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 Pulling Their Own Purse Strings
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Author: Jennifer Openshaw,
Currents I had just finished giving a roomful of women a rundown on the basics of money management. They listened with rapt attention for two hours as I discussed budgeting, credit and debt, banking, investing, taxes, retirement, estate planning, and charitable giving. From the looks on their faces during the presentation—and the questions and requests they had afterward—you would have thought these women had just dropped in from another planet and were eager to learn about this new concept called money. One woman, for instance, came up to me after the seminar and asked, almost desperately, “I have $500,000 that I don’t know what to do with. Can you help?” It wasn’t that the women were ignorant. I was just addressing the subject in a whole new way—a way that was meaningful to them. Instead of focusing on investment strategies and other ways to get rich (topics that seem to appeal more to men), I talked about money in the context of women’s lives—how they can earn it, manage it, save it, invest it, and give it away in accordance with their overall goals and values. (For more on values, see “Fear of Flying Broke”.) This approach was very different from the messages they had been hearing from the financial services industry, which has traditionally focused on acquiring wealth for its own sake or as an endgame to a life of work and investing. Do you remember the ad a few years ago about the truck driver who bought an island with his stock market profits? That ad was popular with men, but aside from its amusement value, women failed to understand its appeal. Who wants to own an island?As I’ve traveled the country talking to hundreds of women, I’ve learned that they tend to appreciate money for what it can do in their lives. The sheer acquisition of wealth is meaningless except as a means to an end. For 76 percent of affluent women, that end is financial independence, according to a 1999 PaineWebber/Gallup survey. For 57 percent, it’s the ability to leave a legacy. Women as a group still are not as affluent as men, but as their goals come into sharper focus they are quickly catching up. Over the last decade, women have made significant strides in accumulating their own wealth. Their next logical steps: to acquire more knowledge about how to deal with this wealth and to take more control of their finances rather than let someone else (a spouse or stockbroker) do it for them. (See “Gender Shift”.) And as they’ve learned more about finance, they’ve become more confident in their ability to make decisions, including decisions about philanthropy. WHAT WOMEN WANT The financial services industry has long debated the issue of gender-specific investments, and most advisers agree that investing principles are the same for both men and women. However, there are a number of differences in the way women approach investing, and these explain the vast proliferation of marketing programs geared toward women over the past few years. The financial services industry finally has gotten the message, as have philanthropic organizations, that talking down to women—or even telling them what to do without explaining why—simply doesn’t work. Women want education, first and foremost. As a group, they are relative newcomers to the investing arena and they want to know everything there is to know before making a decision—sometimes to a fault. Women are often accused of “analysis paralysis” as they keep their money in low-yield savings accounts while they search for the perfect stock or mutual fund. Still, women are holding the financial-services industry to a high standard by demanding education and by giving their business to the firms that do the best job of delivering it. All this is not lost on men as they sit in the back of women’s investing seminars and learn things they may be too embarrassed to ask their own brokers. Women also insist that the investing process relate to them personally or—to put it more accurately—to themselves and their families, communities, and causes. Women are proponents of socially responsible investing: They account for about 48 percent of mutual fund shareholders but about 60 percent of socially conscious investors, according to the Social Investment Forum, a nonprofit organization that promotes socially responsible investing. And according to a 1999 Yankelovich Partners study commissioned by the Calvert Group, a socially responsible fund family, 80 percent of women agreed that a smart long-term investment strategy requires an individual to take a company’s business practices into consideration. Women invest with their conscience not because it’s the right thing to do, but because it makes sense in the long run. To women, a company that treats its employees well, looks out for the environment, and makes products for the greater good can’t help but succeed—hence it should be a better investment than a company that has a negative impact on society. There’s no either/or decision here. Companies that do good should also do well, they reason. WOMEN'S PHILANTHROPY If women are changing the financial landscape by earning more money and insisting that the marketers of financial services satisfy their thirst for education and socially responsible investing, the world of philanthropy should take heed. Women have always seen the value of community service and helping those in need, but in the past their contributions have been in the form of volunteering