Five Things You Need to Know

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00:00 - 00:48

So when it comes to their money, women tend to downplay their abilities and often delegate control, but they're likely to be the primary financial decision maker, whether they like it or not, at some point in their lives. So today we're going to talk about the five things we think women should know to be fully engaged in their financial future. Welcome to Women and Wealth. I'm Beata Kirr, co-head of investment and wealth strategies at Bernstein, and this show aims to educate and inspire women to make the right choices for their wealth. Today I've got Heather George with me, who's the director in our wealth planning group. And we're going to talk about the five things we think women need to know. So, Heather, what do you do every day? Tell me what that title means.

00:48 - 01:30

Sure. So as a director of Bernstein's Wealth Strategies group, it's really my responsibility to help clients and their professionals really explore key financial planning decisions in their life. And there's a lot of key financial planning decisions, right? So many financial decisions over time, whether it's how much to save, when to retire, how much to put into a college fund for your children. The list really goes on and on. Right. There's a constant evolution. And if you found that over your career and doing this and working with clients, how have you found the engagement of women in those discussions? Not as robust as I would have hoped as a woman in the industry. And so I'm really excited that we're launching this series to really help drive additional engagement with women. Fabulous.

01:30 - 01:51

All right. Well, let's get right to it. Why don't we start to talk about these five things? And I think you'll agree with me that it was hard to boil it down to five things. There are so many complexities, and I think that's one of the challenges that financial planning sometimes feels overwhelming and it's easy to procrastinate and put off to the side, but we're going to get right to it. Let's start with the keys.

01:51 - 02:32

So what is the most important thing that we'd advise people to know? Right. So the first category that we think women should focus on is this idea of knowing your numbers and Beata you and I were very intentional about having the word number be plural, right? Because there's not just one number that you need to know. There's many numbers to really have a control over your finances that you need to know. But by far the most important and the largest driver of a financial plan is spending budget. Cash flow. How much do you spend now? How much are you going to need to spend in the future? Yikes. That's the number nobody wants to know. Right? And how often have we seen with clients when we meet with them, whether they actually know they're spending?

02:33 - 02:57

Not as many as you would think. Even. You know, I would say it's quite rare that I get a detailed budget spreadsheet. People usually have a ballpark. A good place to start is, at a minimum, knowing what your take home is. And how much of that do you spend, either on a monthly basis or an annual basis? That's usually a good place to get started, right? And that spending number is literally the critical input to deciding how much you need for retirement, right?

02:57 - 03:38

Absolutely. It's not only what you're spending today, but it's what you're going to need to spend in the future. And importantly, the byproduct of spending is what it's savings. Right. So what's your annual savings number? Right. The difference between the two, what you're making, what you're spending and what you're saving. And in your experience, when it comes to your retirement, how much do people spend relative to their spending while they're working? That's a really good question. I think in the industry there's a lot of rules of thumb that don't necessarily make sense. So I would encourage women and really all clients to not necessarily plan on spending a whole heck of a lot less because once you're retired, you're filling your time with other things that maybe you weren't actually paying for while you were working.

03:38 - 04:00

Travel is a big one that comes to mind traveling with family, planning, family vacations, visiting the grandchildren, etc.. And then also, we know women tend to live longer, right? So the health care costs and the needs for their spending are actually unique because unfortunately, our planning shows that women ultimately need to save more to protect themselves and really have comfort in retirement as a result.

04:01 - 04:36

Absolutely. It's really just a numbers game. At the end of the day, if women are living longer, that means that they have more years for which that they have to provide for their well-being, for those lifestyle expenses and importantly, towards the end of their later years, possibly significant health care costs that might go along with that as well. That's right. So spending is the number one number that everybody should know. And then I can chime in with the number two perhaps, which is just what are your current asset values across all of your financial accounts? What is your net worth? And to have access to that information on a regular basis so you can do a constant check in?

