Self-Directed IRAs: Challenges and Options
April 13, 2018
Jenna Dagenhart: Welcome to today's webinar, Being There for Her, guiding women through four events that impact their financial futures, presented by Melissa Mursch and Marissa Weaver from Transamerica. I'm Jenna Dagenhart with Asset TV and I'll be your host for today's webinar.
If female investors control an estimated $14 trillion in investable assets, and 51% of personal wealth in the US, then why does this important and fast-growing segment of investors still feel largely misunderstood by the financial services industry? Transamerica has developed a woman and investing program where they discuss best practices for communicating with and serving female investors throughout their various life milestones. Our speakers will dive into three topics that could affect their retirement, divorce, caregiving and widowhood. Their goal is to continue the conversation on the importance of working with women as clients and how to address their unique circumstances, especially as they approach retirement.
Marissa Weaver: Thank you for joining us today. Melissa and I are excited to speak with you about a program that we are truly passionate about.
We began creating this program about a year and a half ago from our own personal experiences and after speaking with other women about their experiences with the financial services industry.
Our goal is to help financial professionals to better understand and to truly connect with female clients.
Today, we'd like to share with you three main themes.
First, the life events that disproportionately impact women on their journey to and through retirement. Next, key findings about the way female clients view retirement versus their male counterparts. And finally, the qualities that they are looking for when choosing to work with a financial professional.
To begin, I think it's important that we discuss the connection between wealth and health. At Transamerica, we believe that they are inextricably linked. People want to live long, healthy lives, and they need the right tools and guidance to do so. When clients come to us, or they talk to their financial professionals, it's seldom just about money. It's about providing the resources and information they need. Not only at that point in their lives, but additionally to protect the future and their wealth and health. This is what lies at the heart of everything that we do at Transamerica.
Providing the right resources and information requires offering holistic guidance that considers the unique events happening in an individual's life. And when it comes to the specific guidance that women need, it means taking into consideration two factors that are unique to them. First, in the future, women will control a greater proportion of the wealth. And second, they will most likely live longer lives than men.
According to a recent McKinsey & Company study, as women outlive their spouses and partners, females could possess as much as $30 trillion in financial assets by 2030. And this creates a tremendous opportunity.
At Transamerica, we're invested in helping financial professionals stay ahead of industry trends. As we look to the years ahead, both industry and demographic data trends confirm, as I just mentioned, that the future of wealth is female.
Next, I'm going to share with you some information about the opportunity at hand.
Today, women control 40% of global wealth. And according to a recent 2020 research study by Boston Consulting Group, they are outpacing the growth of the wealth market overall, adding $5 trillion to the wealth pool globally every year. Boston Consulting Group also reports that from 2016 to 2019, women accumulated wealth at a compound annual growth rate of 6.1%. Over the next four years, that rate will accelerate to 7.2%. That means by 2023, women could see their wealth reach $93 trillion.
Women are a tremendous financial force, and they are poised to become the world's most powerful investors. That is why Melissa and I are encouraging you today to take a fresh look at this segment of the market. I'm now going to share with you an important quality that investors and especially women are looking for when deciding on who they want to work with.
One of the most important qualities an investor looks for in a financial professional is empathy. They want to know that their financial professional really gets them. Just look at the above quote from a female investor.
"I think you should come off as personable and be someone I feel comfortable telling this information to."
Everyone expects their financial professional to make decisions on their behalf. Decisions that are most suitable for them to obtain their financial goals and help to grow their assets, but today's investors crave more meaningful planning. Meaningful planning requires an empathetic understanding of how someone's circumstances and needs will evolve as they age. And for women, those circumstances and needs are evolving now. One of the most important factors to consider in the evolution of their financial needs is women's expanding time horizon.
Women statistically are outliving men. And according to the latest CDC data, the average life expectancy for men in the United States is now 76. Today's average woman lives to be 81. That means on average, women are living five years longer than men. For women, longer lives can bring with them unique circumstances.