or relatively small donations. Now, however, as women acquire more assets and gain more clout, they are likely to have a huge impact on philanthropy over the next several decades. Unlike the industrialists at the turn of the century, women are not interested in building bridges, hospital wings, or campus libraries named after them; ego gratification doesn’t interest them. Instead, they strive to help succeeding generations become smarter, healthier, happier, and generally better off. According to the Women’s Philanthropy Institute, an educational foundation based in Rochester, Michigan, women like to have direct involvement in the causes they support. Not content simply to write a check and take the tax deduction, women want continual updates on how their money is being spent, and they often volunteer for the same organizations they give money to. They usually prefer to be part of a larger campaign rather than make isolated bequests, and they are not as responsive as men are to fund-raising tactics that pressure contributors to match others’ gifts, according to the institute. As senior marketing officer for Cisco Systems, a San Jose, California-based network equipment manufacturer, Catherine Muther helped propel the company’s meteoric rise in the early 1990s. She left the company in 1994 and made a commitment to social equity. As Muther explains it, she decided to “bring what I learned from building new companies in new industries to creating an entrepreneurial foundation focused on change.” With an initial investment of $2 million of her personal capital, she established the Three Guineas Fund (www.3gf.org) as a public nonprofit organization and grant-making foundation. Muther named the foundation after Virginia Woolf’s 1938 book, Three Guineas, in which Woolf responds to three requests for a guinea (a British gold coin): one for building a women’s college, one for promoting women’s employment, and one to prevent war and protect intellectual liberty. The Three Guineas Fund’s mission is to promote social justice by helping women and girls earn independent livings, participate fully in the economy, and give back to their communities. The organization has funded a computer technologies training facility for immigrant women in the Mission District of San Francisco, an entrepreneurial program for middle-school girls in Chicago, and a revolving loan fund for low-income women in Nepal. TRADITIONAL ESTATE PLANNING Muther exemplifies today’s new female philanthropists: Having achieved financial success early in life, they choose to deploy their wealth immediately so they can both influence issues and causes and see the results of their philanthropy while they are still alive. This approach is in contrast to traditional estate planning strategies designed primarily to keep wealth in a family and to make charitable bequests to minimize taxes rather than to satisfy deep personal objectives. Still, it’s important for development officers to keep in mind that financial independence and security rank higher on women’s lists of financial objectives than leaving a legacy to society. As much as women want to contribute to causes, they must take care of themselves before they can take care of others. Gifting strategies that enable older women to live out their days in comfort, after which all or most of their remaining estate would go to charitable causes, are still valid even in the face of changing ideas about philanthropy. Clearly, women and their families must take age and financial status into consideration as they decide when and how much to give. Since the 1970s, women have been entering the workforce in significantly growing numbers. Many are investing and building assets that eventually will find their way back into society and have far-reaching influence on future generations. I never heard back from the seminar attendee who asked me what to do with her $500,000. I hope she took my advice and sat down with a financial adviser who not only looked at the size of her bank balance but also considered another kind of balance—the kind women strive so hard to achieve as they seek to manage their own lives while bettering the world around them. Jennifer Openshaw is the founder of the Women’s Financial Network (www.wfn.com) and the author of the best-selling book What’s Your Net Worth? Contact her by going to www.jennifero.com.
Fear of Flying Broke The fallout from divorce and widowhood is motivating women to learn more about the dynamics of their wealth, says a top investment counselor Investing seminars geared primarily toward women have become increasingly popular as women take charge of their financial future. In just the past two years, more than 300,000 women have attended such seminars in 1,500 cities. A former senior vice president of the international investment firm Morgan Stanley, David Bach has led more than 200 seminars in his “Smart Women Finish Rich” series. Based on his national best-selling book of the same name, the seminars are aimed at helping women learn more about managing and investing their money. Recently, Bach invited men into the fold. He now is conducting seminars for couples based on his follow-up best seller, Smart Couples Finish Rich. CURRENTS Senior Editor Scott Lajoie spoke with Bach about his view of the changing landscape of women and wealth. What has prompted women to take greater charge of their finances? It depends on their age. Some women in their 20s and 30s have seen their mothers go through a divorce and get wiped out financially. Their first thought is they don’t want