Women, Investing & Retirement, Part 1 Transcript 6/28/2013 #1001

June 28, 2013

CONSUELO MACK:  This week on WealthTrack, the right path to a secure retirement. Why women’s financial needs and priorities call for a different route than men’s. Two knowledgeable financial advisors, GenSpring’s Jewelle Bickford and Morgan Stanley’s Ami Forte, show us the way next on Consuelo Mack WealthTrack.

 

Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. This week we are starting a series on women and investing. Why is this such a critical topic? Because increasingly women are where the wealth is and, unfortunately, most women aren’t taking ownership of their financial power. Remember the last season of Downton Abbey when Lord Grantham lost Lady Grantham’s inheritance, which had kept the estate and family going? We don’t want this to happen to you!

All kidding aside, women need more financial security than men because they live longer. The average life expectancy for women is 80 years in the U.S., five years longer than men. More than half of women live alone- widows for an average of 14 years- and women tend to have different financial priorities than men.

 

First the facts: globally, 27% of high net worth individuals, with investable assets of one million dollars or more are women. In North America women make up 37% of the wealthy. In the U.S. women control an estimated $8 trillion in assets and that is expected to triple to $22 trillion by the end of this decade. Yet women lag behind men in nearly every category of retirement planning. According to a recent survey by Ameriprise Financial, only 44% of women say they have contributed to a workplace retirement plan, compared to 51% of men. 42% set aside funds in their own investments vs. 52% of men and only one in five have determined the amount of income they’ll need in retirement compared to 28% of males. We want to help change this risky behavior and help women achieve financial security for a lifetime. A goal shared by this week’s WealthTrack guests.

 

Jewelle Bickford is senior strategist at GenSpring family offices where she advises wealthy families about their investments, charitable and estate plans and goals. She also chairs GenSpring’s “Women & Wealth Initiative” and is involved in numerous charities supporting women’s well-being globally, including Women For Women International.  Ami Forte is the founder of The Forte Group, which is part of Morgan Stanley’s network of financial advisors. She is a Managing Director of Morgan Stanley itself. For several years she has been named one of Barron’s magazine’s “Top 100 Financial Advisers” and for two years in a row she has been chosen as number one on its list of “Top 100 Women Financial Advisors.”

 

It turns out many women are extremely dissatisfied with the financial advice they receive. According to InvestmentNews, a leading trade publication for investment advisors, 70% of widows change advisors within one year of their husband’s death.  What’s the problem? I began the interview by asking Bickford and Forte why the traditional wealth management approach doesn’t work for women.

 

JEWELLE BICKFORD: The research shows that women are, in general, dissatisfied with their financial advisors. And GenSpring has had a history for the last 12 years of having an annual women’s conference. And the women themselves said they wanted to learn more, that they needed more knowledge. And I realize that if you give women the knowledge they’ll turn it into personal wisdom for themselves.

 

CONSUELO MACK: So Ami, in your business, it used to be, I think you told me, that 80% of your clients were men and 20% were women and now it’s 60% are men and 40% are women and the number of women are growing?

 

AMI FORTE:  Yes.

CONSUELO MACK: So, how are their needs different? When women come to you versus a male client, how are their needs different?

 

AMI FORTE: First of all I think it’s very interesting, women really do their homework before they come to you, so they’ve read a lot of background and so that, I think that’s an interesting distinction. Women are dealing with a lot of issues that men aren’t dealing with.  I think the second family, multigenerational dynamic is very much on their mind. They like to work with another woman because they feel we, perhaps will empathize with some of these situations that they’re going through. Also, I know you know the numbers on, the number of growing women in business. We have some pretty prominent CEOs now. We have members that at Augusta now. So women are growing in their positions of authority and so I think they’re reaching out to other women that can really empathize with some of the issues they deal with.

 

CONSUELO MACK: So Jewelle, what are women’s top financial priorities?

