When it comes to wealth, the battle of the sexes is over. Women won.
According to Financial Advisors magazine, women now control more than half of the personal wealth in the United States — an estimated $22 trillion — and women-managed wealth is growing 1.5 times faster than other wealth, thanks to entrepreneurship, careers, inheritance, divorce and other life circumstances.
What does that mean for the nation’s economy, the financial management industry and the women who are building the wealth? To find out, Az Business sat down with three of the most influential women in Arizona’s financial services sector:
Margaret Paddock, wealth management director of sales, Desert Financial Credit Union
Annabel Whiting, market director, PNC Bank’s Institutional Asset Management business
Jackie Yoder, COO, Wilde Wealth Management Group
Here’s what they have to say.
Az Business: How has the shift of wealth toward women impacted the wealth management world?
Jackie Yoder: It has been a big shift. You used to see a lot of husbands and wives come in and the husbands were the ones that kind of knew everything that was in their portfolio. Now, that’s changing a lot, especially with women not focused as much on getting married. You see a lot of women coming in and taking control of their finances. I think we’re going to see an increase in that among women who are following the Baby Boomer era.
AB: Does wealth management for women different differ from wealth management for men?
Margaret Paddock: Yes, it differs in a couple ways. The first is that females tend to be a little bit more conservative in their investing style, which for me is counterintuitive because women live longer. Sorry, guys, but we do. So women should be investing a little more aggressively than their male counterparts and it’s actually the opposite. Women tend to be more conservative in what they’re investing. So that can be problematic because there are times that their assets won’t keep up with their longevity. So that can be an issue for women.
AB: Are there other issues challenging women when it comes to wealth management?
MP: Yes. Women primarily tend to put the financial decisions on their male counterpart. Today, two-thirds of the decisions based on finances are made by the male in the household and only one-third by the female. But more of the assets are going to be in the hands — or are in the hands — of women. So women need to really focus on learning about finances. It might not be something they’re necessarily all that interested in. There are lots of things I have to learn about that I’m not necessarily interested in, but it is really important that they have some knowledge base on what’s going on with their finances so they can make an informed decision for themselves.
AB: How important is financial education, not just for women but for everyone in general?
Annabel Whiting: Understanding money and our relationship with money is extremely important throughout any stage in our lives. It’s critical to funding our lifestyle and planning for every eventuality. Our financial education should start at a very early age, and I’m a big proponent of teaching financial literacy in schools. It doesn’t matter what stage you are in your wealth life cycle. It’s really important to understand how to get your financial house in order and to understand what your current snapshot of net worth might look like. It’s building a balance sheet, understanding your assets and liabilities, and really taking stock of your net worth. You can start that as early as as school age. But as we get older, it’s important to make sure we are educated about all the tools and resources available to us, including what’s available for saving for healthcare or for education. There is a lot of information out there, and it helps to talk to a professional about what options you might have. It’s extremely important to be educated about your financial situation.
AB: How do women know if they’re saving enough money for retirement?
JY: Women tend to forget that we are the ones who generally step up whenever the children need to be taken care of or when parents need to be taken care of. So, for women, it’s actually a little different in trying to figure out how much they need to save because there tends to be a high rate of gaps in women’s employment. Women need to take a big-picture look at that, factor in the fact that women live longer, and account for the potential need for long-term care. Do they have enough assets in their portfolio to cover all that? There are a lot of factors when it comes to looking at what they will actually need to get through retirement and maintain their lifestyle.
AB: What are some of the factors women should be looking at out when they’re trying to decide how much they need to save in order to maintain their lifestyle in retirement?
MP: That’s the magic question, right? What might be enough for me might not be enough for you. First, you need to determine how you want to go into your golden years. Do you want to leave a legacy philanthropically. Do you want to leave something for your children or for your church? Once you have decided what — realistically — you would like retirement to look like, from there you can create a plan. You hire someone who’s a financial expert — either a financial planner or a financial advisor — and work with her or him to develop a plan and stick to the plan. Have it reviewed at least annually because life does not run in a straight line. There are lots of external factors like taxes and law changes that can impact a financial plan as well as life, right? Life is messy. Life changes. Those types of things need to be taken into account along that journey of financial planning.
AB: Here’s a magic question that everybody probably wonders: Is it ever too late to start planning?
