A recent study by Stephens Invested titled “How Women Can Build Wealth: Rethinking the Role of Networks and Reevaluating Risk” found that women are somewhat more risk averse than men. Invested also demonstrated that when women build more effective and diverse professional networks, it can help recalibrate their approach to financial risk, potentially generating more wealth accumulation.
The study, which surveyed 1,200 executives, found when women bolster their circle of influence, they can make more informed decisions around wealth management. Often, women may have attorneys or accountants in their Rolodex, but no investment bankers or personal finance advisors to help them understand various investment options and implications. While stowing money in a money market fund means you are less likely to lose money, it can also limit the potential for growing wealth. Similarly, when women executives make certain decisions, such as a major personal investment or a capital expenditure, they consult fewer people than men, according to the research.
Part of this may be due to gender differences in appetites for risk. In the Stephens study, 41% of men responded they are “very likely” or “extremely likely” to start a business in the future, as compared to only 25% of women.
Despite viewing financial risk differently than men, women can strike a balance between growing their wealth and feeling secure in their financial decisions by taking a strategic approach to networking. Here’s how.
1. Look to fill gaps in your network.
When thinking about who can provide input for financial decisions, be it the next career role or real estate purchase, it’s important to identify gaps in your network to ensure you make a well-informed decision. Perhaps you have a bevy of marketing professionals, but no investment experts in your network. Or possibly you’ve only dealt with attorneys when it comes to financial transactions. By evaluating your current network, you can then seek out financial professionals who can help fill those gaps or introduce you to people who can. Assessing your network can also help identify your preferences. For instance, perhaps you prefer to work with women advisors, or others who offer more nuanced perspectives.
2. Build relationships based on trust, not transactions.
Too often, we view networking as purely transactional. But the best networks are built upon years of connection, deep listening and the understanding that advisors are not just there when a sale happens. They can help with a variety of business scenarios and can offer up connections to expand your network exponentially. As one former CEO and publisher put it, “I go through all the doomsday scenarios” with her financial advisor. “I also have a personal advisory board made of people who know me well personally and professionally.” In some cases, the more may actually be the merrier.
3. Get comfortable with the cold call.
Sometimes we all need a little nudge to reach out to someone, especially if we’ve never talked to that person before. That’s why it’s important to develop a level of comfort with reaching out and asking for help, be it from a person a few paces ahead in your career or a friend of a friend. You never know what you may learn by writing that cold email.
A robust network can help women rethink their approach to financial planning. By leveraging trusted advisors, filling gaps in professional networks and reaching out to new people, women can help mitigate their risk aversion and potentially capitalize on more opportunities to build and maintain wealth.
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