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By Debra Ohstrom, CFA
Having worked in the Financial Industry for over 27 years, I still see that women are not being served well by the Financial Industry and aren’t confident about investing and their retirement.
UBS, a global financial services company, completed a global survey in 2019 on how women feel about their financial security and whether women are confident in making financial decisions. The results were rather disheartening and I would like to help change that.
According to the survey more than 50% of women of all ages, leave the finance and investing decisions to their spouse even while they perform the daily budgeting and spending responsibilities. Only 23% of women globally take charge of their financial planning decisions and 74% of divorced and widowed women have discovered that their financial situation was worse off than they assumed.
Another recent study from Morningstar shows that 84 % of women expect to work past 65 years old due to money constraints and 90% of women will have to be in charge of their own finances at some point during their lifetime. Morningstar also reported that only 37% of women use a Financial Advisor so financial advice isn’t something that women are receiving during their lifetime. This information isn’t taught in our high schools in the US and not even in college unless you’re a finance major. This means that women shouldn’t be critical of themselves for not knowing this and we all need to invest in ourselves by learning these topics. The reality is that most women are going to be in charge of their own money decisions at some point in their life so the sooner a woman learns the concepts of managing money and investing for the future the better off she will be.
Just because you think your spouse is more savvy than you when it comes to money doesn’t actually mean they really are. The truth is that creating a plan and thinking long-term when investing provides a very successful outcome for people versus picking stocks and short term trading which is what men often do. If more women were involved with their household investments it could be very beneficial for the entire family. Ally Bank sponsored a study in the U.S. where 44% of couples under the age of 55 years old stated that money was a top cause of stress in the relationship. If you have children, these attitudes and stressors around money get passed along and observed whether parent’s realize it or not. Talking to your kids about money and helping them create positive habits at a young age can set them up for a lifetime of success.
History teaches us that human beings usually let emotions drive investing decisions and trading from fear of missing out or fear of loss creates short term thinking. These short term decisions cause us to lose money over the long term. History has also taught us that using a long term approach and an appropriate investment mix can grow our wealth and smooth out the ups and downs that happen when investing over time.
I know that there is so much jargon within the financial industry that makes it intimidating. Technology has changed investing and financial planning by making it easier and less expensive for everyone to get started in a way that meets their situation and needs. I think part of the challenge for women is that approximately 80% of all Financial Advisors in the US are men and I am going to guess it isn’t that much different around the world. It can be hard to understand all the different resources available with financial services here in the U.S. There are different titles of Financial Coach, Financial Planner and Financial Advisor and they all are a little different and charge fees differently. It can be hard to make a good decision if you don’t know what all your choices are and what might be a good fit for you and your situation. How can you know who to trust if you don’t know how fees are charged or what questions to ask? All of these challenges can prevent women from taking action and being in charge of their financial future. I think women want other women to talk with about their money but don’t see many choices or ways to go about doing that. This is why I created and structured my business the way I did. I do see some other women talking about money on social media but then find that they have partnered up with men to offer investments as if men are the only choice. I find that disappointing at best because I think it sends a message once again that there aren’t women out there that are already knowledgeable investors and can teach you the right way to be successful.
Another challenge is that the internet has created a misperception that trading and long term investing are the same thing and that the only way to invest is to learn to pick stocks. That really isn’t accurate and through Mutual Funds and Exchange Traded Funds in the U.S. as well as UCIT Funds and SICAV Funds in Europe, investors have a way to own shares of a basket of stocks or bonds so it’s more convenient and easy to implement.
Trading is very short term in nature which can be high risk, stressful and require a lot of time and attention during the day. Long-term investing is about creating the right long-term mix of investments based on your money goals and risk appetite to help smooth out the volatility so investors stay invested over the long-term. Long-term investing doesn’t sound as exciting as get rich quick schemes on the internet and a lot of rear-view mirror stock picking. Many articles on social media talk about how you would be a millionaire if you had invested in Amazon or Google 20 years ago. It’s easy to see things in hindsight but when you are living through new inventions in technology and large market swings it can be hard to predict which company will be the winner over the next 10 or 20 years. That is why it is often a good investment to own a basket of stocks and bonds and think long-term so you can let the future play out and still have your money grow for you.
Being a successful investor starts with a Financial Plan. Then taking the next step to get started with investing is the path to a secure financial future. It’s a similar process to how someone would work with a nutritionist and create a healthy meal plan to reach your health goals. I created my website DebraOhstrom.com to help women get educated and set up their financial health for a lifetime of success. There is a Free Workshop for the Womenhood Community that I created that goes into more detail on the topics I touched on with this article.
There is a free guide you can download off my website DebraOhstrom.com that is all about Decoding the Financial Advice Industry if you want a reference guide after participating in the workshop. If you have any questions or need any help please contact me at Debra@debraohstrom.com
About the Author
Debra has worked in the financial industry for over 27 years at firms such as Merrill Lynch, Morgan Stanley, Citi Private Bank and Allianz Global Investors. She has worked in different roles such as research, asset allocation and account management. She has an MBA in Finance and the Chartered Financial Analyst designation. Debra created her education business, DebraOhstrom.com to help women get the education they need to become confident investors and be in charge of their financial future.