That “Conventional Wisdom” Isn’t So Wise
It’s that time of year. Spring conference season. And so I’ve spoken at several conferences for traditional financial services companies over the past few weeks.
And as you might imagine, my topic was typically “women and money” or “how to drive gender diversity in the money management industry.” (This last panel was made up of four women, for a conference that was 90% white men, and delivered to a nearly empty room...but I understand the bar was pretty full.)
So I’ve gotten a pretty good read of the “conventional wisdom” in the industry on women and money from the questions asked. They included (along with the gist of the answers):
“How can we get women to invest when they are so risk averse?”
Well, it’s true that women keep more of their money in cash than men do, and this underinvesting can cost us a tidy fortune over our lives.* It’s also true that one possible explanation for this is that women are more “risk averse” than men.
Another explanation is that we don’t invest as much because the industry hasn’t worked as well for us as it has for men, for a whole bunch of reasons.
In fact, at Ellevest, we see no indication whatsoever that women take on less risk than men do. So the better question would be: “What about the industry’s offerings has kept women from investing?”
“How can we justify having clients invest for impact when they must give up financial returns to do so?”
Says who? Where is it written that investing for a positive impact reduces financial returns? That may have been the case some time ago, but impact investing has matured such that it has the potential to earn competitive returns.
“How can we better market to women?”
Wrong question. The better question is “How can we better serve women?”
“Isn’t gender lens investing (ie, investing in women) a bit...um...weird?”
Is it? Because most of us are already investing in a gender — in companies run by one gender, in businesses started by one gender, in loans to one gender. It’s just that that gender is male. Isn’t that a little weird?? Particularly when the research is so clear that diverse companies are healthier companies and women-run startups deliver better returns than those run by men.
“Are women ok with other women managing their money?”
Deep breath. In for the count of four, hold for the count of four, out for the count of four. Ok, I get that 90% of mutual fund managers are men, and closer to 95% of hedge fund managers are men; and so when we think of money managers, we tend to think of men.
But there’s no research that I know of that says that men are better money managers than women; in fact, quite the opposite.
“Do women care that the move to a fiduciary standard for money managers is now dead in the water?”
They should. We all should. Generally, financial services firms can operate under one of two regulatory standards:
Non-fiduciaries, aka broker-dealers, are required to make “suitable” recommendations for clients.
“Suitability” is different from the standard that fiduciaries are held to; fiduciaries must act in your “best interest.”
The fiduciary standard is a higher standard of care; and it’s the standard to which Ellevest operates. Why wouldn’t we all want that?
This article was originally published in Ellevest's newsletter, What The Elle. You can learn more here.
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Sallie Krawcheck’s professional mission is to help women reach their financial and professional goals (or, put more bluntly, to get more money into the hands of women), thus enabling them to live better lives and unleashing a positive ripple effect for our families, our communities and our economy. To that end, Krawcheck is the Chair of the Ellevate Network, a 135K-strong global professional women’s network; she is also the CEO and co-founder of Ellevest, a... Continue Reading
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