On International Women’s Day

The CFA Institute launched an awareness campaign targeting high net worth investors in North America this week. I am optimistic it will raise the profile of the CFA(R) Charter among potential clients. You can view it on the campaign’s website: The Right Question.

Today is International Women’s Day, and CFA Institute asked me to contribute to the conversation and the brand campaign with an article. Here is the full text, which includes some of the passages from my NYT op-ed.

The Future of Finance is Female

On an International Women’s Day sometime in the not too distant future, a financial world dominated by male investors and advisors could be a thing of the past. It is a day that cannot come soon enough.

Women control 40 percent of global wealth according to the Credit Suisse Research Institute’s 2018 Global Wealth Report, a statistic that was unimaginable years ago. That share is expected to grow as high as two-thirds of global wealth in the next decade. Whether through work, business ownership, divorce, or inheritance, women find themselves in control of the highest percentage of financial assets than at any time in recorded history.

To whom will these wealthy women entrust their finances? Most women would not choose the same financial advisor as their spouse. A staggering 70% of widows in the United States change financial advisors, and evidence points to even higher rates of divorced women who make a change. While survey data of high net worth women finds that most have no gender preference, among those who do, there is a strong preference for a female advisor. Yet, less than 20 percent of financial advisors are women, a number that has barely budged for the past two decades despite rising gender equity in other fields.

The reasons for the dearth of female advisors may start as early as middle school. A Microsoft survey found that girls lose interest in STEM (science, technology, engineering, and math) school subjects between the ages of 12 and 15. Reasons cited for the drop are peer pressure – girls are not rewarded socially for pursuing math – and STEM teachers interact less with female students than with boys.

Those divides have a way of calcifying. CFA Institute surveyed its members in 2016 and found 83 percent of women and 80 percent of men chose their career before 25. Only 18 percent of its members are women, a number the organization hopes to increase in due course.

This should be concerning for anyone focused on gender equity, but also for those focused on returns: study after study shows women may be better investors than men.

In one of my favorite papers, “Boys Will Be Boys,” published in The Quarterly Journal of Economics, Terrance Odean at UC Berkeley and Brad Barber at UC Davis found that accounts owned by women outperformed those of men because women traded a whopping 69 percent less than men and incurred less trading costs. Why did the men trade more? The research indicates men regularly exhibit overconfidence in their ability. A more recent study by the Warwick Business School concluded women outperformed men at investing by 1.8 percent.

Clare Francis, an executive at Barclays Smart Investor, agreed with the researchers, who attributed the difference in performance to women’s judiciousness. “The stock market is often portrayed as a high energy, risky environment,” she said. “But this analysis shows that taking a more long-term view about what to invest in, rather than picking eye-catching and potentially more volatile shares, is actually likely to provide a better return on your money.”

Women investors are more likely than men to focus on a family’s financial goals over their own absolute investment performance. Women are overwhelmingly in favor of aligning their social values with their investments, an important concept for shaping the future of capital markets, economic growth, and sustainability.

All told, what has an overwhelmingly male financial workforce accomplished? International Monetary Fund Chairman Christine Lagarde was one of many world leaders to remark that the 2008 crisis might have never happened if there were more women in high ranking positions in global finance. Instead, all told, $19.2 trillion of household wealth was lost in America alone.

Considering it all, to me the future of finance should be female. It wouldn’t just be more fair. If the years of data are any indication, it’s a future in which all of us would make more money.


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