A recent study by Genworth Financial found that while many Americans believe that there is a correlation between financial literacy and retirement readiness, less than half actively seek out the knowledge they need to make informed decisions. What’s standing in their way?
The complexity of financial products, uncertainty about how to even get started, and an apparent lack of time.
The gender split on this issue was even more striking. Only 34 percent of women said they would be willing to try to deepen their understanding of financial matters because of the complexity of the products. By comparison, 61 percent of men said they were willing to put in some effort.
At the core of these statistics is a very basic emotion: Fear. Fear of the unknown. Fear of appearing ignorant. Fear of making a mistake. Fear of taking the wrong step and losing hard-earned savings.
My more than 25 years in financial management have taught me that it is the emotions that often stand in the way of an individual’s path to financial security and wealth. If we as an industry are to help individuals overcome these emotions and redirect their energy toward a healthy financial future, then we need to rethink our approach to financial education.
Education is part of financial management. That is a point that often gets lost in the conversations about asset allocation, retirement savings programs, and estate plans. In order to help clients, it is the job of a financial advisor not only to learn about and advise her clients on their investments and goals, but also to learn about each client’s hopes and dreams.
Usually these hopes and dreams are related to family. It is important for an advisor to know if a client has children and how the family communicates. This is particularly important as financial education should often be designed with all major household decision makers in mind. Are there elderly parents that need support, either financially or emotionally (because the latter can wreak havoc on the former)? What risks, ranging from death and disability to changing jobs, is the client concerned about?
When I meet with a client, most of my discussions are not about investment topics. I’m a mother of four, a business owner, and a former first grade teacher. I also take care of my elderly father, and I understand first-hand the challenge of juggling all of these responsibilities and identities. When I work with someone, I know that I’m not just working with one person, I’m working with the whole family. I need to understand their pressure points so that I can walk them through the steps to creating cushions to relieve that stress.
And what about the complexity of the products cited in the Genworth study? If we take the patient approach and are willing to explain, often repeatedly, how something works, and then give our clients time to digest and practice the skills, they will learn. More importantly, they will feel empowered about the decisions they make. It is that empowerment that allows our clients to shift from a path of financial insecurity and fear to one of wealth. I tell my clients that my ultimate goal is for them to not need me to manage their money, because if I am not here, they could be knowledgeable enough to manage their investments themselves. Having educated and knowledgeable clients makes for a better relationship all around.
Financial education is not a gender issue. The different learning styles and concerns of each client, whether man or woman, requires financial advisors to meet their clients where they currently are. This generally means getting rid of the financial jargon and simplifying the discussion. As an industry we need to raise the financial literacy of both men and women. If, however, we are to close the gender gap in financial education and overcome women’s hesitation to participate, then we must create learning environments that encourage women clients to ask questions in a safe, non-judgmental surrounding.
I have often said that women clients can be the toughest to get, but the best to have. They want to understand, and they invest more time and energy in really digging deeply into every topic put in front of them. Once they trust you, you cannot have a stronger advocate. Women clients who are engaged are great ambassadors. Empower them and, on their own, they will close the financial literacy gap.
Written by Susan McGlory Michel
Michel is the founder and CEO of Glen Eagle Advisors LLC, an independent, full service investment firm with more than $350 million in client assets, headquartered in Princeton. She’s been advising clients for more than 25 years.
As a certified Woman Business Enterprise, Michel is passionate about helping other women succeed as financial advisors and in working with other woman business owners. She is an active volunteer and member of many professional and community organizations, including the Women’s’ President Organization (WPO), Entrepreneurs’ Organization (EO), Princeton Regional Chamber of Commerce, New Jersey Association of Women Business Owners (NJAWO), and more.
She is dedicated to improving educational opportunities for all students, with a particular emphasis on ensuring that financial topics are being incorporated into education curriculum and that young women are being encouraged. She was recently recognized with a 2014 Enterprising Women of the Year Award, a distinction that reflects her volunteer efforts and business success.
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