04:36 - 05:19

Right. I think at a minimum, quarterly, semiannually, probably more frequently than annually. And you should be thoughtful about including everything. So maybe it's the rollover IRAs you may have with various investment managers, cash value and any life insurance policy. The value of your 401k if you're still employed, your savings account, your long-term investment accounts. I think together we could probably come up with a few more. But the idea is that you got to look at it all and to put it all on one sheet in one place to really help you assess where you're at is critical. Absolutely. So there's a lot of numbers. But the two most important, I think we'll agree is your spending and what that tells you about how much you need to save for the future as well as your. Current asset values.

05:19 - 05:40

So let's move on to the number two topic, which I would describe as unfortunately expect the unexpected. And I think you'll agree that in all of our years experience working with clients, tough situations do arise and I've certainly see them arise more often than you would like to see. So what are your thoughts on that?

05:40 - 06:07

Yeah, absolutely. I like how we're turning it the unexpected here, but it's really a little bit of those worst case scenarios that we don't like to think about. So protecting against job loss, against sort of key illness in the family, the need to take time off from work to be able to handle family illness or other things that might be going on. And I think there's really two strategies, a sort of a two pronged strategy approach to begin to build that protection for the unexpected.

06:08 - 06:49

One is making sure that you have enough cash in the bank. It seems quite simple, but many clients don't have a sense for how much that should be. And I think if you're a regular earner, meaning that your cash flow and your income is coming in on a regular basis, at a minimum, you should have six months of cash in the bank to cover expenses. Okay. And if you are a freelance employee or your income is not coming in as regularly, you should be talking to your financial professional about how much more you should have in the bank. And it probably is creeping up towards a year of expenses. Okay. And so having cash in reserve is important. What else? What else can women do to protect themselves?

06:49 - 07:12

So the second prong of protection really falls into the insurance space. And when we were talking about the breadth of insurance, there's a lot on the list. It's not just life insurance. I think in the financial world, life insurance is the first thing that comes to mind. And absolutely, we think clients should go through an analysis to determine how much and what type of life insurance they need.

07:12 - 08:02

But as working women, we know short term and long term disability is critically important, especially if women are the breadwinners in their families. And one of the things I found with disability insurance in particular is that people have to take a close look at what their employer benefits are and whether those benefits are gross or not based on their calculation of current salary. And then really think about adding additional long term disability insurance to supplement that. And it's hard to say there's not one right number, but in my experience, the likelihood of that insurance being needed is frankly much higher than the likelihood of the life insurance being needed. So I would argue that long term disability insurance is probably the most important thing to assess in terms of protection. Right. And that really fits into the other key numbers we were talking about, which is budget and then cash reserves.

08:02 - 08:38

Right, Right. So if your budget is large and your cash reserves are low, then your need for long term disability is even more significant. And step one is exploring what's offered through your employer. But to your point, step two is potentially purchasing a separate policy through an insurance professional. Okay. And we know there's many other insurance topics we could cover, but just on the high level, expecting the unexpected. Those are probably the two most important ones. And it's probably important to point out that we don't sell life insurance. You're a Bernstein, so you do have to seek out good guidance, which is linked to one of our other important five things. But we will get there.

08:38 - 09:23

The next one is correlated and around this idea of everybody's focused on spring cleaning and organizing, whether it's the weekly plan or your plan. Right. Tidy up. Right. But getting your financial house in order is just as important as getting your literal physical space in order. Right. So what does it take to do that? I think for women in particular, it can seem overwhelming about where do I even get started? I think this is a basic one, but it goes back to your experience. Beata with women not always being in the room or having a seat at the table when they're meeting with advisors. So step one really is knowing who the advisors are on your account and also where and how to access those accounts.

09:23 - 10:02

Yeah, I mean, let's talk about that a little bit because how often do we see that people delegate, right? Let's say you have a household with two earners and it's just impossible. They're managing their kids schedule, they're managing their work schedules so they delegate to the best use. And so oftentimes we see one of those members of the household, but we never see the other one. And that's okay from a time management perspective. But we just want to make sure that whoever it is, that spouse or that partner is certainly aware of the financial house, even if they can't physically attend those meetings. So know who those advisors are, know where the accounts are and how to access them on a regular basis.

