The Great Wealth Transfer: An Inflection Point for Women Investors

Audio Description

Achieving financial wellness may mean different things to women and men. Learn why from this candid discussion on empowering women investors.


Stacie Jacobsen: Thanks for joining us today on The Pulse by Bernstein, where we bring you insights on the economy, global markets, and all the complexities of wealth management. I'm your host, Stacie Jacobsen.

Women are in control of their own financial futures more than ever before. As wealth creators and financial decision makers, women control roughly one third of the investable assets in the U. S., equating to approximately 10 trillion. And that number is growing quickly. Here to talk to us today about some of the behavioral differences within the decision-making process for male and female investors is Kara Lewis.

Kara is a Senior Managing Director here at Bernstein. Kara, thanks for joining us today.

Kara Lewis: Thanks for having me, Stacie. It's great to be here.

Stacie Jacobsen: Okay. So, Kara, I think we first need to acknowledge that we are both female earners and we are both in control of our family's financial assets. True.

Kara Lewis: That is true.

True at my house. Yes.

Stacie Jacobsen: So, we might come into this conversation with some of our own biases, but also with our own observations and life experiences. What are the most important things that you want women investors to know who may be starting out on their financial journey or through some life transition are now the primary caretaker of their wealth?

Kara Lewis: Sure. I think first and foremost, I would just encourage women to ask questions. No one has this figured out men or women. We don't have everything figured out. Even as a professional in this business, I don't know every single thing about global markets. So, ask questions. Uh, I think when you're thinking about a new advisor or picking advisor for the first time, there are some key elements that you'd want to understand.

Whether the firm is a fiduciary, meaning are they legally responsible for making sure that your best interest is at the core of their advice? Do they have unconflicted research? Is this what they do? If you're uncomfortable with potential conflicts because of other businesses, they do, whether it's investment banking or traditional lending, that might be important to you.

And then, you know, what are the depth of their resources, right? Do they have other things aside from just investing, which is critical, but can they help you with other things like estate planning? philanthropic giving, you know, thinking about your legacy, thinking about what that money really means to you.

I think that those are critical pieces. Are they starting with you at the center? I always say when I'm talking to prospects, if you meet an advisor who just starts right with, this is how we're going to invest your money. I would run, right? Because investing your money really depends on your journey thus far and where your journey is headed.

So, I think those are the keys. But again, asking those questions, feeling empowered to ask questions.

Stacie Jacobsen: And that's such a great point. And with so many different things in life, men and women have a different bias or lens that, that they view these decisions from. So, what are some of the differences that you've observed, you know, based off of a male or a female client and what is it that they're really thinking through when they're making decisions?

Kara Lewis: Yeah, I do think back to that journey piece. I love working with clients because I love hearing about their journey, where they've been and more importantly, where they want to go. Bernstein actually just did a client survey and we found out that women, when they were asked, what is the most important thing your advisor is doing for you?

46 percent of them said, the most important thing is they understand me and men that was not on their top three at all. So just having someone. Uh, having an advisor and then also a team around you, maybe other trusted advisors, legal counsel, tax counsel that understand you is so important because money for women, it's, it's often more, not just a means to an end, but it's, how do I think about giving back to family?

How do I want to prioritize education? What do I want to do for the next generation? What do I want to do for my community? How does how I invest align with my values, whatever those values might be? So, if we're ignoring those kinds of conversations, I think we're really doing a disservice to women.

Stacie Jacobsen: So, we are now at this inflection point where a significantly larger portion of assets are in the control of women.

And I do want to reference a research publication by Peltz International that was then quoted in Forbes. It found that female-led hedge fund managers outperformed their male counterparts during the dot com crash and the global financial crisis. But the reason cited for the outperformance was really good decision-making skills.

Things like considering other people's viewpoints and encouraging others in the firm to speak up. And also, that women tended to have a longer decision making process. Mm hmm. Now, that was all on the, the hedge fund and the portfolio manager side. How do you think about female investors with their own private wealth?

Do you see any distinct behavioral differences?

Kara Lewis: Right. Well, I think just as you said, women want to maybe be more thorough in their decision making and that can absolutely be a positive. I mean, what we've found is when women are going through transitions, Really joyful transitions or maybe really stressful transitions.