 

JEWELLE BICKFORD: The females think of money as a way to maintain their lifestyle and financial and emotional security. The guys often think of it as a score card, not always, generalizations are hard, but often it’s a score card. And you know, the first question they’ll ask in their monthly meeting or their quarterly meeting is how well has my portfolio done? Whereas the women tend to think, will I have enough? I’m fond of saying to the women, you have to match up your values with your spending. I can give you a personal anecdote.  I planned, as you know, very carefully, for retirement in 2009. I didn’t plan for the market crash of 2008. And I lost 13 to 15%of my portfolio. Now, all my friends said to me, “Jewelle, you did a wonderful job.” Well, that doesn’t help you when you’re in a double bind or no longer getting an income, of course, from your salary, and you’re down 15% in your portfolio that has to generate income for you. So I had to match up my spending with my values. I no longer had disposable income the way I did before, and I had to decide, what are my priorities?

 

CONSUELO MACK:  I don’t think one hears that word too many times from guys when they’re talking about their finances, they’re not thinking about their values. So when women come to you, what do you think their top financial priorities are?

 

AMI FORTE:  I would agree their top financial priorities are I’m going to live longer, will I have enough? How can I provide for my children? How can I provide for my grandchildren? How can we weather… currently, people are very concerned about what effect is downturn in the market going to have on their ability to live our lifestyle? And we found it very, very helpful to really quantify these things.

 

CONSUELO MACK:  Jewelle, research shows that women are less confident in making investment decisions and they are also, they tend to be more conservative because they are concerned about their longevity and can they maintain their lifestyle. So how do you build women’s confidence in making the right financial decisions?

 

JEWELLE BICKFORD: Well, the first thing I do is try to reduce the fear and intimidation around finances. So many of my friends say, “I’m not good at math,” and that’s sort of an excuse for them to not dig deeper and educate themselves. And I, if there’s one message I have that I feel passionately about with women, it’s that you have to have ownership if your wealth.  If you don’t, with all of these life’s transitions that Ami mentioned, divorce, widowhood, the fact that we live longer, taking care of elderly parents, if you don’t understand your investments and what your advisor is recommending and the ramifications, you’re going to have some nasty surprises in your life at just the time that you can ill afford it. So I am very high on educating women, and you need to… the women need to find somebody who’s willing to do that for them. And if they’ll do that for themselves, once again, I believe they’ll develop their own personal wisdom. But you have to start by reducing the intimidation around finances. And to me that’s Finance 101.

 

CONSUELO MACK: Because, you know, it… finances are very intimidating, you know, I think to both men and women. It strikes us if they are extremely complex, I mean the markets are going crazy with the loss of confidence in a lot of our financial institutions, so what’s the first step?  Where do I start?

 

JEWELLE BICKFORD: Well, she has to start by understanding her cash flow needs. Remember I said matching up your values with you spending. She has to understand how much cash she needs each year to sustain her lifestyle. And that’s a particular kind of investment that has to be conservative or moderately conservative and fairly liquid. So that’s why we say the lifestyle bucket versus the long-term bucket. Now the long-term bucket is not money that you can lose, but it’s money that can be much more volatile or illiquid over a longer period of time. So first they have to understand liquidity and illiquidity and cash flow needs.  And once they do that, then we can get into various instruments. And women have very good gut reactions. There’s a new book out by a doctor named Dr. Louann Brizendine, and it’s called The Female Brain. And finally, someone has shown there’s scientific research beyond a shadow of a doubt that women have good gut reactions. So if you give them the knowledge and they will take the time, they really will make good decisions. It’s just a matter of learning.

CONSUELO MACK:  So how do you deal with the fact that women are more security conscious, they are more conservative, how do you handle that with them?

 

AMI FORTE:   I think it goes back to really quantifying it. You talk a lot about asset classes, historical performance. I think they need to know very much more about asset classes but also how will they behave in different scenarios because I think there’s an over-reaction. Equities are too volatile, bonds are too safe. Well, perhaps, within what market? And in some markets, I would argue perhaps this one, there may be situations where bonds are more volatile so I think education helps women take positions that they might have been afraid of in the past.