If we're going to help women harness their power as investors, we need to be familiar with the events and dynamics that impact women's often longer lives. We need to be prepared to have meaningful conversations about these events. And as financial professionals, we need to be ready to provide women with strategies for their individual goals.
To begin, we're going to discuss some important statistics to consider about female clients as it relates to retirement. The first is that women are outpacing men in investing power, but they are behind when it comes to retirement planning. This clearly illustrates an important gap that you as a financial professional can help fill.
According to a World Economic Forum report, the average woman in the United States is expected to outlive her savings by 10.9 years. That's more than a decade. And that's compared to 8.3 years for men. When it comes to achieving wealth and health goals in retirement, you as a financial professional are in the position to help women reach parity.
Women are not only facing the challenges of outliving their money, but there's also statistics of concern regarding women's ability to maintain their desired standard of living while in retirement. The Center for Retirement Research at Boston College found that 46% of married women in their 50s, in two-income households, are at risk of being unable to maintain their standard of living in retirement. That's almost half. The numbers for women in single-income households are slightly better. Only 32% of married women in their 50s in a one-income household, and 39% of women in their 50s who've never been married face the same risk of being unable to maintain their standard of living in retirement. These are significant statistics and they illustrate the opportunity financial professionals have to help women to better prepare for their retirement years.
Let's shift gears. Now that you've seen the statistics, let's discuss the difference in retirement viewpoints between men and women.
MIT AgeLab recently conducted a language study of 990 people across the country. They asked them to describe life after retirement. Men commonly used words like retirement, relax, hobbies, and travel. Women more often chose words like fulfilled, peace, calm and accomplished. The difference. Men were talking more about the physical rewards of retirement, such as the ability to travel, whereas women more commonly described positive states of mind, such as peace or calm, as what they look forward to most in retirement.
Here's one way to look at it. Men look forward to what they will do in retirement, whereas women look forward to how they will feel. And you can help them feel prepared at every step of the retirement process, from when they are just starting out through their years in retirement. The more that you can show your value by helping them prepare, the better. And as I'm sure most of you would agree, life very rarely gets less complicated with time.
I'm now going to turn it over to Melissa, who will dig a little deeper into three unique life circumstances that can complicate and impact women more greatly than their male peers.
Melissa Mursch: Thank you, Marissa. I'm excited to be here. Today, we will just discuss three of the most common circumstances women face that impact their financial wellbeing including: divorce over the age of 50, also known as gray divorce; the loss of a partner spouse, otherwise known as widowhood; and caregiving, which can take two forms, long-term caregiving for a loved one, or care for themselves. This is a topic that hits close to home for me. Unfortunately, I've seen firsthand how widowhood and caregiving have impacted my entire family.
My father passed away due to a massive heart attack at the age of 50, leaving my mom to navigate her finances, children, and returning to a full-time job. My mom had to go back to nursing after 12 years at home, and had to figure out how to manage to get three kids through college. She didn't have an advisor or anyone to turn to for advice at the time. She didn't start her first retirement account until she was in her 50s. Needless to say, she had a lot of catching up to do.
At the recommendation of a close family friends, we got her set up with an advisor, and he helped her build an aggressive plan to help reach her goal of retiring at 70 years old. He was patient. He asked a lot of questions. He included us all in the conversation. And he listened to her needs. He has been her advisor now for nearly 30 years, and is now also the advisor to my brother, my sister and for myself.
Then, three years ago, caregiving was thrown front and center into our lives. My mom was diagnosed with stage four breast cancer. The type of cancer she had was so aggressive, she had to do six months of intensive care chemotherapy on a weekly basis, along with a full month of daily radiation. Her immune system was so poor, she was unable to leave her home through the entire treatment.
After completion, she appeared to be cancer free. But six months later, in March 2020, we found out that the cancer was back and we also found that we were facing a global pandemic. She was forced to wait four months before having her mastectomy, followed by additional treatments due to the pandemic. Through it all, we have kept in close contact with her advisor. We not only had to build a plan to pay for all the costs associated with her treatments, her surgeries, figuring out her day-to-day care and plan for the worst-case scenario. We had some incredibly hard conversations and there were a lot of tears, but she had a fantastic advisor who guided us through it all. This is why I'm so passionate about this program, and why I'm excited to be here talking to you today.