The balance is sometimes they either want to fix it right away or just forget it and pretend, you know, ignore it. Well, we would suggest there's a balance, right? Like not making immediate decisions but being really thorough back to asking those questions. So, I do think that what you see from portfolio managers, maybe that buy and hold strategy does translate to women.

The very first portfolio manager I worked for in this business used to say, don't confuse motion with progress, right? Just because you're making changes doesn't mean that's going to better your outcomes. And so, I think that's a great thing for women. One opportunity might be that research does show that women actually have a greater percentage of their portfolio in things like cash and bonds that return less.

And so about 30 percent of women's portfolios are in cash and bonds. For men, it's about 17%. So what does that mean? It might be a good thing, but it also given that women live longer, we may need to have women getting better income returns and investment returns so that they can make sure that they have wealth to sustain their lifetime.

Stacie Jacobsen: That stat does potentially hinder future growth with a larger portion of the assets in a more risk averse investment strategy.

Kara Lewis: Right. Absolutely. I would also say this is, this is more anecdotal, but what we're seeing going forward is the need to provide differentiated source of return. So, investing in things that aren't just stocks and bonds, and sometimes those investments are complex.

It doesn't mean they're riskier, but they're complex. And so, for women who really want to understand everything, that might be a challenge, but we want to be able to educate women on why there's a place in a portfolio for something like real estate or real estate. Things like private credit, private equity.

And so again, I think that goes back to just the importance of women asking questions, us being able to really meet folks, any client right where they are is critical.

Stacie Jacobsen: There's another study that was done that showed that only about a quarter to a third of women are confident in making these investment decisions.

So, to your point right there, that delay or the fact that there may not be the information that We all feel confident in moving forward with stalls some of the future growth.

Kara Lewis: Right. And I think the confidence piece is key, right? I team in nature, not to want to make a decision unless you feel confident.

And so for women who maybe hasn't grown up talking about money, talking about financial wellness. That might feel uncomfortable. And so hopefully you and I, one of the goals for today is just for encouraging women to be more bold. And if you find yourself with someone who doesn't accept that boldness or, you know, embrace it, you might be talking to the wrong, wrong person.

Stacie Jacobsen: Kara, as I had stated, the wealth management industry is in a bit of an inflection point as there is a great wealth transfer, not only from a generational aspect, but also from a gender positioning. And we see that. Younger women are actually significantly more confident in taking control of their financial decisions.

Kara Lewis: Absolutely. I mean, we hopefully are, are normalizing talking about financial wellness. There was a study by BCG that said 70 percent of millennial women are reporting that they are taking the reins in financial decisions. Now, the hope is that they are also feeling confident in taking the reins. For listeners, I would say, if you've got a woman in your life, a young woman, millennial woman, anyone, you know, help them think about talking about wealth.

I've got for my own family, I've got two boys and two girls, and hopefully I've socialized and shared perspectives and just information about the work I do and having them follow the markets as they're interested in it, you know, my boys and my girls equally, because I think that's just so important.

Stacie Jacobsen: All right, Kara, in your work with clients, what do you think are some of the steps that can be taken in order to normalize this conversation about money and make sure that both Men and women are in the financial conversations.

Kara Lewis: Right.

Well, I think that's the first step is getting both partners at the table. I can't tell you how many times I've heard from male clients and my wife just not interested in it. She thinks it's really boring. She's really busy. She, you know, whatever it might be that's taking up her time. And I really try to push back and say, I get it.

She might be bored. But this is important and she's not going to be bored if something happens to you and to try to draw them in, it might not have the same level of interest, but just having both folks at the table is so key. And then when we get both folks at the table and we ask good questions, it's amazing how even, you know, perfectly happily married couple has different views about their money.

Like, what is the money for? What are those different lifestyle goals? Someone might be just really thinking about that second home and the next person might be thinking, we want to take care of the kids. The other partner might say the kids are on their own. And so, getting alignment around that is really critical.

And we have some tools to do that first. I think we're, we're really good at asking questions, but I think having some exercises, whether it be doing some, what we call priorities cards, like literally a deck of cards that has some priorities, whether it's lifestyle, education, community, and having folks rank them.

And then in a really friendly way, sharing how each partner ranked, and it's amazing how it can be very different and that's okay. We can still meld those two goals together and in a portfolio and in a plan, but if you don't have those conversations, I think that that's a mistake.