 

JEWELLE BICKFORD: And also the asset-backed bonds were bonds that caused the market crash.  I had a very good friend, after 2008, who said to me said, “Oh, I’m safe, I’m in bonds.” And I said, “You mean you’re in treasuries.” She said, “No, I’m in bonds.” She was very surprised to find out that she had a ten percent allocation in asset-backed bonds.

 

CONSUELO MACK:  You know, women live longer and they need their money to last longer, so talk about some of the strategies that one should think about, at any rate, to make my money last longer?

 

AMI FORTE:  Well, I think the saddest part, Consuelo, is when women start doing this when they’re in their late 60s, because it’s very hard in your late 60s or early 70s, even if you’re going to live another 20 years, all right, to start investing in private equity and some of the instruments that would give you over long term, a great deal of return if you’ve got a good manager, and he or she knows what she’s doing.  So, the first piece of advice I have is start earlier with this diversification because when you come to either of us so much later in life, there are still things you can do, but you may have the illiquidity problem which I mentioned before.

CONSUELO MACK:  I just want you to define your approaches that you tell your clients to consider two buckets.

 

JEWELLE BICKFORD: Our lifestyle bucket is made up of investments that we think are very safe, as safe as you can have in today’s market, and are relatively liquid, depending on the amount of cash you need on an annual basis. Our view is that you can only preserve your wealth through diversification but through rebalancing your portfolio every year. It’s very much like going to the gym. You don’t go to the gym once and have a good figure. You have to go to the gym on a continual basis. It’s the same way with your finances. You’ve got to constantly look at them. So in the lifestyle bucket we tend to have things that are bonds, high grade corporates, munis, high grade munis, money market funds. We definitely have stocks, but they’re not hedge funds usually because you’re tied up for a year or two in hedge funds. They tend to be much more liquid, mutual funds. So it’s something where you can count on the cash flow and you have liquidity. That would be a lifestyle bucket.

 

CONSUELO MACK:  And again, the lifestyle bucket is to support your lifestyle. So that’s income that you need to maintain your lifestyle.

 

JEWELLE BICKFORD: That’s right. If you tell us you need $50,000 a year, $100,000 a year, we expect that lifestyle bucket to generate that year in and year out, whereas your long-term bucket may have a lot of volatility and it may be illiquid. You might have private equity in that one. You may have credits. You may have real estate. You may have other instruments, but you would not depend on those for instant liquidity if you needed the money.

 

CONSUELO MACK:  And what’s the long term bucket for? When would I use that?

 

JEWELLE BICKFORD: Growth, growth and growth.

 

CONSUELO MACK:  Do you have a similar approach? Or what is your approach at The Forte Group?

 

AMI FORTE:  I think there’s a lot of similarity. I think that whether you call it growth and income buckets or cash, income growth, there are a lot of facets any well diversified portfolio would have, but I would agree the goal is always never to touch principle. So you have to find realistic ideas of what the expenditures are going to be and then you need to take a portion of the portfolio and use that. Some very good instruments there, we use MLPs for income as well.

 

CONSUELO MACK:  Master Limited Partnerships.

 

AMI FORTE:  Right. Things that can… and income is not as easy to find right now, so I think you have to really sharpen your pencil and do some homework, but there are some very good MLPs out there. Sometimes, if it’s appropriate and the client understands it, you can get a little bit more on the high yield side of muni. So there are some very good opportunities, again, same thing, you want to produce income and not touch principle, but we all need growth.

 

CONSUELO MACK:  So why not touch principle? We’ve had many conversations on WealthTrack that basically, let’s get real here, that I mean unless you’re saving your money for your children or grandchildren, that in order to support yourself, it’s your money. So why not go into principle?

 

JEWELLE BICKFORD:  I have some friends who say, “I’m not going to leave it to my heirs. I want to spend it and have a good time, I’ve earned it.” So we get our information from our family members and if they do not care about going through their money, and we do all kinds of projections and simulations, then that’s up to them. But if you want to pass something down to your heirs and you want to be more conservative then not touching principle is a good principle, no pun intended.