As an advisor, you can help your clients plan for an empowered retirement. One that supports their unique needs and can help support and guide them through situations similar to the one that my family has gone through.
The first tenet I want to discuss is divorce. As I said on the previous slide, divorce over 50, also known as gray divorce, is becoming more and more common. Let's set the stage with some pretty astounding statistics and then talk about how you can help your clients.
Between 1990 and 2017, the divorce rate for women aged 55 to 64, tripled. And for women 65 and older, in other words, women in or nearing retirement, the divorce rate increased six-fold.
Financial professionals are in a unique position to help women confront some of their fears and the challenges as well as utilize some tried and true best practices to support women in their journey to become financially independent. Divorce can also coincide with a time when many women over the age of 40 make other big life changes. They start businesses, they become entrepreneurs, and they can experience financial surprises, such as being aware of the size of marital debt, health care costs, and the cost of staying in their home where they've raised their family. We as financial professionals, can help them navigate this period in their lives.
In the white paper you will receive as a follow up to this presentation, we go in depth about best practices. Here are a few to consider.
First, stay in touch routinely. This can be an emotional time, it is important to keep communication open.
Second, provide a judgment-free zone to talk about finances. She may be new to this and needs you to meet her where she is at.
And third, establish a team to address the life event holistically. For example, does she have a lawyer, a divorce coach, possibly a therapist that you need to communicate with? Make sure you're bringing her entire financial community together.
Keep in mind, no one intends to get divorced. That's why it's so important to remember from your first meeting with a couple that there are two individuals at the table. Individuals who have their own needs, perspectives, and experiences. If you build trust and have equal rapport with each person, you will be better equipped to provide meaningful, individualized solutions to both if they do decide to divorce.
Show your value with strategies that meet your recently divorced clients' needs of a newly single woman. Many states split a couple's assets in half, which means there may be money to invest. Retirement plans will have to be revisited to accommodate her new life and her new goals. And Social Security is an issue where you can offer support as well. Women receive smaller Social Security benefits on average compared to men because they have lower average lifetime earnings. In which case, an alternative retirement income strategy could help a woman take positive strides towards long-term financial security.
Some additional strategies to consider that we go in more depth in the white paper are:
First, take time to understand where she is at. Help her segment the decisions that need to be made and when.
Second, think about immediate and near term decisions prior to the divorce. Immediate needs post-divorce, and finally, six months post-divorce.
And third, learn about her financial literacy and provide additional education where she needs it. This will help you build trust and help ease her concerns.
Now, let's transition and talk about the loss of a partner or a spouse, widowhood. As I watched my mom traverse this difficult time, she didn't have someone like you to help guide her through it. Your client is coming to you after experiencing possibly the biggest loss in her life. The financial and the emotional strain on your client is likely vast, and both are equally important for you to understand. Having the right conversation can help ease some of the strain on your client's feeling, and help you better navigate the stages and the dynamics that she will go through as a widow.
As Marissa stated earlier, greater longevity means women will typically enjoy a longer retirement than men. It also means they are likely to experience some of that retirement alone.
According to a 2017 study by MarketWatch, 80% of men die married, while a staggering 80% of women will die single. If those two statistics didn't grab your attention, this one surely will. According to a financial advisor magazine, as many as 70% of women will leave their financial professional after losing a spouse. Take a minute and let that sink in. 70% of women will leave and find another advisor.
As Marissa alluded to, how do you as a financial professional, change those dire statistics and help women regain financial confidence? The best practices and the tools we are providing today, create a great opportunity to change those numbers and to start a conversation.
As you're thinking about how to work with widows, you need to identify where she is at. Much like retirement, there are stages of widowhood: grief, growth and grace, according to Kathleen Rehl, a CFP, who has written extensively on financial planning for widows. Through every stage of widowhood, your goal is to make your client feel understood, and financially secure. And like retirement, it's going to be a process.