Stacie Jacobsen: Yeah. And I think so often we just assume that the people that we live with know what our priorities are and might even know what our values are, but guess what?

Unless you speak up and share them, that may be a false assumption.

Kara Lewis: Right. We're so busy. Whatever everyone's busy is that sometimes you don't have those deep conversations. It's not probably the topic on date night. You need a safe space and hopefully your advisor, whoever anyone's working with can create that safe space to have those conversations and then multi-generational, right?

If the matriarch and patriarch maybe hopefully got aligned, what do the kids think? And maybe they've got male, you know, women and men. Children, and they may think differently. I've seen so many times when it just so happens that the sons are involved in the business for whatever reason. And maybe the daughter or daughters aren't well, are they part of the same conversation and how do we make sure they can be part of the same family conversation, even if they're not in the business?

Stacie Jacobsen: So, for those that do have younger kids that are still at home, right, having this conversation around the dinner table about money, I think is a great place to start just to again, normalize that there will be these family discussions about really important things and money doesn't have to be shoved under the rug.

Kara Lewis: Yeah, we do this exercise with families or in midsize groups about it's called money messages. Like what was the message that was passed down from your family? And it shows that the message you got early on in life about money is often carried through some of your behaviors later in life. So, whether it was really taboo to talk about.

Whether it was, you know, just you work hard and the money will come, whatever those messages are, seem to be instilled at a very young age.

Stacie Jacobsen: So again, Kara, when we look at like the difference between men and women, their goals tend to be a little bit different. How do you see that within the investors that you work with?

Kara Lewis: For sure. I think for women, sometimes that benchmark when they're feeling good and confident, it's just. Am I going to satisfy my lifestyle goals? What does that look like? Actually, I was just at a dinner and it was eight women. Some knew each other, some didn't. And we were thinking about our vision, what our legacy looked like.

And so, we at Bernstein actually have these cards. They're beautiful cards of fantastic, they're picture cards. I mean, you might think this is really elementary, but they are picture cards. They're gorgeous. And we had everyone at dinner. Sort through them and identify what three pictures really spoke to them about their legacy and it could be their professional or personal legacy.

We left it really ambiguous and it was fantastic. The women were so intrigued. We actually had one woman follow up and say, can you send me a picture of those three that I picked? I want them on my phone to remind me of where I'm headed. And what my journey looks like. And another person said, can I have a deck of those cards?

I want to use them at a family event with my siblings and my parents. Um, and this is an adult woman saying this about her, you know, slightly older parents and adult siblings. And so I think some of these conversations might feel silly or uncomfortable, but it really works. And finding a safe space, whether it's a, you know, a women's dinner of eight people or a facilitated conversation with an advisor or your team of advisors with your family.

I would just really encourage folks not to lean away from that, but lean in and take the chance because overwhelming majority of the time, it is fantastic. And people walk away feeling really connected to their family members and having a better idea of where they're headed financially, which just creates healthier relationships.

Stacie Jacobsen: So, how can the women at this dinner now connect that exercise with building and developing their goals for their own wealth?

Kara Lewis: Right. Well, I think for these women, that was a foreign exercise to them. They'd never done that. And so I think it sparked things that they wanted to have conversations with their partners about.

The cards had things like, you know, a tropical space or had kids looking at a book or it had a computer, you know, you could read into the pictures, however you wanted to, but just a conversation. Yeah. Feeling more centered about, yeah, that, that is what I want for my family and my wealth, and then being able to use that picture to help describe it.

Maybe it was hard to put words to it, but when you see these visuals, it really helped folks be able to articulate what was important to them and then how that would translate into their investment portfolio. And I think also building a community, right? Having eight women around discussing the same thing, we all got really vulnerable.

I shared as well. And so being vulnerable and like I said a couple of times in a safe space feels pretty good. And then that maybe empowers you to keep having that conversation.

Stacie Jacobsen: Yeah. And that feels like it would be a really great way to articulate what your goals are.

Kara Lewis: Absolutely. Like I said, it might seem silly to look at picture cards to help you think about really serious topics, but it works.

Stacie Jacobsen: So, for those women who are not accustomed or have not started their financial journey, there are certain catalysts in life in which they may take over the management of the assets for the family. Let's talk about that. What are some of those catalysts and the things that we should be thinking through?

