth Management, we encourage women to fully engage in discussions about their individual and family finances; to learn not just how to create wealth, but also how to allocate and invest their assets to meet their goals. Our Wise Women series of educational seminars helps our clients improve their financial and investment acumen in a like-minded community of women.
 
Judy Moses is a Partner and Portfolio Manager at Evercore Wealth Management in San Francisco. She can be contacted at [email protected].