AW: No, it’s never too late to start planning. Whether you have had a financial plan in place for years or you’re just getting your arms around what your situation looks like, there’s always something you can do. Understanding what your cashflow looks like and where you might be able to allocate funds to meet certain goals is a great way to start. Women tend to step back and defer when it comes to financial decisions in their households. They focus their attention on other things. But it’s never too late to get involved and get started on financial planning. Women do tend to be more conservative in their investments and we’re very good savers, better than our male counterparts. We tend to sit on cash and that in itself is making an investment decision. It’s never too late to figure out how to put some of that cash to better use and it’s never too late to get started.
AB: Are there mistakes you see women make over and over again when it comes to financial planning?
MP: A couple things. I would say women need to own it and become educated when it comes to their finances. Be an active participant in it. Even friends and family members who I have talked into putting together a financial plan tend to tell the advisor, “Just do what’s best. You’re the professional.” Well, that’s true, but it is important that you take ownership of your financial self-sufficiency because if things go awry along the way, you will have a better chance of correcting it if you have that knowledge base. So it really is important that they are educated along the way.
AB: When we’re talking about healthcare and long-term care, how do you factor that into your financial planning?
JY: It’s going to be different for everyone, obviously, but if you have a goal of wanting to retire early, you have that gap that you need to account for with healthcare — same with long-term care. If it’s just you and your husband, nine chances out of 10, you’re going to live longer than him. You’re going to have to figure that out and really take a deep dive into planning. Do you need to actually purchase long-term care insurance? Do you have the assets to keep yourself comfortable so you don’t actually need to get the long-term care? That’s going to look different for everyone. But I think a lot of people feel comfortable getting the long-term care. It’s just that safety blanket.
AB: We’re seeing a lot more women entrepreneurs and women business leaders in Arizona. With the added wealth they’re building, what advice would you give to them in terms of managing it and taking care of it?
MP: I think sometimes financial entrepreneurial-type women tend to look at their assets, believe it or not, as a burden, because it’s just another thing they have to manage. They see it as something else they have to worry about, and they’re really focused on their business, so they tend to ignore it. I have seen a lot of female business owners keep a lot of cash, too. Keeping cash is a financial decision, but it’s a decision that isn’t going to keep up with inflation. So you’re literally losing money by keeping it in cash. So instead of looking at it as a burden, it’s important that women business owners think about it as a gift that they could be making toward things that they’re passionate about, things that are important to them. More than their male counterparts, women tend to think of money and want to do good with money. They’re more philanthropic. So I think they should just look around them. What’s important to them? What are they passionate about? Then, put their money to work there.
AB: When is the best piece of advice you could give to women about managing their money and building their wealth?
AW: For a woman, it’s really important to take control of her own financial destiny and be an advocate for herself. It’s never too late to get started and get yourself on the track to where you want to go.
MP: My advice would be a little bit selfish. Put yourself first. We, as women, tend to take care of our children. In my case, it was my children, it was my mother. We’re that sandwich generation. Be selfish. Put yourself first, because if you are financially self-sufficient, you will be a better caretaker for the ones you love.
JY: Women are very good at being conservative, but just take that little bit of a leap since it does take us a little bit more to get us through everything. Just be a little bit more aggressive in getting through to retirement.
AB: How important is it to seek out a professional for financial help?
MP: I think it’s critical. Although I’m in the industry, I’ve hired somebody to manage my money. I know that managing a family’s life savings is a full-time job, and it shouldn’t be done on a part-time basis. So whether you’re male or female, unless that’s your full-time job, I believe you’ll have better outcomes by hiring a professional. It’s just like not going to the dentist and trying to do your own root canal — it’s a bad plan.
AW: It’s not just investible assets, it’s taking stock of your whole financial picture. So to your point about philanthropy for business owners, sometimes it’s planning charitable intent, it’s estate planning, it’s beneficiary designations and a whole host of things women need to think about for their financial futures. Hiring a professional is critical to making sure all of those aspects are covered.
AB: When a lot of us think about financial planning, we’re thinking about retirement, but how important is it to look at the big picture?
JY: I know for our firm, we have a whole holistic approach. When you come to us, you don’t just get an advisor. We have an estate attorney in our office, we have a CPA, we have a mortgage consultant, we have a health insurance person. For us, that’s so important because clients put so much trust in us, and they know that we can give them the tools to put it all together.