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Stereotypes, unfortunately, still permeate the financial services industry, including the outdated misconception that men are more capable investors than women. The good news is that this narrative is shifting for the better.
Despite men historically being more confident in investing, women investors tend to earn higher returns than men – in some cases, outperforming men by 0.94% to 1.2% per year.
And when it comes to investing behavior, women tend to be fully educated, rational and deliberate in the approach, which is why they often seek to work with a financial advisor to help reach their financial goals.
That being said, investors, and women in particular, should give careful consideration when it comes to choosing a financial advisor. One should prioritize working with someone who is best equipped to understand the nuanced challenges and opportunities that women face. Here are a few considerations to keep in mind:
The fact is that women tend to earn higher returns than men when they invest, which is often attributed to the notion that they tend to think more rationally about investing by asking questions that will impact their decision-making, as opposed to being impacted by swings in the market and the associated knee-jerk reactions.
However, the reality is that less than half (42%) of women are comfortable with their current investment strategy, as opposed to 65% of men.
To reap the potential benefits of the equities market, individuals first must be invested in it. While no amount is ever too little, it’s crucial that your advisor be a partner in building an investment strategy. The advisor is the key in answering questions and addressing concerns through a plan that’s built together.
To stick to a road map, one must be comfortable with it.
Another strength? Savings acumen. Data also show that women earning more than $90,000 have a greater average savings rate than men who are earning the same salary (10.3% versus 10%) – potentially leading to $516 more per year in retirement income than their male counterparts.
It’s important to consider an advisor who is proactive in offering suggestions on how to invest those savings or otherwise allocate them to help achieve one’s financial goals.
Women are likely to outlive men by an average of 2.5 years, meaning they need to stretch retirement savings further than men. Another important factor to consider when it comes to building up one’s nest egg is that women are more likely to enter this stage of life with lower lifetime earnings because of the gender pay gap and work loss on account of caregiving responsibilities.
Even more, industry data show that women also hold roughly two-thirds of outstanding student loan debt in the U.S.
This is why, for women in particular, it’s important to find someone who understands these societal differences to help lead a productive conversation on how to invest to account for these challenges. Whether that is through taking advantage of a tax-deferred retirement investment plans like the traditional 401(k), 403(b) and 457 plans or other investment vehicles, there are a multitude of resources at one’s disposal to make sure that what’s being created is a customized financial plan that accounts for these factors.
While this quality is gender-agnostic, it’s essential when finding the right advisor, especially given the reality of recent market events.
Market volatility will continue to occur, and it’s particularly prevalent amid the ongoing global health crisis. Working with an advisor can be especially helpful when markets fluctuate.
For investors, it can often be tempting to make rash or emotional decisions in response to market changes. Working with an advisor can help address one’s concerns by providing steady, fact-based advice and reassurance when the markets go off turn.
Regardless of your gender, ultimately investors and financial advisors should work together to create a personalized plan that takes into account how an individual wants to spend each day, the life milestones they want to reach, and the protections they want in place along the way.
The plan should also account for potential roadblocks or challenges they might face. The advisor should be proactive in asking questions about one’s unique circumstances to devise a sound financial strategy that enables a clear path forward – with room for flexibility.
Communication is a key starting point that will enable the investor and financial advisor to ensure the setup for long-term financial success.
Disclosures: Investment adviser representative and registered representative of, and securities and investment advisory services offered through, Voya Financial Advisors (member SIPC). These materials are not intended to be used to avoid tax penalties, and are provided by Voya for your education only. The taxpayer should seek advice from an independent tax advisor. Neither Voya nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax advisor or attorney before making a tax-related investment/insurance decision.