In our white paper, we provide for the questions to ask every widow, which are:
One, what is weighing on your mind right now?
Two, who is a trusted friend or family member to include in meetings to take notes and help you ask questions?
Three, what other advisors or financial service providers do you have that I should connect with?
And four, do you have enough money in your bank to cover funeral and estate expenses, as well as cover bills for the next several months?
Now, let's dig into each stage of widowhood to better understand how you should approach each.
Melissa Mursch: During the grief stage, most widows are not ready for big permanent decisions. Your client is likely overwhelmed by her loss. Encourage her to not make any big financial decisions for a while. Help her financially manage living day to day. Help her deal with immediate needs and understand where her assets are. Focus on tackling a financial checklist, which we provide as part of our caregiving toolkit. The checklist will include things like discussing estate distribution, claiming the deceased spouse's Social Security benefits, updating beneficiaries, and locating financial assets. Ask her about her concerns, listen to her, and assure her that it will all be okay.
Next is the growth stage. Growth in this case means helping your client plan for a future without her spouse. It will require not only a revision of her financial strategy, but also could potentially include decisions about where she wants to live. These changes can be overwhelming, especially when added to her emotional burdens. Be patient, listen, and work according to her schedule.
Finally, the grace stage. Grace, which may take years to reach, a widow moves into a new phase of life, an independent phase. She may find a new purpose, start a new business, or begin traveling more. She might also be thinking about the legacy she's leaving, including inheritances, and charitable giving. The advisor who sees their client through this stage may not just be retaining a female client, they may be building relationships with the next generation. This was definitely the case with my [inaudible 00:25:50]. You can help her leave the legacy that she wants.
Our final tenet, and one of life's most challenging circumstances, is caring for an ill or disabled loved one. According to a 2020 study conducted by AARP and the National Alliance for Caregiving, almost one in five Americans are providing unpaid care to an adult with health or functional needs. In my experience with my mom, I had to figure out how to provide around-the-clock care, while also maintaining my career and tending to the needs of my kids in an unprecedented time. I was fortunate to have the help of my brother and my sister, but many caregivers aren't that lucky.
For women experiencing the caregiving role, it alters everything in their lives, savings, retirement, stress levels, and even the caregivers mental and physical health. Let's walk through the numbers.
58% of women, 65 and older, will need long term care during their lifetime, according to a 2019 Morningstar report. In addition to meeting that care, aging women often take on the role as caregiver as well. 62% of family caregivers are women compared to 38% who are men, according to a 2019 Bankers Life Center for secure retirement study that was cited in a May 2020 report by investment leaders. Think about that. More than twice as many women will become caregivers than their male counterparts. This can mean providing care to her parents, or spouse or partner, and to her children. Sometimes they call this the sandwich generation, women may be taking care of not only one, but possibly all of these people at the same time.
There are many reasons why women may require long-term care as well. They include Alzheimer's disease. Almost two thirds of Americans with Alzheimer's are women according to the Alzheimer's Association, and cancer, which comes with a 38% lifetime risk for women, according to the American Cancer Institute.
The implications don't only impact health, they also impact wealth. Consider these most recent national averages compiled by the US Department of Health and Human Services for the cost of long-term care. As I'm going through these numbers, think about how high these costs are. Over $3,500 a month for a private room in an assisted living facility, that number is more than the majority of people's mortgages on a monthly basis. It costs over $6,500 a month for a semi-private room in a nursing home, and over $7,500 per month for private room in a nursing home. Those are just the national averages. They don't account for things like cost increases, extra charges for things beyond basic care, and charges for the living facilities.
As Marissa stated, on average, women will outlive their retirement savings by 10.9 years. And this is why it is so vital to provide guidance to women during this time.