to go through what mom did. I grew up in this nice community [in Northern California]. We were all children of what we thought were happy families, but when we went away to college, many couples started getting divorced. After divorce, women’s incomes actually drop and men’s go up. So all these newly divorced women couldn’t afford to live in the community [where they had been for years] and had to get apartments. But not all women are motivated by fear, are they? No. More women are also going to college and grad school, developing a career rather than getting married right away. It’s a demographic shift. And women as a group are earning more than ever. In 2000, women in the United States earned more than a trillion dollars. They control more than 80 percent of all purchasing decisions and increasingly are managing the family investments. And older women? Some are the victims of divorce, forced to take crash courses in financial security because they simply didn’t know where their assets were in the marriage or precisely how much they amounted to. When you don’t know how big the pie is, you don’t know what half is. Some women in their 50s and 60s are dealing with the deaths of parents and husbands. Any way you cut it, the largest bulk of inheritance assets eventually will end up in the hands of women in the next 10 years. Trillions of dollars will shift from one segment to another. How are they preparing for the shift? They are proactively taking classes and reading books. Ten years ago there were only a handful of books on the subject of women and investing. Now there are literally hundreds.Women don’t want to be sold anything. Men, who dominate the financial services industry, have it all backwards. They approach women with a lineup of products and services. The first thing women want is education. Once they get some basic education, then they want specific coaching and professional advice. How do they respond to this coaching and advice? Based on my experience, women make significantly better clients than men. They do their research first and are less emotional than men. They are also more disciplined, patient, and committed to the long term. They get along with their financial planner better because they see the relationship more like a team approach to investing. Men treasure their stock tips and boast about them to their adviser. Women’s approaches to investing are based on value; men’s are based on ego. In your book, you define a “values ladder” for women. Explain the premise. I always say “Values first; money second.” Many people manage their lives based on goals, relationships, commitments, and other stuff. Women, I have learned, are a lot more in tune with their values. Men lag behind in that department, but as I talk with greater numbers of men, I have discovered that they are becoming increasingly concerned with how they manage their lives in accordance with basic values. The recent tragedies and economic situation have influenced this even more. But it shouldn’t take a horrific experience to make you focus on your values. Where does charitable giving fall on the values ladder? For some people, giving back to the community is very high on the values ladder. For others, although the value of giving back is very high, they never get beyond addressing the value of financial security. How can they? Well, I advise that people set time aside every day to address all of their values—even if it is just a small amount of time. For instance, if they set charity as a value, the best way to disassociate it from spending is to make it part of an income stream through payroll giving opportunities and automatic tithing. This approach separates giving from spending. In many cases, a woman is one half of a married couple. How do couples dole out their wealth? The couple that plans together stays together. More couples are figuring out which charities are near and dear to each other. Some are important to both. I come across this situation as a financial adviser. So I ask honest questions: “Will you both be involved in the decision?” and “Should I call on a particular one of you when it comes to a particular issue?” I can’t tell you how many male CEOs say to me, “Just call my wife.” Is there ever any confusion? Typically in a relationship, especially an enduring one, the dynamics have long been established. It is not a concern. When women feel more financially stable, are they more apt to donate to charity? I usually tell women that once they feel secure about their financial situation, they can donate 2 percent to 3 percent of their income—or perhaps more if they are comfortable—to charity. The New Tithing Group in San Francisco has suggested that individuals think of giving to charity in terms of a percentage of their assets, not a percentage of their income. I just read about that. But I still encourage giving a percentage of income. From your perspective, what should education fund raisers focus on when courting potential women donors? First of all, one should have a high level of respect for the potential donor. In financial services, we likewise have to have that high level of respect for the investor. Don’t assume anything. Understand that when dealing with a couple, decisions might take a little longer as they consult one another. And when a decision is made, make both of them feel like they are being understood. By giving to charity, women are saying that they are coming from a place of abundance, a place of financial security. The future of philanthropy in the United States rests on that attitude.