 

CONSUELO MACK: Ami, what are some of the strategies that work for women to have financial security?

 

AMI FORTE: I think always broadly diversify portfolios. It’s not, doesn’t have a lot of sizzle, but it’s true.

 

CONSUELO MACK: Still? We’ve gone through a financial crisis where basically diversification did not really work that well, you know, during the financial crisis the only assets that went up were treasuries and gold.

 

AMI FORTE:   Managed futures did extremely well.

 

CONSUELO MACK: But, let me just say, the typical definition of a broadly diversified portfolio is among different stock, types of stocks, that didn’t work. So when you talk about broadly diversified, what are you talking about?

 

AMI FORTE:   Well, I think it’s no longer stocks, bonds and cash. I think we have alternative investments, non-correlated investments, we have real estate in the picture. There’s so much more available to the average investor, things that used to be only available to foundations.  So I think when you have a very broadly diversified… I think also, though, I agree with you, you can’t just position a portfolio in its own autopilot. You have to look at what’s going on in the world, take profits, lighten up, be very proactive. Just because you have a well-diversified portfolio doesn’t mean that you’re not going to say we’re very concerned with what’s going on in financials and we feel we need to get ahead of that and lighten up. So I think you were a little more tactical now than perhaps in the past.

 

CONSUELO MACK:  Is there anything different that you would tell a woman about her strategy than you would tell a man?

 

AMI FORTE:  I think you have to be very aware that whatever a woman’s strategy is, it’s going to have to last her most probably longer.

 

CONSUELO MACK:  Which maybe goes to your point about don’t delve into principle, especially if you’re a woman because you have no idea, there’s no guarantee of when you’re going to live or die so…

 

AMI FORTE:  And you don’t know when income-producing securities are going to produce a lot less income, so you need something that’s growing that will be able to produce that down the road.

 

JEWELLE BICKFORD: There’s one thing I would tell a woman that I don’t necessarily discuss with the men in our office.  The one thing you can control is your spending. Women love to shop. And you’d be surprised how many times we all buy things that we really don’t need. And if you’re worried about your lifestyle, really take a look at your spending.

 

CONSUELO MACK:  Women go through a lot of transitions. We have children, we are care takers of both children and aging parents. Divorce, widowhood, the average woman is going to live single the last five or seven years of her life. She is going to be a single person. So how do you get women through, financially, through the different transitions that they are going through?

 

AMI FORTE:   Well, I think the first thing we do is try to take the emotion out of it as much as possible. We always advise, let’s do… when there’s a loss of a husband or a loved one, let’s do the things we need to do, legally take care of titling. But let’s not make any huge decisions right out of the gate that don’t need to be made. Think it through, settle down, don’t act out of emotion, and very often that’s our role, and bad markets or in transition, it’s to take the emotion out of investing and turn it into a very calm, well thought out decision.

 

JEWELLE BICKFORD:  I think that’s an excellent point, Ami, because the charts show that you sell at just the wrong time because your emotion is fear and…

 

CONSUELO MACK:  Both men and women.

 

JEWELLE BICKFORD:  Yes, that’s not a gender specific. So, taking financial advisor who can educate you and help take the fear out of your decisions is worth everything.

 

CONSUELO MACK:  We asked each of our guests on WealthTrack if there’s one investment that everyone should make for a long-term diversified portfolio, I would ask you this in the context of advising women, so what’s the one action we should take, Jewelle Bickford, as a woman?

 

JEWELLE BICKFORD: It’s the one I feel passionately about. You have to own your own portfolio and your own finances if you… you can trust someone, but trust with knowledge.

 

CONSUELO MACK: Explain how you own your own finances?

 

JEWELLE BICKFORD:  I’m telling this to my daughters all the time because being a financial woman, my daughters say, “Mom, just do it for me. I trust you. Please do it for me.” I say to them, “I’m not going to be around forever ladies. You have got to learn this yourself. And I feel passionately about by the time I’m no longer on this earth, I want to make sure that you know what you’re doing and that no one will take advantage of you.  So please spend the time to learn.

