Nearing two decades of experience in the financial services industry, Melanie Husk, a financial planner and founder of MEL Consulting Company in Chicago has made a career of helping people achieve their financial goals. A former volunteer with Women Tech Founders and Femfessionals, Husk has made it her focus to empower women to economic prowess.
At her company, Husk teaches a financial wellness program once a year to educate and empower women. AdvisorNews asked Husk a few questions about what advisors can do to better empower female investors.
Q: Mel, according to a Wells Fargo study, Women make up 45 percent of all millionaires and control $14 trillion of U.S. personal wealth. That’s a lot of money! What can advisors do to empower more women to invest? Why aren’t they investing as readily as their male counterparts?
A: Advisors can help to educate and empower women to invest by offering seminars and workshops around the basics of money. They can use terminology that resonates with women like shoes or coats in their closets to describe asset classes. Another analogy I use is describing products as candy wrappers with different ingredients inside. Find out what hobbies or interests they have and then provide explanations using aspects of say gardening or cooking. Talking in their language will go a long way in helping them understand how investing works! In addition, it’s important to ask lots of how and why questions to learn what goals the women investor has and really listen.
I think women aren’t investing as readily as their male counterparts for a couple of reasons. Probably the biggest is one is that they just don’t know how to do it or understand it. Women may have not been brought up around money matters. Historically, men have handled the finances in a household. Luckily, we are seeing that trend change. More women are taking control.
Another issue I think that exists is women fear making a mistake. They question themselves, “what if I’m doing it wrong?” Or “what if I invest in the wrong thing and lose all my money?” Investing can be very scary for those who don’t understand it.
Q: What are women missing out on by not starting to invest earlier? And how can advisors advocate for more women to invest?
A: Women are missing out on quite a bit by not starting to invest earlier. Since they are not paying themselves first, they aren’t taking advantage of the potential of compounding on investments and building wealth for future goals like retirement. As financial advisors, we can educate and empower them to take charge of their money. We can help them plan for life’s curve balls.
Q: How do investment strategies differ between men and women?
A: Men usually make their investment decision less on emotions than women. They are more concerned about returns and performance, things that they can quantify. Typically, they are more aggressive in taking risk. Women are traditionally the complete opposite. They are focused on intangible reasons for investing like financial independence and leaving a legacy for their families. In addition, they typically do more due diligence on investment products. We find that they are more likely to be conservative investors and take less risk to achieve their investment goals.
Q: What are good first steps to take for women who want to invest?
A: Arm themselves with knowledge and get educated! Stop making excuses and do some research online, interview multiple financial planners, attend some seminars, and get a game plan in place. An easy to place to start investing is through your employer’s 401(k) plan. Take advantage of the employer match. If that’s not an option, consider opening an Individual Retirement Account.
Q: How do you recommend women deal with the intimidation factor that comes with investing?
A: Again, stop making excuses! Women put themselves through college and build businesses. We often make the majority of the buying decisions. We now own 51% of the wealth in this country according to a study done by Business Insider published on April 7, 2015. So why would you NOT educate yourself about your money? The more they know, the less fear women will have about making bad decisions.
Q: Are the investment gap and the gender pay gap related?
A: Yes, without a doubt. If women make less money and work less, then clearly there is a direct correlation between the investment gap and gender pay gap. Should women take time off to start a family, she is missing out on saving for her retirement and potentially missing out on getting promoted. Lastly, if women make less and yet live longer, we will receive less in Social Security benefits.
Q: What are some of the most common questions you get asked by female investors?
A: As financial advisors, we receive a lot of common questions and I think the biggest one is how I pay down this student loan debt. It’s one of the biggest issues affecting younger women. They come out of school loaded down with so much debt and to keep their heads above water they then turn to credit cards to survive. From there, it just snowballs, causing financial anxiety that immobilizes them.
Another common question I get is “do I need this whole life insurance policy?”
They are smart to question whether it’s right for them and should review with a life insurance agent.
Women also ask, “If I’m investing, what should I be investing in?”
That could be stocks vs. bonds or it could be mutual funds vs. Exchange Traded Funds. It could mean, should I be conservative or aggressive. The right financial planner will dig deeper into the definition of the word investing by asking the woman what does she mean … what are your goals, what are your investment objectives, what is your time horizon, what is your risk tolerance, to name a few.