BY: Mollie J. Seymour
Market President, Birmingham, Argent Trust Company
By 2030, American women are expected to control much of the $30 trillion in financial assets that baby boomers will possess – a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.[1] There are unique challenges in wealth management for women though, and they must be addressed to help ensure there is enough saved for retirement.
Selecting an investment manager
Choosing who to trust with your money and investments is a very important decision, and you want to be sure you make it correctly. According to research by the Spectrem Group in 2020, more than half of investors (55%) want an advisor to build trust as a key to gaining their business. They are also looking for expertise (46%) and education about investing (40%).[2] The bottom line is that investors want to build a relationship with someone they can trust now and in the future. That’s especially true when it comes to wealth management for women.
Many firms and individuals call themselves an investment manager, money manager, wealth advisor or broker, but are they a fiduciary? Moreover, what does it mean to be a fiduciary and what does that mean for you as an investor?
A fiduciary is an individual in whom another has placed the utmost trust and confidence to manage and protect property and money. A fiduciary relationship demands the highest duty of care. As a fiduciary who manages investments, it means acting in the best interest of the client. There are a myriad of investment choices, and it can be overwhelming for an investor to decide what is appropriate, understand the risk and the reward – as well as comprehending the terms, fees and ongoing due diligence and monitoring of each investment.
As a fiduciary who invests for our clients, these are valuable services Argent Trust brings to the table.
Our conversations start and end with you, our client. Understanding your goals (current and future), risk tolerance, cash flow needs and time horizon are important components of any investment discussion. We don’t have a one-size-fits-all approach to building a portfolio because no two client situations are the same. The way we handle wealth management – for women, families and everyone – is customized for your needs. As a fiduciary, we take time to understand your situation, so you know we are acting in your best interest.
Common wealth management challenges facing women
When addressing the unique wealth management needs of women, there are several items to consider that affect how much money should be saved for retirement. For example, it’s important to factor in that a woman’s life expectancy is longer than a man’s. In 1960, the average 65-year-old could expect to live another 14.3 years. That number has grown though. By 2060, the U.S. Census Bureau projects that the average 65-year-old man will expect to live 21.7 more years, while 65-year-old women are projected to live 24.4 more years.[3]
Women also take off more time from work to raise children and care for aging parents, which has been especially true during the coronavirus pandemic. In a November 2020 report, the Census Bureau noted, “In the United States, around one in five (19.6%) of working-age adults said the reason they were not working was because COVID-19 disrupted their childcare arrangements. Of those not working, women ages 25-44 are almost three times as likely as men to not be working due to childcare demands. About one in three (32.1%) of these women are not working because of childcare, compared to 12.1% of men in the same age group.”[4]
Additionally, the Census Bureau reports that women currently earn 81% of men’s income, a gap that continues to persist.
Wealth management plans must also be flexible. Tax laws change and economic events happen that will impact investment decisions. Any adjustments must be reviewed to make sure the investment choices continue to be appropriate for the client and are handled with a fiduciary standard of care.
It is also important to be aware of another standard that is used in the wealth management industry: suitability. If a financial professional is being held to a suitability standard (which is different than fiduciary), a recommendation made by that advisor should be suitable based on the client’s personal situation. But here is the catch: The investment does not require the advice to be in the client’s best interest.
One might ask, “If the investment is not in the best interest of the client, then whose best interest is it in?” Here is some helpful information that explains the differences between a fiduciary and a non-fiduciary:
• Non-fiduciaries may be compensated by commission. This structure opens the door to conflict of interests between the advisor and the client as priorities are not aligned.
• Fiduciaries are fee only. Fiduciaries are not compensated by what investment, product, or fund they choose for the client. A fiduciary does not earn a commission or trading fees but rather a fee based on assets under management or an hourly rate in some circumstances. This structure aligns the priorities of the clients and the fiduciary.
The cost and fees associated with working with a financial advisor can sometimes be confusing. Make sure you work with an advisor who clearly outlines the fees, how and when they are charged, and the services you are receiving for that fee.
Most women are likely to be solely responsible for financial decision-making at some point in their lives. Women need to find the right advisor who can help them protect, manage and grow their wealth in an environment that is unbiased and conflict free – so they can spend less time worrying about money and more time with their loved ones.
If you could benefit from financial planning or simply need advice on fiduciary-based wealth management strategies for women, please contact me or any one of our professionals at 800.375.4646. We are ready to help.
[1] McKinsey Price Metrix, 2019. Price Metrix is an integrated data and business intelligence platform for the wealth management industry. This analysis includes US industry surveyed households with $100,000 to $10 million in personal investable assets.
[2] Spectrem Group 2020: Capturing the Wealthy Advisor.
[3] U.S. Census Bureau, February 2020: Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060.
[4] U.S. Census Bureau, August 2020: Parents Juggle Work and Childcare During Pandemic.
