Monday 20 February 2017 2:19 pmCFA Institute Talk

Three tips to help women start investing

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Some women never start investing.

My research uncovered three main reasons why many women “sit on the fence” when it comes to investing:

  • Some women aren’t interested in investing and don’t understand why it is important.
  • Some are perfectionists and feel they do not know enough to begin. They think the world of investing is “too big” or “too complicated,” and they are not interested in learning, especially when so much of it sounds like jargon.
  • Time is precious. Some women would rather devote their energy to other, more pressing matters.

As advisers, our job is not to judge the reasons why our female clients don’t invest — our job is to get them started. Why is this so critical? Because cash is among the lowest performing asset classes over time, and on average, women live nearly five years longer than men. That means the average female retiree needs to save and invest well over $100,000 more than the average man.

So what is the best way to help our female clients begin?

Let’s draw on the advice, ideas and stories of the smart women I have met with over the years. Here are three tips advisers can use to start women on the road to investing.

1. Help them learn why they should invest in the first place.

The best cure for being “stuck” is a stronger competitive impulse. If you can help your clients determine why they should invest, there is a better chance they will make the commitment.

The main reason why women decide to invest? To take control and achieve financial independence. Talk to your clients about this. Wouldn’t it build confidence for a client to grow her knowledge, her wealth, and to be able to look after herself no matter what? What would that feel like? How would it make her life better?

Women need to think about their futures and the futures of their family. Wouldn’t it be great to have a sense of security both for themselves and their families?

2. Invest in what interests them or in ideas they understand.

Investing isn’t as complicated as many people think, and the sooner our clients start the better.

According to Anna Erman, head of marketing, corporate communication, and investor relations at Danske Bank, Stockholm:

Many women don’t invest because they have been told it is too complicated. But investing is not difficult, you just need to get started. Take a small amount of money and invest in the things that you like. It should be intuitive. If you think it will be difficult, it will be.”

Encourage clients to carve out enough money for a discretionary account — this way they can do their own research, analyse companies that interest them, and practice buying stocks. Encourage them to be aware of trends and patterns — to think of investing as a window on the world.

Suggest that clients track their spending so they will have a better chance of living within their means. And the side benefit: They will notice the companies they do business with in their daily lives.

3. Make the investment process fast and simple.

Our clients have access to technology and all the tools it offers. Women of all ages are embracing the latest apps and investing platforms.

Gamification is also a huge help in persuading female clients to invest.

“There are significant differences between men and women in all of our studies or focus groups in how they approach finance, the meaning that they ascribe to money, and their values,” Katharina Norden, CEO and co-founder of Three Coins, in Vienna, explained.

“Game-based learning is more effective than book-based learning and either way, learning really only occurs if people are able to connect it to their lives. Banks are slowly starting to realise they need to be working to develop products in a more human-centred way, as well as using game design principles. Banks need to redefine themselves.”

And yes, mobile has completely changed our clients’ lives when it comes to money.

Advisers can play a major role in encouraging their female clients to invest. So go ahead, start the conversation.

Barbara Stewart, CFA, is a researcher and author on the issue of women and finance.

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