On Tuesday night, January 18, at the Cornell Club in New York City, Myron Kandel, one of the founders of CNN, moderated a panel that I sat in with four other financial professionals. Our most perplexing question: “Should women rule the world of investing?” In fact, I took the presumptive approach going in and while on panel. I told my guests that the panel was called “Why Women Should Rule the (Investing) World.” Because all the data points in that direction.
To consider:
• For the first time in our nation’s history, in 2010, women controlled the majority of our nation’s wealth. In fact, we control 60% of it.
• By 2030, 54.9% of all Boomers will be women.
• We are currently two-thirds of the workforce.
• Women spent 81 cents of every dollar.
• 80% of women will be responsible for all financial decisions in households.
o This supports a study by Citibank that found that 73% of all full-time working women see themselves as the financial manager of their family, moving from seeing themselves as the “chief purchasing officer” of his family.
Still:
• 90% of women feel financially insecure.
• 50% fear losing everything and becoming homeless (and that includes 48% of all women earning at least $100,000 a year).
• Only 1 in 5 women read the financial section of a newspaper (compared to 3 in 5 men).
• 42% of women do not know what a mutual fund is.
Come on Wall Street! Wake up and smell the Starbucks! Women have taken on all this financial and fiduciary responsibility, but are not getting the information they need to make sound financial decisions! Are they going to go to the big Wall Street firms to get it? (I don’t think so. Wall Street has lost much of its credibility and is only now retreating.) Are they going to the “Money TV” talking heads? (I don’t think so. Most viewers perceive it as entertainment versus education.) Will they go to their financial advisor? (I don’t think so. 86% of all financial advisors are men.) And we already know that women do not read the financial section of a newspaper.
And frankly, since most finance writers have a background in journalism, not economics or finance, and have never had a fiduciary responsibility for other people’s money, can anyone really trust that they deeply understand what they’re doing? going? (NOTE: Wonderfully gifted, talented and brilliant finance writers and commentators DO exist, but they are few and far between. The good ones are usually VERY good; most of the rest are not educated enough about finance to communicate their important lessons ).
Wall Street needs to be given a good shake and turned upside down. Her language needs to be creatively communicated for every woman to understand. Most women don’t read much of the material on finances because it’s as dull and dry as sawdust. Therefore, finances seem to most women overwhelming, complicated, confusing and… BORING.
No wonder we’re in trouble.
My participation in the panel included these talking points, and more:
• The first question you need to answer is this: “Do you know what you own and why you own it?” As I mentioned that night, I ask every client and prospect this question. I have never met one who could answer both sides. We’re not talking about Monopoly money here. This is real money. serious money. You better be able to answer this very simple question about your own money and investments or someone is sleeping on the switch.
• The female brain on money is different from the male brain on money. Ask any woman who has more than one gender in her offspring. Women:
o Desire to embrace their femininity, which will produce different and gender-specific decisions about how to spend money.
o Desire to raise their children and families, which will lead to different risk management measures.
o They are more risk averse. When the combined housing crisis and financial crash of 2008 wiped out half of investors’ wealth, men tended to look at the world with anger and perceived it as less risky. Women tended to look at the world with fear and perceived it as more uncertain.
o They are less likely to choose “The Big One.”
o Trades less frequently than men. Men trade on average 45% more than women. Single men trade more frequently than married men, who trade more frequently than single women, who trade more frequently than married women.
o Double returns when running hedge funds. The problem is that only 6% of all hedge funds are run by women.
o Portfolio managers average 1.4% higher returns than those led by men.
• Work on Personality Theory, supported by the various disciplines of philosophy, psychology, behavioral finance, psychoanalysis, psychometrics, and neuroendocrinology, shows that different personality types “see” money differently . I am using this research in my next book, What Color is Your Purse? to turn women into finance. My goal is to see women fascinated by money, choose to study it, ignite their imagination and fuel their inspirations.
o Hippocrates noted personality differences as early as 400 B.C.
o Galen named the Four Personalities.
o Carl Jung developed the trait-type personality.
o John Holland studied the “science of personality.”
o Freud, Kant, Erickson, and Myers-Briggs developed their own version of examining personality type.
o Recent writers attributing to the notion that there is a “Money Personality” have it backwards. There is no Money Personality. Each of us has a personality, from which we derive the way we “see” and handle money. How we earn it, spend it, save it, invest it, and give it away depends on our personality (not the other way around!)
• The relatively new field of neuroeconomics shows that “animal spirits” question or emphasize efficient market theory. It turns out that people don’t use logic and reason to make investment decisions; they behave irrationally.
o Investors are more willing to take more risks to avoid losses than to make a profit. It turns out that investors essentially become risk takers to avoid losses!
o Investors deal with the fear of regret when dealing with their own money.
o Investors tend to be overconfident in their ability to invest. They tend to confuse luck with skill.
Should women rule the investment world? In many parts of the developing world, they certainly are. As Mark Monchek, a guest in the audience at the question-and-answer session, pointed out, almost all of microfinance is dedicated to women’s businesses. If money rules the world, and the hand that rocks the cradle rules the world, I’d say it’s pretty safe to assume that women are certainly making it. But we have to control it. As a woman, you need to know who you are, where you are, where you want to be, and how money can help you get there. And to do all of that, you really have to “get” money.
Panelists at the New York City Cornell Club’s Money: More Money Series event on January 18, 2011: “Women Should Rule the Investing World” included: Nancy Trejos (The Washington Post); Liz Pulliam Weston (called the most widely read personal finance columnist on the Internet0); Muriel Siebert (the first woman to sit on the New York Stock Exchange and founder of Muriel Siebert & Co., Inc.); Jason Zweig (The Wall Street Journal) and Carolina Fernandez (Vice President of Investments, Source Capital Group and Founder of “SheEO Network”). Myron Kandel, Moderator, is one of the best-known financial journalists in the country. As one of the founders of CNN, he pioneered the financial news on television, and served as the network’s financial editor and economics commentator for 25 years.
