What Money-Smart Women Want

Research shows that women prefer a personalized approach that focuses more on goals than on results.

Leave it to a man with a big case of foot-in-mouth disease to reignite the heated conversation about whether women can handle money as well as men. At a recent forum at the University of Virginia, hedge fund manager Paul Tudor Jones remarked that women traders lose focus after becoming mothers and breastfeeding their babies. A predictable flap ensued, and Jones backpedaled and then apologized.

Go ahead and roll your eyes, chuckle or stamp your foot, depending on your point of view. Arguing that there are differences in innate ability between the sexes always makes for trouble.

Certainly, when it comes to money management, women have plenty to crow about. Consider Sarah Ketterer, chief executive of Causeway Capital Management, who co-manages its International Value fund (symbol CIVVX (opens in new tab)) and has helped guide it to the top 21% of its peer group for the ten-year period that ended June 30. In fact, the fund beat its competition in eight of the past ten calendar years.

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Mars and Venus

Results aside, research shows that men and women do approach money and investing differently. A classic study by behavioral finance academics Terrance Odean and Brad Barber is often cited in gender-and-investing debates. The two examined tens of thousands of brokerage accounts from 1991 to 1997 and found that female investors traded less often than their male counterparts, thereby cutting costs — and boosting average returns by nearly one percentage point per year.

Economics professor Gary Charness, of the University of California at Santa Barbara, assembled data from a host of experiments to conclude that women are more risk-averse than men. Study participants were asked to choose how much of their experimental assets to allocate to a risky investment, with a payout at the end of the experiment based on what they’d earned. Given the choice, women invested less, keeping more for themselves. On average, they parted with just 50% of their laboratory windfall, while men were willing to invest about 70%.

And yet, women also tend to squirrel away more money. The Vanguard Group found that more women than men participated in their retirement plans at work, and women earmarked 8% to 11% more of their paychecks for saving.

All of this is significant because women are now the principal breadwinners in four out of ten families with children younger than age 18, reports Pew Research (63% of such women are single and 37% out-earn their husbands). The financial-services industry is taking notice of gender differences, and so should you.

For women, finding an adviser who speaks their language is key. Presentations that focus on a portfolio’s return, investment style, market capitalization and performance compared with a benchmark tend to resonate with men. But women prefer a more personalized conversation that focuses on goals, says Karin Risi, head of Vanguard’s advice-services unit.

Certified financial planner Eleanor Blayney sees it in her practice. "The husband says, 'How am I doing?' He wants an answer relative to an index, other funds, other clients. But the wife says, 'What does this mean to my lifestyle? To my kid going to college? To our decision to take a vacation? To my retirement plan?'"

For now, the conversation in most financial-services venues is decidedly male-centric, so Vanguard's finding that nearly three-fourths of women surveyed are dissatisfied with the industry isn't surprising. The industry has launched a number of initiatives to tweak communications with clients and recruit more women into the field — which should help everyone in the family play to their strengths.

Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.