According to a 2019 Morningstar study, women are 2.5 times more likely to live in poverty after retirement than women who are not family caregivers. You as a financial professional can help your client close that gap. Preparation needs to start early. It's a conversation too many clients and their families avoid. 69% of aging adults have not discussed long-term care with their family members. That is a huge number and presents a huge opportunity. But 26% of aging adults expect their children to assume the role of caregiver, while 47%, nearly half, expect their spouse or their partner to step into that role. This is a big issue. One that not only affects your clients and their personal relationships, but also their financial planning.
Remind your client that she does have options. This is a tough topic. Clients may not want to talk about it. But it's a conversation that needs to be had. One that can be empowering, when you frame it as an opportunity for your client to take control of her future. If a client wants to self-fund, help her prepare for the worst-case scenario. Though they are expensive and come with some risks, caregiving options, coupled with income options and other retirement solutions may help create a holistic plan for her.
The most important thing to do, ask questions about the kind of care your client wants, and the kind of care she might be required to provide in the future for ailing partner or spouse. It will help guide her and it will help you form the plan that makes the most sense for her and her situation. Ask her and her family questions to get a better idea of what she wants for herself. A few examples of these questions are: Does she want to prioritize staying in her home? Has she talked to her children about whether they will provide care and have resources been allocated for them to handle that? Has she spoken with her partner or spouse about how they will prepare to provide care for each other, and what that may entail for their finances? Get her entire family involved if possible. It's not going to be an easy conversation, but it will be a worthwhile one.
I hope that these data points, insights, tools, and my personal story in regards to gray divorce, widowhood, and caregiving will help you build stronger relationships and help you grow your business with female investors. Now, I'll turn it back over to Marissa to discuss how to keep the conversation going.
Marissa Weaver: Thank you, Melissa. This is great information on how gray divorce, widowhood, and caregiving situations can affect women.
The question now is how do you take all of this information and put it into action? How do you keep the conversation going?
The best way to position your client for success is to know who she is, where she is in her life, and what's important to her. Always ask questions and be sure to listen. Whether you're talking to your client on her own, or with her spouse or family, ensure you're being attentive, compassionate, approachable, and most of all, inclusive.
Take a look at this quote. "Don't act like I'm the little lady; don't talk to the little lady in the corner; you know, she just smiles and nods."
That's powerful. This is what a lack of inclusion looks like. You can tell this female investor is not feeling acknowledged. She's not feeling heard. Make sure that you're including her in the conversation just as you would include her spouse or partner. It's important to pay attention to her concerns.
Women are loyal customers. According to a women in wealth 2020 special report by ThinkAdvisor, they are more likely than men to refer their financial professional to friends and colleagues. On the flip side, that means that they are also more likely to tell people not to work with financial professionals who don't listen, or take the time to understand what's important to them. So again, ask questions and listen.
Recap each discussion to be sure you understand her priorities. By doing so, you will gain her trust when she knows that you truly hear her, and that you see her as an individual customer.
These are tough topics. Conversations about financial planning for retirement, divorce, death, and caregiving are often emotional, and sometimes very painful. These conversations require empathy, compassion, and a focus on the individual. It is important to remember that our industry has a very unique vocabulary, and not everyone is well versed. As evidenced by this quote, "Sometimes it can make your confidence go way down if they only speak to you in their lingo and... some of them can be condescending."
It's easy to forget that not everyone understands the ins and outs of our industry and its vocabulary like we do. Try not to weigh down your discussions with unnecessary jargon. Make sure to assess where your client is at with her financial literacy, so that you can help to provide her with the appropriate information. All too often, we hear similar sentiments to the quote on this slide.
Remember to be aware of any preconceptions that you may have when it comes to female clients, especially those who come in with a spouse or a partner. If a couple comes in, make sure that you engage with both people, they wouldn't have come in together if they both didn't want to be involved. It's not uncommon for women to note that financial professionals address their husbands instead of them, even when the woman is the household CFO. I know for both myself and Melissa, we have experienced this firsthand.
In cases where it's appropriate, like discussions about caregiving, as Melissa mentioned, consider asking your client if she'd like another family to be involved as well, especially if she hopes that they will be involved in her care one day.