Gender Shift Women are experiencing an influx of wealth and making more financial decisions According to a 2000 survey by the Spectrem Group, a consulting firm specializing in retirement markets, 43 percent of affluent households reported that both partners share in financial decision-making, compared with 39 percent in 1995. During the same five-year period, male head-of-household decision-making dropped to 37 percent from 43 percent as women demanded an equal say in their households’ major financial decisions. An online survey conducted by MSNBC in May 2000 showed a discrepancy between the way women and men view decision-making responsibility. When asked “Who manages the investments in your household?” 29 percent of women said “We both do” while only 19 percent of men gave the same response. Fifty-eight percent of men said “I do” compared to only 34 percent of women. Could it be that even in this enlightened age, women exert subtle influence on their partners and let men think investment decisions are up to them? I’ll leave the explanations to the social scientists, but it is worth noting that in households consisting of a male/female couple, shared decision-making is becoming more prevalent. Further, women are making up an increasing share of single-adult households and thus have exclusive decision-making responsibilities. The proportion of households consisting of one person living alone increased from 17 percent in 1970 to 26 percent in 2000. The number of single mothers increased from 3 million to 10 million. And among people over age 65, women are much more likely than men to be single: About 77 percent of senior-aged men are married versus 43 percent of senior-aged women. Almost half of all women over 65 in 1999 were widows, and there are more than four times as many widows (8.4 million) as widowers (1.9 million). As I point out to my seminar attendees, the odds are very good that every woman will be solely responsible for managing her finances at some time during her life. Other relevant statistics about women and wealth include the following:
Upping the Ante Women and philanthropy programs have gained recognition and respect—but not headline-grabbing gifts By Andrew Freiburghouse Lori Stevens, director of the Women and Leadership task force at Harvard University, has been thinking a great deal lately about quantifying progress. Harvard is a fund-raising juggernaut; a few years ago, the Harvard University Women’s Matching Fund—which matched gifts from female donors—brought in nearly $19 million dollars in only 110 business days. Still, Stevens admits, “We’ve made a lot of progress with donors in the $100,000 to $200,000 range, but we’re having a hard time getting to that next level: donors who give around $1 million.” That’s the level where donors have regular meetings with deans and the campus CEO. Because of the shortage of high-profile gifts from women, fewer of them are privy to such meetings. So despite the marked increase in their giving levels, women donors still ultimately exert less influence than their male counterparts at Harvard. Although Harvard’s fund-raising numbers are relatively higher than other institutions, Stevens’ situation is typical. Women and philanthropy programs—like those at UCLA, Ohio State University, the University of Tennessee, and Rhodes College—often have more involved donor-members and a “more communal feel” than typical male-dominated programs, but they produce significantly fewer headline-grabbing gifts. The next challenge for these programs? They will have to increase the size of gifts without alienating constituencies who often don’t want their contributions measured in purely dollar figures. The women in philanthropy movement was founded upon a set of key ideas, many derived from the seminal work by Sondra Shaw and Martha Taylor, Reinventing Fund-raising: The Potential of Women’s Philanthropy. Women give to create something. Women give to bring about change. Women want face-to-face, direct connection with the causes and organizations they support. In education fund raising, this often means offering female donors opportunities to meet and speak with the students or faculty they’ve assisted with their gifts. Women often prefer private rather than public recognition of their gifts. Women, because they’ve often inherited wealth, need more assurance that they won’t run out of money if they start giving. That is why every program surveyed in this article also has a strong education component—including financial seminars, workshops, and gift-planning counseling—designed to help women understand and feel at ease about the financial implications of making gifts to education institutions. REVIEWING THE CONCEPT Some of these founding principles are being tested, however. Sally Blowitz and Tracie Christensen, co-directors of UCLA’s Women & Philanthropy program, note a blending of purposes across the sexes. Women, they say, now want many of the same rewards from their giving as their male counterparts. “In our most recent focus groups in 1999,” Christensen says, “women said that they were motivated to give not only by passion but for perks and business purposes as well. Some saw a benefit in priority seating at events and having their business peers see that they had contributed X dollars to a cause. At this point we don’t look at our audience any differently than any other development officer would. We try to treat everyone as an individual.” This approach raises two questions: Why is it necessary to section off women from the rest of the donor population, and why shouldn’t women be approached for gifts and recognized for giving in the same ways as men? Blowitz recently faced such questioning at a local fund-raising event. “There was a man present who felt that we were basically making much ado about nothing,” she says. “‘Women get recognized,’ he said, ‘so what’s the big deal?’” Her response: “Anything that involves people individually with the university is worth nurturing. Our program does that.” She further argues that women have come a long way in philanthropy, but they’re still playing catch-up. “There are more opinions to change,” she says. Women‘s philanthropy programs are entering an extremely crucial time. “What distinguishes us from being seen as just another ‘feel-good’ program?” asks Dorothy Bryson of the University of Tennessee Alliance of Women Philanthropists. “We need to do everything we can within the next three years to answer that question. If we don’t, well, then I’m sure there will be some revisiting of this whole concept. The women in philanthropy movement—as with all development efforts—must be accountable for results.” Andrew Freiburghouse is a freelance writer based in Los Angeles.
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