Kara Lewis: Well, I think the two not great catalysts are death and divorce, right? Which are reality. The death is a reality for all of us at some point, that divorce is an unfortunate reality, um, for many. So, when those happen, if a woman has not been part of the financial decision making process, it can be really overwhelming.

So not only are they in a middle of a really emotional situation, but then the financial piece is overwhelming also. And that's when you need a team to surround you and finding someone who's well equipped to helping you assemble that team. Stats show that actually, a woman, when they've gone through one of these major transitions, about 70 percent of them change advisors a year after that transition.

So, what does that say? It probably says, you know, maybe they weren't at the table. They didn't feel like their voice was heard. They didn't feel comfortable asking those questions. They're seeking advice. They're seeking someone who can really understand what they've gone through and has worked with women in similar situations, et cetera.

Stacie Jacobsen: And for better or for worse, women tend to outlive their male counterparts. But enough of that, let's move on to the joyful transitions, you know, when somebody might be taking over the management of their assets.

Kara Lewis: Right. Well, I think for women entrepreneurs that have worked really hard building a business, they know their business, whether that's a, you know, consumer products business, a tech business, etc.

That still doesn't mean they've managed their money in a capital markets way, right? So that could be overwhelming. Not only are you potentially giving up your baby, the business selling it to another entity. So that's emotional in and of itself, but then managing your wealth in a very different way.

Again, really experienced women in a certain vertical, certain industry still might not have complete confidence in managing their wealth in a more liquid way and through the capital market. So. Understanding how they should go about how you pick an advisor, how you figure out what the resources are that that advisor can surround you with.

So I would say, yes, that's a very joyful transition, but also stressful or women who are just taking a step back maybe, right? Like they've worked in a profession, they've made it to the top tier of their profession and they want to work part time or cut back their hours, which may be cuts back their income and maybe total income for their family.

How does that look and how does that translate into their overall wealth plan?

Stacie Jacobsen: So, you may find significant success elsewhere in your life, but it doesn't always translate into investment knowledge and it shouldn't, it doesn't need to. So, realize that there is a need for advisors and information and feel free to ask for it.

Kara Lewis: Absolutely. I mean, I had one client, true story, sold a business for about 50 million. It was in the quick service food business. And he said to me, so how am I going to get my money from you? He had no concept of just how it worked, how we would invest this portfolio. And he was so used to just taking money out of the business for his pay.

And so, he wasn't afraid to ask that question. He didn't think it was a silly question. And I'm just betting that women would probably have a more fearful time asking that kind of question, but that's okay. He was uber successful at what he did. He just didn't understand our world.

And so I think, understanding that, yeah, the investment world may seem complex, just like I wouldn't be able to step into the technology space and know all the answers. And I still don't know the, all the answers here either. Don't get me wrong, but have more confidence in this space. Of course.

Stacie Jacobsen: Well, I am so glad that you brought that up because it is not something that we all have the answers to.

So, admitting that is a great place to start. And I'm thinking now about prenuptial agreements as well, right? So that is certainly a time to have an open conversation about money prior to signing a legal document.

Kara Lewis: For sure. I think that's back to like normalizing these conversations. Those are tougher ones.

We think about that when we're working with clients who have children that are then getting married and just trying to make that not so scary or defensive or contentious, right? It is just a part of the way our society is living these days. And we want to have those conversations and healthy conversations today that prevent more stress down the road.

So, I think regardless of the size and magnitude of the wealth, but a prenuptial agreement is, it's really appropriate.

Stacie Jacobsen: All right, Kara, thanks so much for joining us today.

Kara Lewis: Thank you. This was really fun. Hopefully we sparked something in our listeners to say, you know what? I want to be part of that conversation or I should grab my spouse, woman in my network and encourage them to do that because if we can do that, then this podcast was successful.

Stacie Jacobsen: Thanks to everyone for listening. Please tune in to our next episode in two weeks from now. In the meantime, don't forget to like, share, and subscribe to The Pulse by Bernstein, wherever you get your podcasts. I'm your host, Stacie Jacobsen, wishing you a great rest of the week.

Stacie Jacobsen
National Director—Wealth Strategies Group
Kara Lewis
SVP, Senior Managing Director

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