 

CONSUELO MACK:  Ami, so what is the One Investment that we should all have in a long-term diversified portfolio, the One Investment that a woman should make whether it be an actual investment or in time or whatever?

 

AMI FORTE:  I have to mimic a little bit what you’re saying because I agree with it very much.

 

JEWELLE BICKFORD:  Then we must be right.

 

AMI FORTE:   We must be right. I think the most important thing for women to do, honestly, is to take charge of their own finances and their own future, educate themselves. I think it’s very, very important to, if you want to know where you’re going in life or in investing, you need to clearly define where you want to go and then you need to own that, you need to have a plan and execute.

 

CONSUELO MACK:  One last question, and that is, how important it is for a woman to go and talk to a financial advisor alone as opposed to with her husband or significant other? Should every woman have a conversation with a financial advisor by herself, Jewelle?

 

JEWELLE BICKFORD:  Well, I think it depends on your relationship with your spouse and it depends on how you share money and whether you have the same goals. I know in my case with my husband, we have these conversations together and we have a very close relationship. We’re very open so it’s not an issue. I have clients who don’t say much when their husband is in the room. So I think it’s one of the reasons that GenSpring, that we’ve developed these small seminars so women who have common interests can get together. Women learn by sharing ideas and learn from each other. So they’re very popular, these seminars. So I don’t… there’s not one answer, at least from my experience, to that question. It’s having a variety of possibilities for your clients.

 

CONSUELO MACK:  Ami?

 

AMI FORTE: I would tend to say, in many cases yes, I think it’s a good idea. I know when I go to women’s conferences, I can go to a conference given by the same organization but there’s a woman’s conference, little more openness, a little more sharing. The experience in life as a woman is just a little bit different. There are subtleties and ways that we think and many ways that it’s been proven that we think differently. And I think sometimes women will open up to you about concerns. They don’t want to be disrespectful to their husband or their spouse, but they have concerns that are sometimes a little hard for them to openly talk about. So I think a one-on-one, and that could be a lunch or an event, that I think will help them open up and help you understand. And if you know them and you understand them and what’s going on in their head, you can advise them in a much better way.

 

JEWELLE BICKFORD: And often women are very concerned about their husbands’

spending. I’ve found that to be an issue. And that, you’re right, would not come up in a…

 

AMI FORTE:   And vice versa.

 

JEWELLE BICKFORD: Vice versa, that’s true too.

 

CONSUELO MACK:  So let’s have the solo interview with your financial planner, no matter what even if you think you don’t have issues. So Jewelle Bickford from GenSpring, it’s so great to have you on WealthTrack, thank you so much for coming, my dear friend, and Ami Forte as well. I’m sure you will become a dear friend from the Forte Group at Morgan Stanley. Really appreciate your giving such valuable advice to women.

 

AMI FORTE: Thanks for having me.

JEWELLE BICKFORD: Thank you.

CONSUELO MACK:   At the conclusion of every WealthTrack we leave you with one suggestion to help you build and protect your wealth over the long term. This week’s Action Point is: Think like a woman! Schedule a visit with your financial advisor to discuss how your portfolio is or can reflect your long-term lifestyle needs and personal values. Most financial advisors tend to be performance-oriented. That’s what their mostly male clients wanted. With women controlling more of the financial assets and depending on them for years longer than men, it’s time to change the conversation to reflect women’s financial needs and priorities as well.

 

Next week we will continue our conversation about women and investing with award-winning retirement and social security expert, Mary Beth Franklin and another top rated financial advisor, Erin Botsford, author of The Big Retirement Risk: Running Out of Money Before You Run Out of Time. If you have missed any of our past Great Investor or Financial Thought Leader guests you can find them on our website wealthtrack.com. In the meantime, Have a happy Fourth of July holiday, a great weekend, and make the week ahead a profitable and a productive one.

 

 

 


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