Data & Research October 15, 2015

Investing Confidence Gap Between Men and Women Persists

Women have the responsibility of making financial decisions, but not the confidence.
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More women than men say they are solely responsible for making financial decisions for their households—but these decisionmakers express lower levels of financial confidence and optimism than men, according to a new study from Regions Private Wealth Management.

Forty-four percent of women report being the financial decisionmaker for their household, compared with 35% of men. However, men rated their overall confidence in handling finances higher (6.20 on a seven-point confidence scale) than women (5.86). Women under age 50 rated their confidence even lower (5.61). The largest confidence gap between women and men is in the area of investing, in which women respondents showed a confidence level of 4.75 versus 5.42 for men.

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“When people talk about the wealth gap, they are typically referring to the disparity in salary and retirement savings between men and women,” says Anne Copeland, head of Private Wealth Management for Regions Bank. “Our study shows there is also a confidence gap between men and women when it comes to financial matters. As women continue to advance personally and professionally, women’s financial opportunities and responsibilities are actually outpacing their financial confidence and optimism.”

Differences in the ways women and men gain confidence to make significant financial decisions, and where they seek financial advice and guidance, were also revealed. When asked to identify one or more resources and tools that helped them gain confidence in making their last major financial decision, 56% of women identified a financial adviser, and an equal number of men (56%) cited prior education.

NEXT: One gender is likelier to turn to mom and dad for advice.

Notably, 48% of women under age 50 identified their parents as a resource, compared with only 30% of men under 50 who said the same. Women also more frequently identified financial advisers and spouses as resources for making financial decisions. In contrast, men cited financial books, magazines and websites at higher rates than women. “Women are hungry for financial advice and guidance, and are ‘crowd-sourcing’ this information from a wide variety of trusted resources,” Copeland says.

Regardless of gender, respondents clearly indicate the financial advice they would give their younger self would be to start younger and to save more (69%). Women were more likely than men to say they would “seek more advice from professionals” (38% vs. 30%).

Just under two-thirds of respondents rate their confidence in their future financial well-being as a 6 or 7 on a 7-point scale, where 7 is “Very confident.” The mean rating is 5.75. Females (5.62) are slightly less optimistic than males (5.83). And younger females (5.14) and divorced females (5.07) are even less optimistic.

Only one-third of respondents consider themselves financially “wealthy.” Females were less likely than males to think of themselves as wealthy (27% vs. 38%). And younger females were even less likely to say they’re wealthy (9%).

Two-thirds of respondents say a financial planner or adviser assists them in their investment or financial planning. This percentage grows to 72% for females. The next most frequent adviser is “Self” at 65%, and this drops to 54% for females. Married females are twice as likely as married males to seek advice from their spouse (65% vs. 32%). Younger females often look to their parents for advice (46%).

NEXT: ROI trumps the investor’s social values.

Overall, nearly 60% of respondents would not accept a lower return on investment (ROI) just to invest in companies that have social values consistent with their own. Females are more likely than males (47% vs. 38%) to say they would accept a lower ROI from companies with social values that match their own, and this acceptance is even higher for younger females (51%).

In terms of risk tolerance, respondents skew slightly toward being more conservative when making investment decisions for their retirement plans. Nearly half say they are “moderate,” 31% say they are “conservative” or “extremely conservative,” and 21% say they are “aggressive” or “extremely aggressive.” Females tend to be more conservative than males (41% vs. 24%).

The most common activities done by men and women to help improve their future financial security are reviewing a retirement savings plan (71%) and meeting with a financial adviser (61%). Younger females are more likely than others to say they have done nothing in the past year to improve their future financial security (18%).

An online survey was fielded by Regions Bank from June 2 to June 14. The survey targeted an audience of roughly 9,000 private wealth management clients and 18,700 consumer/priority customers with estimated household income producing assets of $2 million or more. A total of 1,157 customers responded for a response rate of 4.2%. The survey was designed in conjunction with faculty at Vanderbilt University. The survey objective was to obtain deeper insights into the perceptions and attitudes of Regions’ customers.

More information about the Regions Women and Wealth study is available on the Regions website on www.regions.com.

