Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics
We all know the stereotype: the uncertain, docile woman who defers to the man (or men) in her life when it comes to financial matters. Like many stereotypes, it is wildly inaccurate, at least in my experience. As I pointed out in an earlier article, more and more of the high-net-worth women I support in my wealth management practice are accomplished, entrepreneurial and financially savvy. They know money, what they are doing with it, and how to make decisions. When it comes to their finances, they don’t automatically defer to anyone. And that is undoubtedly a very good thing.
But why is it good? Why should women in particular ensure they are involved and engaged in wealth planning for themselves and their families? Or, to look at those questions another way, what are the risks women face in not being involved in financial management and leaving the “big” decisions about wealth planning and investing to their spouses?
Life takes unpredictable turns.
You might be in a stable marital relationship one day and find yourself facing a life of singledom the next. Or your life partner might suffer a catastrophic illness or accident, leaving them unable to perform all the tasks they once did – and leaving you in charge of your family’s finances. Or perhaps you are a shareholder in the family business, and everyone gets along great … until one day they don’t, and the future of the company is in jeopardy.
The risk of unforeseen events upsetting your life is always present. The big ones can often lead to financial distress. These are the Four D’s: Death, Divorce, Disability and shareholder Disagreement.
These are not uncommon occurrences, if you look at the statistics. Death, of course, is a 100% certainty for all of us, but women tend to live longer than men by about four-and-a-half years, according to Statistics Canada in 2020. More than half of marriages end in divorce. Especially in our advanced years, disabling mental or physical conditions become more common; in fact, nearly half of people age 60 and older live with one or more disabilities, according to the United Nations Department of Economic and Social Affairs. And shareholder disagreements – while the least grievous of the Four D’s – nevertheless happen more frequently than most business owners care to recognize.
If or when such events occur, they can thrust women who have not paid much attention to their finances into new and frightening territory. These women may now have to navigate complex legal and financial challenges, deal with advisors they do not really know or trust, or simply be asked to make decisions for which they lack the necessary information. If they are unfamiliar with how decisions about their wealth have been made, or if they do not know whom to turn to for trusted advice, a personal hardship can quite quickly become a financial one.
There might not be much you can really do to mitigate the risk of death,
divorce, disability or shareholder disputes. But you can prepare for the worst, simply by taking part in financial decision-making, getting to know your family’s advisors – and ensuring they are following not just your partner’s priorities, but yours as well.
Especially for women, becoming financially literate and involved is one of the best insurance policies against the unknown.
Your perspective is valuable.
Plenty of research has been devoted to understanding the differences between men and women when it comes to wealth and investing, and some of those perceived differences are overblown. However, in my experience advising high-net-worth families, I have found that women do tend to be more risk-averse than men, and they often place greater emphasis on maintaining familial harmony and co-operation when planning for retirement and legacy. These are important priorities, and they can help guide your family and your wealth advisor to make the right decisions for everybody.
At least some of the responsibility for making sure women have their say in wealth planning rests with the wealth advisor. It is vitally important for women to find an advisor who values her needs and priorities as well as those of other family members. The advisor needs to be an active listener, which means being able to ask the right questions and to help family members, including women, reach consensus on financial goals through clear, two-way communication. They also must understand that not everyone has the same approach to wealth management and investing, and that women may have unique concerns and aspirations.
When the voices of women go unheard, the result can be a wealth plan that is simply not as effective or relevant as it should be.
Six ways to get involved.
- Find out what – and who – you don’t know. If your spouse handles the relationships with important advisors (lawyer, tax advisor, wealth advisor), make sure you know who they are and, at the very least, how to reach them. Even better, take some time to get to know them.
- Regularly review your family’s wealth plan and important financial documents with your spouse, and ensure you know where to find them if and when you need them.
- Whether you’re married, widowed or single, find a wealth advisor who listens to you and is willing to work to understand your needs and goals.
- Familiarize yourself with the basics of wealth management – retirement, estate and succession planning, as well as investing. You don’t need to be an expert, but a little knowledge can go a long way.
- Communicate, communicate, communicate. If you are married, talk to your spouse about your desire to be consulted on and involved in financial decisions.
- Be confident. Your opinions and priorities matter. Make sure they are granted a place at the wealth management table.