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Seeing the latest Blackrock Global Investor Pulse made one thing very clear: The financial services industry has made a gradual but dramatic change for the better by bringing awareness to what’s at the core of investor’s actions every day: deep rooted money memories. The report begins with examining “Feelings on Money and Investing” which leads into family influence. This shift is from focusing strictly on the nuts and bolts of investing, usually packed with hard to understand lingo, glossy but difficult to decipher pie charts, and obscure goals in the terribly distant future. This core movement has happened gradually over the years since I first launched my Financial Woman blog encouraging women to get more involved with their money, a rarity back in 2007.
Not all financial advisors are embracing this money mindset awareness, but the more insightful advisors are. Why has this new paradigm shift occurred in the financial services industry? I think it’s largely because women have finally stepped into financial empowerment with the last of the baby boomers moving into their 50’s and beyond. Or maybe it happened because of the macro shift from more demanding consumers, including women investors, to be smarter about their money following the terrifying performance of the stocks markets in the early 2000’s, and then again in the late 2000’s, severely threatening financial security.
These devastating corrections were accompanied by the even scarier decimation of home values, often below the amount of money borrowed to finance them, causing fear of potential and real home loss, in addition to a comfortable lifestyle threat. I don’t know a single woman whose home is not near her heart, because, after all, shelter is at the core of our needs as humans. Getting hit in the gut, or heart, initiates change.
Sure, we’ve had years of strong stock market performance since then, but those fearful memories are still solidly in tact with current investors in or near their 40’s and beyond. Good things eventually come from painful lessons. The outcome of this messy money decade was investors saying “Don’t show me pie charts that I don’t understand. Don’t tell me that I’ll be okay in twenty years if I do this now”.
Studies have repeatedly shown that women want to truly understand investing. More than ever, women investors are saying “Educate and guide me so I understand”. More importantly, they’re also saying “Help me know what I need to do today to have financial security both now and later, whether that means setting realistic financial goals, adding a new income stream, or investing smarter”.
This huge shift has been an awareness that something simple yet powerful needs to happen before the calculators even surface in the financial advisor’s office: the dumping of negative or erroneous money messages rumbling around in every potential investor’s head. These messages are usually from childhood influence, and they frequently result in self-defeating money habits. These covert negative messages lead to bad decisions day in and day out, such as dodging your finances due to a myriad of seemingly valid excuses, settling for under earning, or avoiding investing, to name only a few.
These defeating behaviors breed a lack of confidence. Lack of confidence fuels more self-sabotage, creating a vicious cycle that must be broken before you reach your true financial potential, the primary goal of both earning and investing. (While working eight plus hours a day hopefully involves doing something pleasurable, for most, the core of that endeavor is to make money for sustaining a good lifestyle both now and later.)
If you think about it, you’ll see that almost every single day comes with some sort of money decision. That decision may be as elusive as procrastinating tallying your net worth so that you really know where you stand financially, incurring a completely unnecessary large or tiny expense, or settling for less in your career yet another day. Changing the message in your head changes your daily actions, and this breeds confidence and clarity. This empowerment is what frees women investors to confidently step up to the table and make smart decisions about their money. I, for one, am glad to see that financial advisors are recognizing and addressing this important element of wealth accumulation.