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Women in Business Largely Untapped by FAs

If you’re ignoring the women business owner segment of the marketplace, you may be handicapping your own potential.

If you’re ignoring the women business owner segment of the marketplace, you may be handicapping your own potential.

It’s no secret that women are our society’s biggest consumers. So it shouldn’t be too surprising to learn that women are getting active in the investment arena, too, either by choice or by necessity. Many more women are becoming well-paid professionals, like doctors and lawyers, than in previous generations. Indeed, 50 percent of first-year law school students are women, according to the American Bar Association, up from 43 percent in 1991 and 10 percent in 1971.

Also, an escalating divorce rate, a rise in single-parent households and a large number of widowed baby boomers heading for retirement are trends that have forced women to not only be the breadwinner but also become more knowledgeable about investing.

“We’re now seeing the maturity of women in the workplace,” says Linda Erickson, a certified financial planner who runs Carolina Investment Advisory Services, a fee-based RIA firm in Greensboro, N.C., affiliated with Financial Network Investment Corporation. “They have their own money.”

And within that half of the population, the number of women who own businesses has also increased dramatically, to 10.6 million in 2006, according to the National Association of Women Business Owners, representing the fastest-growing segment of the business market.

Given their rise in prominence, these women have become more sophisticated investors, no longer just parking money in CDs and Treasurys but also using money-market funds, mutual funds and real estate investments to save for retirement and build wealth.

More than half of women business owners say they are responsible for saving or investing for retirement in their household, developing and balancing a household budget and paying the bills, according to research published by OppenheimerFunds in May. Nearly 40 percent are solely responsible for buying and selling stocks, bonds and mutual funds for their households, the survey says.

But while they enjoy investing, most women business owners still say they want financial advice. Sixty-five percent of women business owners surveyed concede they need help managing their financial affairs. Oppenheimer used an online survey to poll 155 members of the Women Presidents’ Organization, a nonprofit membership organization that consists of female entrepreneurs whose ventures generate $2 million in gross annual sales or $1 million for service-based business.

“Women business owners are savvy about making financial decisions and are interested in trying new things,” says Lauren Coulston, assistant vice president of advocacy and training at OppenheimerFunds. “However, they are also pressed for time and rely on their financial advisors to help keep them on top of their finances.”

Erickson, who has many female clients, says that women business owners and women professionals are largely untapped segments of the marketplace. Much of the reason is that a lot of advisors don’t know how to communicate with them. “Male advisors must learn to respectfully partner with wealthy females,” Erickson says.

She says that oftentimes women are put off by their advisors because they talk down to them or patronize them. “The older guys—the traditional Merrill broker—don’t get it. Having a gray-haired guy give them a nice drink in a plush office isn’t going to cut it,” she adds. They want information delivered in a way they want to take it, not in a “don’t worry your pretty little head” tone, she says. Advisors should avoid condescending remarks as a rule, but particularly with women.

Erickson talks to her women clients about why they need total return portfolios as opposed to investments that earn interest or spit dividends. As for women business owners, she says they tend to be more pragmatic. As an example, she recalled a male client who invested heavily in a friend’s company because of their relationship. He is now down $50,000 and refuses to take his money out. “I can’t see a woman doing that,” she says.

Perhaps even more intriguing is the fact that an overwhelming majority of these women say they are more willing to take financial risks in the workplace than at home. Eighty-five percent of the respondents said they would take above-average risks expecting above-average returns when it comes to their company finances, and 54 percent said they would do the same for their household finances.

This could open the door for advisors to talk to these women about more than just money funds and mutual funds. While money funds and mutual funds are the most commonly used vehicles, the research bears out that these women are ready to explore other options, like hedge funds, ETFs and managed accounts. And with many of these business owners running the show at home, there is an opportunity for cross selling, whether its college savings, succession planning or retirement.

“Women remain at the forefront of making financial decisions for their business and at home and are seeking different wealth strategies to achieve financial success in both,” says Marsha Firestone, president & founder of the WPO.

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