10:02 - 10:24

So I mean, it sounds really basic, but we just see it time and time again. And then of course, if the unexpected happens, that's when the challenges really arise. So exactly right. These are all interrelated and and knowing how and where and who your advisors are is absolutely critical for the next. But it's also just critical for day to day and doing that financial assessment, that regular assessment that we've been mentioning. Yeah.

10:25 - 10:47

And so, you know, certainly not a plug for HBO, but I will mention that they have a great show called Succession. And in watching that show, it's a fabulous reminder of how difficult situations arise and how families are really not well positioned, no matter what their wealth status is. To understand what to happen when their parents become incapacitated or sick. So can you talk about that financial house as well?

10:47 - 11:08

Right. So the reality is, is that as we're all aging and as our parents are aging, there's a number of things that we have to be on top of and that is related to sort of the plan of what's going to happen for caring for your parents, what their desires and wishes are, but more importantly, making sure that you and potentially your spouse and your family also have your own plan in place, right?

11:09 - 11:56

Yeah, I think we're going to have to have you back, Heather, to have an entire podcast around the topic of elder care and how do you broach that conversation. That is such a difficult conversation with your parents, but at a minimum for today, get it on the checklist. Having your financial house in order is not just about your generation, right, but about the generation above you and the generation below you if that applies. Also related to that is just your basic estate planning documents, part of what happens as an elder care plan. But all families, all individuals, all women need basic estate planning documents. And not only do you need to make sure that you have them, you need to understand what they do when they come into play and make sure that they're actually carrying out the wishes that you have for what will happen to to your assets and the wealth that you've accumulated after you pass.

11:56 - 12:35

And speaking of estate plans, how often do you think those should be updated? At a minimum, they should at least be checked in every 3 to 5 years. But more importantly, it's not so much a regular check in schedule. It's when something changes in your life circumstances. In your life circumstance, you have another child. There's a death in the family or the other potential change, especially in today's environment, is what tax law change. Oh, right. Forgot about that big one. So we need to be prepared. That tax law will change as it relates to gift in a state taxes. And that's absolutely a reason to revisit your estate plan.

12:35 - 13:01

Right. And every time there's a change in the estate tax, it seems like it's a permanent change, but it's never really permanent. Right? It's always up for grabs. So you have to stay on top of it. I tell clients that I'm aware that you should be prepared to live through several estate tax and income tax regimes over your lifetime and make sure that you have a plan that's flexible enough to be able to adapt to different environments. Absolutely. And that's that's a good segue into item number four.

13:01 - 13:33

So moving along here, which is knowing your team, not just having your financial house in order, but making sure that you build a team of advisors that is effectively on call for your needs as those needs evolve. Right, Right. We I think we designated as build your Dream team and we use the term dream team intentionally because you want to make sure that these are advisors that resonate with you, that you trust, that you develop a deep relationship with, and that you have the confidence that they're really putting your best interest first.

13:34 - 14:06

This is so important, and I think it's very tricky when we're talking about how women feel about engaging with the financial services industry because you don't want to overgeneralize. But what I can say is based on surveys that have been conducted time and time again, that women have expressed a real challenge with engaging with the industry. Either they feel like they're not being listened to, their advisor isn't taking their needs into account. It's not really about their values and goals, and it's about a lot of numbers and products. And that is not the way it should be.

14:06 - 15:03

Right. And that's why this is so important that especially if only one part of the household is really doing all the meetings, you have to make sure that that advisor team resonates with both sides of the household, Right? Whoever it is that's been delegated to undertake those tasks shouldn't just have the right to choose right. And being willing to speak up and say, I know you've had a relationship with this advisor for a long period of time, but either the approach isn't working for me or the relationship isn't working for me, or have a frank conversation about how to improve it. But being an advocate for yourself with all of the advisors that are at the table and there's a it's not just your financial advisor, right? Absolutely. I mean, you have to have a great accountant that you can trust depending on where you are in your life stage. At a minimum, we've talked about an estate planning attorney. A corporate attorney may be appropriate for you, An employment attorney may be appropriate for you. Right. Who do you call when you have questions about those changes in life circumstances?