Engaging female clients is not only the right thing to do, but as I hope both Melissa and I have illustrated for you today, it is also a great opportunity to expand your business. Our job is to help people plan for the future. Let's do that for ourselves too. Through embracing and specializing in some of these harder topics and conversations, you can further differentiate your practice. And by addressing the financial goals and concerns of women in more meaningful ways, we truly achieve our mission. And that is to expand client relationships, and improve their wealth and health.
Thank you all for joining us today.
Jenna Dagenhart: What additional resources are available and are there any other programs coming in the month of March?
Melissa Mursch: This was a lot to take in. I know there's a lot of information, a lot of statistics, but we want to make sure that you have the resources necessary to take the next step and have conversations with your clients today. So in addition to a follow-up email that will go out after the presentation, which will include the white paper I referred to earlier, we do have a landing page that you can go and find additional resources. That landing page is www.transamerica.com/women-and-investing. Transamerica.com/women-and-investing. On that landing page you will be able to see the white paper. We do have a video discussing the topic, an infographic that goes through these high-level statistics and the journey that women face. We do have toolkits for each of the three tenets: caregiving, gray divorce, and widowhood, that dig deeper into some real-life examples as well as questions to ask your client who has gone through a situation like this, and some additional supplemental materials, like the checklist I referred to. So please go there and take a look. Lots of information to go through.
In addition to that, as March is Women's History Month and we're approaching International Women's Day, we do have some additional programs that are going to be happening throughout the month of March that I want to bring to your attention. We're going to be having some great speakers, some panels, and really bringing together the community to talk about the unique segment that women bring into the financial industry.
On March 8th, International Women's Day, Asset TV will be hosting a women's masterclass panel with some phenomenon speakers. Starting on March 10th, we will be running a podcast each week with Mary Beth Franklin, speaking to some financial advisors who are experts in each of these tenets. As well as we are launching a big social media campaign during the month of March. This campaign is to help support a non-profit organization called Savvy Ladies, and Transamerica will be donating $1 bar to Savvy Ladies, up to $20,000 during the month of March for every engagement that we have with our social media campaign.
And really the purpose of that campaign, other than providing back to a great non-profit organization, is to really talk about the women who inspired us. So I really encourage everyone who's listening to this today to go look for the posts that are going to be coming out from Transamerica about our partnership with Savvy Ladies and hashtag women who inspire. Tell a story about a woman who inspires you and why, and tag some other friends to do the same. We really want to fill the month of March with inspiration about the women who impact our lives.
With that, I will give it back to our moderator and just want to say thank you so much for your time today and we hope that this really is helpful in how you'll take your steps forward with your current client base.
Jenna Dagenhart: As we wrap up this discussion, what's one final thought you'd like to leave the audience with today? Marissa, Melissa?
Marissa Weaver: If I could leave our audience with one final thought today, I think it would be to really hear the statistics that by 2023, which is just two years away, $93 trillion could be in the hands of women. And that creates a tremendous opportunity and I know we've stated that a few times in our presentation, but that is truly an opportunity to help women and to improve your business. That would be the one thought that I would like to leave the audience today.
Melissa Mursch: Yeah, we did cover obviously a lot of ground, but I think the one thing I would leave everyone with is take an opportunity to really take a look at your current client base and potential clients. Ask yourself the question, have you talked to them about any of these issues? We know that over the last year, COVID has impacted us as individuals, as families in ways that I don't think we ever thought possible. And how that has impacted you, it's probably impacted some of your clients as well. So, take the time, ask the questions. Start digging in a little bit deeper and start to build those relationships.
As Marissa said, you have an incredible opportunity to build your business here, but you also have an incredible opportunity to build your community, to build your relationships within that community, and that really for me is probably the biggest takeaway I would leave with you today.
Jenna Dagenhart: Thank you for that presentation Melissa and Marissa. Really appreciate your insights into these important topics. And thank you for watching this webinar, Being There for Her, guiding women through four events that impact their financial futures.