Young Women Are Bad at Money, Say Old Men

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A survey of mostly male, mostly old financial advisers came to this conclusion: Women and the young are bad with money and need to hire financial advisers.

The survey of 350 certified financial planners, insurance advisers, and other professionals was conducted online by AdviceIQ, which bills itself as a service that “educates all consumers about the need to hire a trusted, local advisor.”

The results cover some familiar tropes in financial literacy. More than half of respondents said that male clients were more financially knowledgeable than women; just 9 percent said the reverse was true. Asked which age group had the best money sense, 6 percent said it was those 30 to 40, while 76 percent said it was those 40 and older. About 60 percent said that wealthier clients are more financially literate than poorer clients.

“Due to their personal interaction with investors, financial advisors can serve as a terrific barometer on the current state of investor knowledge, and the feedback we’ve received from our survey respondents reveals an urgent need for financial education that helps women and younger investors,” AdviceIQ’s chief executive, Nick Stuller, said in a press release.

That financial advisers believe everyone in America is in dire need of their services is hardly surprising. And the Bureau of Labor Statistics projects a 32 percent increase in financial adviser jobs by 2020 as compared with 2010. What’s interesting is that amid this growth, a throng of startups has come along to upend the traditional financial adviser model, promising better returns and lower fees—and more upbeat messaging that avoids telling clients they’re illiterate.

Three hundred of the 350 survey respondents, or 85.6 percent, were men, and more than 60 percent were older than 50. Many women resist the personal finance industry because it’s the domain of “men in bad suits,” as Joanna Coles, the editor of Cosmopolitan, told me in February. She was speaking in praise of LearnVest, a personal finance site that recently became a registered investment adviser with the Securities and Exchange Commission. The service had become popular thanks to its founder Alexa von Tobel’s canny targeting of women, which helped LearnVest stand out.

Competitors include Personal Capital, a wealth management service founded by Bill Harris, the former CEO of Intuit and PayPal. Others, including NestWise and Betterment, offer various ways for investors to manage their finances while paying dramatically lower fees than those typically charged by old-line financial advisers. Money lost to fees today never has a chance to compound as an investment over time—something that can be especially costly for younger savers with uncomplicated finances.

“Most advisors are older and male, so perhaps they are projecting their own image,” Harris wrote in an e-mail about the AdviceIQ survey. “Our own experience is that younger investors generally have a good grasp of their investments—particularly when the data is available to them using Web and mobile tools. And that women often have a longer-term view of saving and investment. It’s very hard to generalize, but we see no indication of a relative lack of understanding in female and/or younger investors.”

In fact, plenty of studies have found that women do lag men in financial literacy—see this 2010 Rand paper (PDF), or this 2012 report in Time. A major SEC study last August found that Americans of all kinds are ignorant on the topic, but noted that “women, African-Americans, Hispanics, the oldest segment of the elderly population, and those who are poorly educated, have an even greater lack of investment knowledge than the average general population.”

That stands to reason. Groups that have historically had lower incomes (see: above) have had less money to invest, and therefore less incentive to learn about investing. Put another way, most people don’t learn a lot about cars until it’s time to buy one. But the demographics are changing, and that’s part of the appeal of the startups that target groups that have traditionally been left out of the financial planning mainstream.

Stuller’s not convinced. “To be candid, their models are quite often flawed,” he says about the startups. “The one thing any computer program can’t do is look you in the eyes and see that you’re confused.”

It is true that these sites are so new that their worth over the long term hasn’t been established. What’s equally true is that not everyone needs advanced estate planning, intergenerational trust schemes, and tricks like tax-loss harvesting—nor the hefty fees that so often accompany them.

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