15:03 - 15:25

So can't forget about the insurance back to that disability policy. You need a really good insurance professional. Make sure that they really have your best interests at heart and you have to be able to coordinate the team right now. How does that work? It has to be a team, has to be a team that works. Together. If you have professionals that are not willing to coordinate on your behalf as how they're working with you, then it's not the right. This is not a good team.

15:25 - 16:12

Right. And I think the reality is we're not here to say that women prefer to work with women on those teams. But what is so critical is that women's voices are heard. And I think one of the key aspects of finding the right team in this setting is ensuring that the team is doing more listening than talking, right. Really understanding your goals, your needs and your values. There has to be a lot of input before the advisors earn the right to frankly come back and talk. That's always been my perception and I think it's really critical that women feel their voices heard, and I think they also have to learn to speak up and share and open up and actually share the details of their hopes, their desires, their dreams, so that their professionals can actually best help them. Absolutely.

16:12 - 16:42

So moving on to our fifth item, which we have titled Fund Your Favorites, that wealth is really a means to an end and it can feel like a burden and a big item on your to do list. That we need to reverse that mentality and think about it as an opportunity, an amazing asset that's been created. No matter how we got there. You're in a place of wealth to make decisions that can really be empowering and impactful. So talk about your experience with that with women and what does that mean for them?

16:42 - 17:24

Yeah, so we would encourage women and really all clients to think, to really shift their thinking about wealth and begin to think about the meaning behind the wealth and importantly, what the wealth can be used to do. And it's not prescriptive. I think each client has to do that self-assessment as to what's most important to them. So Fund your favorites is first about identifying what your favorites are, What's most important to you? If you have an advisor that has a baseline assumption about what's most important, but you haven't shared that information. Well, there's a disconnect there. So is lifestyle the most important driver of how you're going to utilize the wealth that you've accumulated or the income that you're earning? That's a possibility.

17:24 - 18:16

But there's many other things on the list beyond what are some of the things that you hear people say are really meaningful to them? Well, women in particular, I think, are very focused on enabling a great future for their children and passing on the values that are important to them, to their children, whether it's their education or around their overall values. So children have always been high on the list, right? In my experience, I would also say charity has has had a lot of connectivity for women that have the means to give and that really see an impact from their giving. And again, we're going to have a whole separate podcast dedicated to all the various ways you can enable giving. What are the most efficient, what are the most impactful, what makes sense for people? A lot of tradeoffs, but absolutely, I would say the two. CS Right. Charity and children have tended to be the biggest funding favorites with women that I worked with.

18:16 - 18:38

Absolutely. And I think the other thing that we can add to the list, it's really just planting a seed for I know that's another topic that you're going to cover in a future podcast is really thinking about doing good with your wealth, employing the wealth and the sort of the most meaningful purpose driven way possible. So this idea of impact investing or socially responsible investing really does fall under this category.

18:38 - 19:30

Absolutely. And that's been around for a long time, but has really had enormous momentum in the last couple of years. And you're right, we will dedicate at least one podcast to that topic because it's been a Big Apple. Lucian So we've gotten through the five things. So let me just recap for our listeners. Know your numbers, right? Spending is important. What your assets are and your net worth are important. Expect the unexpected and that unexpected is not always good. Really prepare for the worst. Take stock of your insurance coverage, getting your financial house in order. So know who your advisors are, where those accounts are. We didn't talk about it earlier in the podcast, but potentially using a password manager to make sure you can get into all of those various accounts could be helpful over time as well. You have the right to have a dream team, you have the right to have your voice and values heard and build the team that resonates with you.

19:31 - 20:02

And then last but not least, empower yourself by funding your favorites. Children's charity may be high on the list. Lifestyle may be the highest, right? Just know the choices that you're making and use your wealth as a means to an end. Anything else you want to add? Heather Nope, that's perfect. Summary Beata. If you enjoyed the podcast and haven't subscribed to our show, please go to Apple Podcasts, Google Play, Spotify or wherever you listen to subscribe and rate us. You can also find us on Twitter at Bernstein or find me Beata Kirr on LinkedIn.