Women Investors Are A Powerful Group

By Sharon M. Green



Although they account for 52% of the U.S. population, for decades women have been largely viewed by Wall Street as a niche group. Recent shifts in women's careers, wealth, education and attitude, however, are changing that dramatically.

In higher education in 2001, for example, women made up 38% of MBA graduates, 46% of medical degrees and more than 50% of freshman law school students. The trend is even more dramatic for undergraduates. In the class of 2000, women college graduates outnumbered men 707,508 to 530,367.



Sea of Change in the Workplace

Take a look around your workplace, and it's no surprise that women have reached new levels in the workforce. What is often surprising is the businesses that women have begun to dominate. Between 1987 and 1999, the five top-growth industries for women-owned businesses were: construction, wholesale trade, transportation/communications, agriculture and manufacturing. And, as of 2002, there were an estimated 6.2 million majority-owned, privately held women-owned firms in the United States, employing 9.2 million people and generating $1.15 trillion in sales.

Of particular interest to Wall Street, professional women are creating wealth. Nearly one million women are earning $100,000 + annually. Twenty-three percent of women out-earn their husbands and head 42% of households with $600,000 or more in assets. In addition to generating wealth, women are investing a good bit of it in the market, representing 48% of stock market investors.



Distinct Financial Needs

The explanation for why men and women have such different financial needs lies in a number of demographic and societal factors:

Fact: Women, on average, live seven years longer than men.

Financial Implication: It stands to reason that if you live longer, your financial resources have to last longer. In addition, 80 to 90% of women will be individually responsible for their finances at some point in their lifetime. In fact, in 2000, 25% of women over the age of 15 had never married, 13% were divorced or separated and 10% were widowed.

Fact: Women continue to lag behind men in some preparations for retirement and tend to be less confident in their preparations and various financial aspects of their retirement. Also, women are less likely to indicate that they are disciplined at saving and willing to take substantial financial risks for substantial gains.

Financial Implication: Twenty-four percent of women say the realization that time was running out to prepare for retirement was the top motivator to start saving. Even though research shows women are living longer than men, they start saving later in life, which leaves fewer years to build up a retirement nest egg.

Fact: The average age of widowhood is 56.

Financial Implication: This can be a shockingly young age to be faced with a single income, not to mention sole financial responsibility for the household. For some women this may be the first time in their lives that they have taken over as "CFO" of the household.

Fact: A woman's average job tenure is 4.8 years. Most company pension plans don't start to vest until you're five years on the job.

Financial Implication: Historically, women have spent more time in and out of the workforce. Not peripatetic by nature, women are often the ones who take time off to care for their children and aging parents. The long-term financial implications can be frightening. Too often women find themselves outliving their money. And, with women earning 76.3 cents for every dollar a man earns, women need to save a higher percentage of their income to fund retirement.



Catering To Women

As women increasingly achieve financial success, their financial responsibilities grow. Historically the financial services industry has viewed an individual's financial needs through the prism of the man of the house. Only recently has the banking, insurance and investment community begun to appreciate that a woman's financial objectives, needs and goals are unique from those of men.

The process of choosing the right relationship can be a daunting and intimidating experience for many women. Here are some of the things to look for in the ideal relationship.

- One-on-one consultation and financial advice. A team leader with depth and breadth of resources and specialties.

- On-going education offerings through an array of educational content including online, local seminars and news you can use.

- Discounts on financial and non-financial products and services.

To service this huge market, many large financial institutions, banks and insurance companies are directly targeting women as clients. These companies may offer access to financial professionals, products and services geared specifically to women's needs. For example:

- Survivor support for clients who face the unexpected death of a spouse or domestic partner. A financial planning counselor will walk through the steps of settling an estate, transferring property and basically coordinate the effort of the family's other trusted advisers: attorney, accountant and financial consultant.

- Discounts and savings on the financial resources such as preferred interest rates on mortgages and student loans, savings on auto and home insurance.

- Financial education and research on current trends and other relevant financial topics.

Women have taken control of the business world; now it's time for them to take control of their finances.



Sharon M. Green is a financial consultant with Smith Barney. She can be reached at 301-664-6563 or sharon.m.green@ smithbarney.com.