Investing for Women: Working With a Financial Advisor
Behind the gender investment gap looms a deeper problem: the gender knowledge and confidence gap. Women investors are less likely to have the information they need to make the most of the financial markets. Less understanding may mean being less likely to be financially prepared for an emergency and retirement.¹ For women who invest, enlisting a financial advisor may be a good choice.
Finding a Financial Advisor for Women
One way to close the gender investing gap may be to work with a knowledgeable financial advisor. As a woman, working with a financial advisor provides guidance for setting and planning for goals such as buying a house, sending kids to college and saving for retirement.
The best financial advisors for women will have:
A track record of working with clients with similar goals. When meeting advisors, ask about their average client. Are those clients working toward similar goals?
Services that enhance your financial plans, such as building your retirement savings or helping you invest for your children’s education savings.
The availability to work with you on your terms. Do you want to meet frequently or communicate through email? As a woman working with a financial advisor, the professional should understand and compliment your communication style.
What Working With a Financial Advisor Looks Like
We asked these three women to tell us how exactly their relationships with financial advisors helped them grow and gain confidence as investors.
Alicia’s Investing Story
Years working with an advisor: 3
Lives in: New York City
Works in: Future consultant (currently completing MBA)
Even as a woman looking for a financial advisor, Alicia knows money can be an awkward subject. That’s why she intentionally chose a first financial advisor with whom she had a couple of things in common: They’re both Black women.
“It's just nice to have someone who looks like you. Maybe there are things you don't have to explain as much,” she said. “The more barriers you can take away in the conversation, the better.”
Although Alicia now works with a different advisor, she continues to enjoy a frank and open advisor/client relationship. That’s good since she has a lot on her financial plate this year.
“I'm breaking all the rules in that I'm doing the big financial moves at one time: I relocated to the city, my fiancé’s buying a house and we're getting married and I'm starting a new job,” Alicia explained.
While she completes her MBA, Alicia and her advisor have been focusing on the spending side of her financial life.
How a Financial Advisor Can Help
When you face big life changes, an advisor can help you prioritize and keep the financial part organized.
“She's been helping me keep my debt in check,” Alicia said. “I'm pretty good with my money, but every once in a while, I might do a big splurge. Knowing you have someone who's going to check in with you in three months and talk about the splurge has really held me accountable.”
Her advisor has also helped Alicia deal with an issue that can be as emotional as it is financial: helping family. Together, they made a plan for Alicia to continue helping her brother as a student loan cosigner—including the important step of when and how to wind down that help.
Soon, Alicia plans to sit down with her advisor to discuss how to handle all the changes coming her way.
“My income is going to be doubling at the same time that all these expenses are going to be coming through,” she noted.
And as her wedding day approaches, Alicia plans to bring her fiancé into the discussion. The couple hasn’t really worked out yet how their financial lives will merge, like how they’ll share living expenses.
After that, Alicia looks forward to working out a plan for investing beyond her retirement account.
Even though she considers herself smart about money, Alicia is glad she’s starting off her financial life with an advisor at her side.
Chris’ Investing Story
Years working with an advisor: 4
Lives in: Chicago
Works in: PR/writing
At 49 and newly divorced, Chris had never completed her own tax return.
“I had no idea what my financial picture was, and I was terrified. My advisor was very calming and helped me to get a handle on my finances,” Chris recalled.
During her marriage, she had never been part of managing the family finances. Her husband told her it was “too complicated.”
But once she started working with her own advisor, Chris realized how empowering it could be. She wished she had insisted upon taking part in financial advisor meetings while she was married.
Like Alicia, Chris’ work with her advisor started with spending.
“He asked me to give him a picture of all of my expenses. That request knocked the wind out of me since I hadn't yet created a system to help me track my spending,” Chris said. But it also taught her how to budget.
Then the advisor gave her a simple spreadsheet for logging all aspects of her personal financial life. Chris took the spreadsheet and ran with it.
“His spreadsheet inspired me to create something more detailed, and I update it regularly,” she explained.
As Chris began building her own business, her advisor helped her grasp the importance of setting aside reserves.
Understanding Your Financial Needs
“Now, come tax time, I don't have any surprises. And I can sleep at night knowing I'm prepared for an emergency,” she said.
Chris is now working with her advisor to plan for retirement, an especially important move for self-employed folks like her.
She hopes other women get to learn that they have the right to be fully engaged in their financial lives, whether single or part of a couple. She’ll never again let anyone tell her financial planning is “too complicated” for her to understand.
Years working with an advisor: 14
Lives in: San Francisco Bay Area
Works in: Mental health counseling
MacKenzie’s certified financial planner began handling her money for her when she was just 11 years old. That’s because he also happened to be her stepfather.
When she entered the working world, MacKenzie gradually became an active participant in managing her money.
“A lot of our early work was him explaining what different kinds of investments are; what's the difference between a 401(k), an IRA and a Roth IRA, for example,” MacKenzie recalled.
Getting a financial education from her advisor was part of MacKenzie’s goal.
“People want different things out of financial planners,” she explained. “For me, I definitely wanted the skills to do it by myself.”
MacKenzie lived leanly in her first years after completing her education, determined to pay off her student loans as soon as possible. Once that was done, she began saving aggressively.
At some point, her advisor convinced her that there was more to life than simply piling up a “dragon’s hoard” of cash. They discussed things she could spend on that would enhance her career, such as training courses.
“He’s been helpful in understanding how investing changes over the course of the life span,” MacKenzie said. “Now I understand that knowing when I want to retire shapes how much money I should invest where and how much risk I can tolerate.”
Guided by these conversations, MacKenzie realized she was relatively risk tolerant and made steady progress investing toward her eventual retirement.
Planning Your Financial Moves
“Then I started saying, let's talk about other long-term financial investments. I am a millennial; our generation is not in really great shape for things like home ownership,” she said. And MacKenzie knew the Bay Area is one of the most expensive housing markets anywhere.
“But I wanted to talk it through with him, to figure out, if I got enough people together, would we be able to buy something?”
In the shorter term, MacKenzie needed to replace her first car.
MacKenzie’s financial planner asked questions to determine her needs and priorities and used her answers to come up with an appropriate strategy: Cash for the car purchase went into a savings account, so she could access it immediately when her current older car died. Savings for longer-term goals went into less liquid investments.
“Those are questions that I would not have known to ask myself, just because I don't have thousands of hours of experience and training,” MacKenzie said.
She considers herself lucky as a woman who worked with a financial advisor from her early days. If she hadn't, she definitely would hire one now.
Mind the Gap: Women, Men and Investment Knowledge. March 2020. Global Financial Literacy Excellence Center and FINRA Investor Education Foundation.
Private Client Group advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. This service is generally for clients with a minimum $50,000 investment. Call us to determine the level of service that is appropriate for you. The advisory service provides discretionary investment management for a fee. All investing involves risk.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
These investors' experiences may not be representative of experiences of other investors.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.