- Some women are afraid of investing because they don’t want to lose what they have.
- By not investing, women may be losing out on growth opportunities in the long run.
- With your guidance, women can be more confident investors.
What’s scarier than “Friday the 13th,” “Halloween,” and the clown from “It”? For women, it’s often investing. Considering women already face challenges in making money, such as lower incomes than men1 and taking time off from their career for caregiving,2 there’s a tendency for them to hang on to what they earn and keep it in savings accounts rather than take the risk of investing.
The fear women hold onto could end up being a self-fulfilling prophecy. Many reports indicate that women live longer than men.1 Therefore, they may need to have more saved for more years out of the workforce and potential healthcare costs that come with longevity. They may be missing out on growth opportunities by not investing, which could affect their retirement.
So how can you help boost the number of women who want to invest? First, sit down with them and listen to why they’re not investing. As a financial professional, you’re already following FINRA suitability rules and asking your clients about their risk tolerance. If you want to simplify the conversation, you can use our risk tolerance questionnaire.
“Lower earnings from smaller paychecks result in a more conservative approach, as women try not lose what little they have.” – Lisa Smith3
If you’re finding your female clients are leaning on the conservative side and are afraid of taking any risk, they may just need some encouragement to boost their confidence in investing. Here are a few strategies to help them do this:
Let them know that just saving brings another risk
Investing provides an opportunity for growth. And while there is no guarantee, by just keeping money in a savings accounts with little interest, women may run into another kind of risk — not keeping up with inflation. If your client doesn’t understand inflation rates, take a moment to explain how it works and how keeping up with or outpacing inflation is important.
Help them use their money for social interests
Ask your clients if they’re interested in learning about socially responsible investing (SRI). SRI is investing that aligns with companies that may support your client’s beliefs. They may be more engaged in their portfolio knowing their money is invested in something that supports passions and interests as well as their retirement strategy.
If your clients have a low risk tolerance, they may also be prone to emotional investing and following each investment a little too closely. Suggest some strategies that will help them take a step back so they can see the big picture and think more long term. While the following does not guarantee gain or prevent loss, suggest ways they can take advantage of automation and help keep their positions balanced and on track with little maintenance, such as:
- Dollar cost averaging
- Target date setting
Catch bad habits early
If your client is new to investing, it may be the best time to work with them, before they form bad habits. In a previous article, we discussed behavioral finance and some of the ways people may be sabotaging themselves without even knowing it. Keep an eye on your clients’ financial habits to make sure they aren’t becoming overconfident, following crowd mentality, anchoring some misguided beliefs, or any other detrimental financial behaviors.
With guidance and a solid financial strategy, you can help women overcome their fear of investing. With these approaches, you may help them look forward to a comfortable retirement in their future.
Share our risk tolerance questionnaire with your clients and help them get started today.
1 “6 Charts That Show the Glaring Gap Between Men and Women’s Salaries,” Business Insider, April 2019
2 “Here and Now: How Women Can Take Control of Their Retirement,” nonprofit Transamerica Center for Retirement Studies®, March 2018
3 “Women and Investing: It’s a Style Thing,” Investopedia, June 2019
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