But shared decision-making can introduce uncertainty, according to findings from The Generations Project, a recent OppenheimerFunds’ study of financial attitudes and decisions among high-net-worth investors and advisers, based on age, gender and other factors.
A Greater Uncertainty
When asked for their views on diversifying the assets in their investment portfolios, 33% of women with shared decision-making responsibilities were unsure, compared with just 12% of women who have a primary role in making decisions. A similar disparity (32% to 14%) occurred among women asked about their interest in specific types of assets, and about their preference for active versus passive investment strategies.
Such findings suggest that even when couples ostensibly commit to working together, true collaboration doesn’t happen without a concerted effort to make sure both partners take an active role in understanding the key issues. “It really starts with trying to be very purposeful about the process and viewing it not just as a responsibility but as a shared opportunity to really think about finances together,” says Ned Dane, Head of OppenheimerFunds’ Private Client Group.
Understanding Gender Differences
OppenheimerFunds’ research suggests that women favor a balanced approach and place higher importance on the professional qualifications of the financial advisors they work with. Men, meanwhile, may display a greater degree of investing confidence when it comes to taking the risks necessary to achieve long-term growth.
Ideally, women and men can help each other overcome personal investing roadblocks, says Lori Zager, co-founder of 2X Wealth Group, a team at Ingalls & Snyder specializing in serving the financial needs of women. “Women typically underestimate their financial ability” and may become overcautious. “We see women who have kept their money predominantly in cash since 2008,” Zager says. At the same time, men’s overconfidence may lead to undue risks. When men and women have equal financial knowledge, “the woman might say, ‘There's a lot about finance I don't know.’ And the man will act as if he knows.”
Advisors Can Help Lead the Way
Financial advisors are uniquely positioned to help. After all, three-quarters of investors surveyed in The Generations Project said they discuss issues such as their personal finances or tax planning with an advisor.
For example, advisors can educate clients to help ensure comparable knowledge of financial issues the family faces, says Lisa James, co-founder of 2X Wealth Group. “Education has a lot to do with risk tolerance,” she adds. “Experience and knowledge of financial markets makes you more comfortable investing.”
James and Zager use behavioral economics to help couples avoid taking their differences personally. A simple test may reveal common personality traits such as a high or low level of comfort with risk. Seen in this light, spouses are more likely to view their partner’s behavior as a natural human response rather than a personality defect—increasing the likelihood they’ll find common ground, according to James.
Despite the advisor's key role in all of this, OppenheimerFunds’ research found that many advisors continue to focus their attention on their primary client rather than including spouses or other family members.
“Engagement with whole families is about creating common goals, common plans, and helping to facilitate that dialogue,” Dane says. “Advisors play such a critical role in all of this.”
Taking a Horizontal View
When advisors do expand their focus beyond the primary client, often it’s with an eye to helping families prepare for the expected $30 trillion wealth transfer from Baby Boomers to younger generations—the largest such transfer in history.1
Yet the horizontal transfer of wealth to spouses deserves equal attention. Women are 3.5 times more likely than men to outlive their spouses,2 and those who have not taken an equal position in the decision-making may find themselves unprepared for complex financial choices ahead. Thus, an advisory relationship involving solely a primary client poses risks for a surviving spouse, and for the advisor’s practice. Studies show that some 70% of women leave their family’s financial advisor after the death of a spouse.3
“There will probably come a time where that spouse is now the wealth holder,” Dane says. “If you haven't really engaged her, the structures that you put in place previously may or may not be aligned to what she's thinking.”
Changing Times, Changing Attitudes
As the financial power and prominence of women has grown, so too have certainty levels of younger women investors, The Generations Project found. Among Millennial women, for example, just 15% expressed uncertainty about their preference for asset diversification, half the rate of Boomer women.
“Younger couples today are much more partners in their approach to finances,” Dane says. “They have more college debt than previous generations, so they have to work together. And you’re more likely to have a couple comprising two professionals, both in the workforce.” Regardless of such changes, though, true collaboration on family finances will always require more than just lip service, and the role of the advisor will only continue to grow.
Read the full Generations Project report here.
- ^Source: Accenture: The Great Wealth Transfer, 2015.
- ^Source: https://www.barrons.com/articles/widowed-women-highlight-wealth-gap-between-genders-1536096020
- ^Source: https://advisors.vanguard.com/iwe/pdf/FASGPESM.pdf?mod=article_inline
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.