On Tuesday evening, January 18, at the Cornell Club in New York, Myron Kandel, one of the founders of CNN, moderated a panel on which I sat, along with four other finance professionals. Our thorniest question: “Should women rule the world of investing?” In fact, I took the presumptive approach by walking in and being on the panel. I told my guests that the panel was titled “Why Women Should Rule the (Investment) World”. Because all the data points in that direction.
• For the first time in our nation’s history, in 2010, women controlled the majority of our nation’s wealth. In fact, we control 60%.
• By 2030, 54.9% of all baby boomers will be women.
• We currently represent two-thirds of the workforce.
• Women spent 81 cents of every dollar.
• 80% of women will be responsible for all household financial decisions.
o This confirms a study by Citibank which found that 73% of all full-time working women see themselves as the CFO of their family, rather than seeing themselves as the “Purchasing Manager” of their family.
• 90% of women feel financially insecure.
• 50% fear losing everything and becoming a bag lady (and that includes 48% of all women earning at least $100,000 a year.)
• Only 1 in 5 women read the financial section of a newspaper (compared to 3 in 5 men).
• 42% of women do not know what a mutual is.
Come on Wall Street! Wake up and smell the Starbucks! Women have acquired all of this financial and fiduciary responsibility, but are not getting the information they need to make sound financial decisions! Are they going to go to the big Wall Street firms to get it? (I don’t think so. Wall Street has lost so much credibility and is just digging.) Will they become the masterminds of “Money TV?” (I don’t think so. Most viewers view this as entertainment rather than education.) Will they consult their financial advisor? (I don’t think so. 86% of all financial advisors are men.) And we already know that women don’t read the financial section of a newspaper.
And, frankly, since most financial writers have a background in journalism rather than economics or finance and have never been in fiduciary responsibility for other people’s money, can anyone really believe that he deeply understands what is going on? (NOTE: There are wonderfully gifted, talented, and brilliant financial writers and talking heads out there, but they are rare. The good ones are usually REALLY good; most others aren’t educated enough about finance to communicate its important lessons.)
Wall Street needs to be shaken up and shaken up. Her language needs to be creatively communicated so that every woman gets it. Most women don’t read much financial literature because it’s as dull and dry as sawdust. Finance therefore appears to most women as overwhelming, complicated, confusing and… BORING.
No wonder we’re in trouble.
My panel participation included these talking points, and more:
• The first question you must answer is this: “Do you know what you own and why you own it? As I mentioned that night, I ask this question of every client and potential client. I have never met one who can answer both parts. We’re not talking Monopoly money here. It’s real money. Serious money. You better be able to answer this very simple question about your own money and investments or if someone is sleeping at the switch.
• The female money brain is different from the male money brain. Ask all females who have more than one sex in their offspring. Women:
o Desire to embrace their femininity, which will lead to gendered decisions on how to spend money.
o Desire to take care of their children and family, which will give different risk management measures.
o Are more risk averse. When the combined housing crisis and financial crisis of 2008 effectively wiped out half of investors’ wealth, men tended to look at the world in anger and perceive the world as less risky. Women tended to look at the world with fear and perceived it as more uncertain.
o Are less likely to take “The Big One”.
o Trade less frequently than men. Men trade on average 45% more than women. Single men trade more frequently than married men, who trade more frequently than single women, who trade more frequently than married women.
o Double return when managing hedge funds. The problem is that only 6% of all hedge funds are managed by women.
o Portfolio managers have on average 1.4% higher returns than those led by men.
• Work in personality theory, supported by the varied disciplines of philosophy, psychology, behavioral finance, psychoanalysis, psychometrics and neuroendocrinology, shows that different personality types “see” the money differently. I’m using this research in my upcoming book, What Color is Your Purse? encourage women to finance. My goal is to see women fascinated by money, choose to study it, ignite their imaginations and fuel their inspirations.
o Hippocrates noted personality differences as early as 400 BC.
o Galen named the four personalities.
o Carl Jung developed the trait-type personality.
o John Holland studied the “science of personality”.
o Freud, Kant, Erickson and Myers-Briggs all developed their own version of the personality type test.
o Recent authors who subscribe to the idea that there is a “money personality” have reversed it. There is no monetary personality. We each have a personality, from which we derive how we “view” and deal with money. How we earn it, spend it, save it, invest it, and give it away depends on our personality (not the other way around!)
• The relatively new field of neuroeconomics shows that “animal spirits” challenge or underline efficient market theory. It turns out that: people don’t use logic and reason to make investment decisions; they behave irrationally.
o Investors are more willing to take more risk to avoid losses than they are to realize gains. It turns out that investors essentially become risk takers to avoid losses!
o Investors face the fear of regret when dealing with their own money.
o Investors tend to be too confident in their ability to invest. They tend to confuse luck with skill.
Should women lead the investment world? In many parts of the developing world they certainly are. As Mark Monchek, a guest in the audience, pointed out in the Q&A, almost all microfinance is dedicated to women’s businesses. If money rules the world and the hand that rocks the cradle rules the world, I’d say it’s pretty safe to assume that women certainly do. But we have to pull ourselves together. As a woman, you need to know who you are, where you are, where you want to be, and how money can help you get there. And to do all this, you really have to “earn” money.
January 18, 2011 panelists at the New York City Cornell Club’s Money: More Money Series event: “Should Women Rule the Investment World” included: Nancy Trejos (The Washington Post); Liz Pulliam Weston (called the Internet’s most-read personal finance columnist; Muriel Siebert (the first woman to serve on the New York Stock Exchange and founder of Muriel Siebert & Co., Inc.); Jason Zweig (The Wall Street Journal ) and Carolina Fernandez (VP Investments, Source Capital Group and founder of the “SheEO Network”). Myron Kandel, moderator, is one of the most well-known financial journalists in the country. As one of the founders of CNN, he pioneered financial news on television, and served as the network’s financial editor and economics commentator for 25 years.In 2000, he was named one of the 10 most influential financial journalists of the 20th century.