Wealth Management

The Risks of Reluctance

Research shows that 80% of men die married, and 80% of women die single. That means that 80% of women will become responsible for their and their families’ futures at some point in their lives if they aren’t already. Yet many women don’t want to engage with their financial picture unless or until they absolutely must. This reluctance puts women at a risk that’s worth thinking about and working to avoid. There are five main reasons—each one, as you will see below, embedded in issues related to women’s roles in life and society.

I ALREADY HAVE TOO MUCH TO DO

Even before the pandemic hit, your calendar was probably already packed. Taking on your finances just seems like one more thing to add to your already long to-do list. And one that’s easy to put off.

> INSTEAD

Start by just gathering the information you need to make a list of your investment and bank accounts: how they are titled, where they are housed (the custodian), who the financial advisor is and how to contact him/her. Move on to add your insurance policies, your assets (e.g. home, car, etc.) and any

debts you have from student loans to mortgages and credit cards. This is a huge step and will give you a sense of accomplishment. A good financial advisor will help you with the rest—identifying your goals, figuring out whether you will have enough money to meet them and investigating the tradeoffs of different investment strategies to address those goals. Not adding “engaging with my financial future” to your to-do list risks leaving you literally and figuratively, shortchanged when it comes to your financial security.

I WORRY THAT AN ADVISOR COULD TAKE ADVANTAGE OF ME

It’s easy to be suspicious that you could be taken advantage of by a financial advisor trying to sell you something you don’t need—especially if you feel you don’t know enough to evaluate possible choices.

> INSTEAD

Before you choose an advisor, you need to understand which incentives your particular advisor receives. There are three questions you need to ask.

Is your advisor a fiduciary?

Advisors who are fiduciaries have a legal duty to place your interestsahead of theirs—even if a different choice might earn them more in commissions or otherrewards. If your advisor is a broker, but not a fiduciary, the investments he or she selects for yousimply need to be “suitable,” but not necessarily in your best interest. (You could also have anadvisor who acts as a fiduciary with some accounts and a broker with others.) Ideally, you’d liketo work with an advisor who must act as a fiduciary on all your investments.

How is your advisor compensated?

There are two options, though some advisors can earn bothtypes of compensation across your accounts, depending on how each is set up:

  • Through commissions charged on each trade. If this is the case, s/he has an incentive tohave you buy and sell products frequently in your account—including those where thefirm has increased the commission in order to “push”a particular product).
  • Through a fee. If your advisor charges a fee (flat or, more likely, as a percent of assetsyou give them to manage). s/he “sits on the same side of the table as you”—makingmore money when your portfolio grows and less if it shrinks.

Does your advisor own the same products they are recommending to you?

If they have theirown “skin in the game” you can be confident that you are receiving their best thinking and theirattention is fully tuned to those investments. They probably won’t own everything you wouldinvest in in the same proportions, but you want to be sure that they invest alongside you.

Not knowing how your advisor gets paid means you can’t allay your suspicions and risks your ability to build a collaborative partnership.

I DON’T UNDERSTAND ANYTHING ABOUT INVESTING

Investing is a specialty and it’s easy to believe you lack the expertise to be able to understand yourfinances or the knowledge to choose the right investments. And no one wants to be embarrassed,condescended to or feel overwhelmed.

> INSTEAD

A good advisor will be the partner you need to learn about investing and build that plan that will help you reach your financial goals.

If you already have an advisor and you still feel this way about investing, that’s the advisor’s fault, not yours. If an advisor can’t explain what they are recommending in plain English, they either don’t really understand the investment strategy themselves or they don’t want to spend the time explaining it to you. Either way, this is not the person with whom you want to be working over the long term.

I’D RATHER DO NOTHING THAN MAKE A MISTAKE INVESTING

Worried about making mistakes, it’s easy to believe that doing nothing is safer than doing something“wrong.”

> INSTEAD

This fear can be paralyzing. Yet doing nothing is as much a decision as making an investment. Doing nothing—i.e. not investing in a product for fear you’ll pick the “wrong thing” —usually means that your money is sitting in cash.

While cash seems the “safest choice” to many women, it means two bad outcomes for your money: First, cash loses its purchasing power over time because places where cash is stored, such as money market funds and bank CDs, don’t pay enough interest for it to keep up with inflation. Even low inflation adds up over time. Second, cash simply won’t grow enough over time to meet your goals. Testing different scenarios for your future and understanding the impact different investments can have on your ability to meet your goals requires expertise, a good advisor will collaborate with you through this process to help you build a plan for your future with which you are comfortable.

Not understanding the tradeoffs among investment choices risks your investments taking on too much or too little volatility and thereby missing your overall goals.

I DON’T WANT TO OFFEND MY HUSBAND/PARTNER BY INTERFERING

If your husband or partner takes care of family finances, you might not want to interfere in what hasalways been their domain. (Some women even fear what they could find out about their financialsecurity if they look too closely.)

> INSTEAD

Every couple arrives at their own unique dynamic with respect to communicating—or not communicating—about their financial situation. If you are reluctant to be perceived as interfering in what has become your husband or partner’s realm, stay focused on the following.

  • First, you really don’t want to have to start from scratch after an unforeseen accident ortragedy— and your husband/partner, although they may not have considered that, probablydoesn’t want you to either.
  • Second, if your husband/partner has put in a lot of time building and planning for your future,they probably don’t want those plans to go unheeded or misunderstood.

Setting goals together and building a joint relationship now with your financial advisor increases the likelihood that you will preserve your family’s future no matter what happens to either of you along the way. If you are not comfortable with your current advisor, this is also the time to find one you both feel is a good fit. While it may feel overwhelming at first, there is tremendous peace of mind to be gained through developing a mutual understanding of your financial situation and the steps you need to take.

Not getting involved risks undermining the plan that’s in place to achieve your financial goals.

The Right Financial Advisor Can Help

Unless you have deep knowledge of finances—as well as investment strategy, tax law and other aspects of wealth management—it really helps to turn to an expert. A good advisor will collaborate with you to build a plan that ensures that your age, income, spending needs, savings goals, tax status, retirement, estate planning, philanthropic and legacy goals are all properly reflected.

It’s important to find an advisor you can trust and with whom you can work well. You’ll recognize an advisor is “right” for you when you feel they are bringing out your strengths. By demystifying the path towards building or enhancing a wealth management plan or by simply helping you understand the plan that’s in place, a good financial advisor can uncover opportunities in your future that you may never have contemplated.

Once you’ve taken that step you can enjoy the satisfaction and sense of accomplishment that comes from engaging in wealth planning, understanding your financial picture and building a secure future for yourself and future generations.

Contact Us

Sign up to receive newsletters from Fischer Stralem Advisors