The Markets October 15, 2015

Staying the Course Sometimes Means Taking Action

It’s rarely a good move to trade on emotion, but it does make sense to revisit risk tolerance during times of volatility.
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In light of the stock market volatility of the past several months, PLANADVISER asked experts if there isn’t something that participants and sponsors should do to alter their portfolios.

The response was unanimous: participants should not change their portfolios, but many suggested they should revisit their risk tolerance. This will help ensure they are properly diversified, that their allocations have not become overweight and that their holdings are performing as expected. If these are all in check, then they shouldn’t make any changes. The key is to remember that the goal of a retirement plan is long-term investing.

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Even defined benefit plans rarely make changes in times of volatility, says Mike Fischer, institutional investments executive at U.S. Trust in Charlotte, North Carolina. “If a plan sponsor is seeing greater volatility on the downside than they expected, the first thing they have to do is look at their expectations for returns,” Fischer says. “But merely reacting to the air pockets we see in the market is either looking backwards or market timing, neither of which we advocate. They need to look at their funding and benefits policy and then make asset-allocation decisions based on those policies.”

In fact, for institutional investors, volatility presents strategic opportunities, Fischer says. “The S&P 500 was down 6% in August and 2.5% in September. Hopefully, if they are making any changes, they are moving to assets that have not done well. Otherwise, I don’t expect plan sponsors are looking to change their asset-allocation targets based on the two-month span of the S&P 500. We are telling our clients to stay the course unless something has changed at the company to cause it to revisit its funding, benefit or investment policy.

“We have ongoing conversations with our clients to determine if their needs have changed, but we are not going to tell people to get out of equities because of the volatility we have seen in the last two months,” Fischer continues. “We are overweight equities and underweight fixed income, and that hasn’t changed because of what has been going on in the equities markets in the last 60 to 90 days.”

NEXT: How DC participants and sponsors should respond

Whenever markets become volatile, Marie Vanerian, wealth management adviser at Merrill Lynch in Troy, Michigan, asks her plan sponsor clients to think about three things. First is their investment policy statement, which she describes as “the roadmap for their strategy, their investment philosophy and risk.”

“Second is that they have a very disciplined and diversified asset allocation of stocks, bonds, cash and alternatives. The point of diversification is that if one asset class is struggling, another is doing well and this smooths out the peaks and valleys. We approach asset allocation from the standpoint of risk reduction and not just returns. When we do asset-allocation work for institutional clients, we stress test it to see how it could return in bear markets, and then we dial down the risk in accordance with the plan sponsors’ goals,” Vanerian says.

Susan Viston, a client portfolio manager and head of investment services for multi-asset strategies and solutions at Voya Investment Management in New York, agrees that diversification is the key. “We still believe the best way to manage volatility over the long term is diversification of asset classes. And we believe sponsors should increase participant education to remind them that retirement investments have a long-term horizon, as well as underscore the importance of dollar-cost averaging and the challenges of trying to time the market.”

NEXT: Historical data tells the tale

Third, Vanerian shows her clients data on how the market has performed since 1980. In these past 34 years, the market has experienced an average intra-year decline of 14.2%, but 75% of the time, it ends the year higher. “If we were to react to every economic or capital markets event, then we would be changing strategies every day,” she says. “In the middle of an annual correction, you never change your asset allocation. In the calm of day, you need to develop an asset allocation you can live with in good markets and bad markets and only change it when there is a demographic event, such as a defined contribution participant retiring or a defined benefit plan closing the plan.”

Kendrick Wakeman, CEO of FinMason in Boston, agrees with Fischer and Vanerian that investors should have a portfolio aligned with their risk tolerance and not sell out as the market is declining. “The call to action in this marketplace is to check your risk tolerance and make sure your portfolio is in line with your risk tolerance,” Wakeman says. “Many people don’t do this.” He advises participants to check with their retirement plan adviser for risk tolerance tools.

It is also important to ask the adviser whether the holdings in the portfolio are performing as expected, notes Joe Halpern, chief executive officer of Exceed Investments in New York. “The real thing to do during these stressful markets is to see how your strategies are doing. While it’s only been two months of volatility, it’s a nice period of time to look at your strategy and see if it is performing as expected. I think you should be reactive if the performance isn’t what was expected,” Halpern says. “If losses are worse than expected, you might want to dial it down. If they assets are performing better, then maybe you want to make more of an allocation.”

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