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Do Your Clients Fear Becoming Bag Ladies?

December 5, 2014

Nearly half the affluent women in the U.S. fear losing their financial independence before they die. This apprehension led Lance Drucker of Drucker Wealth Management in New York to write How to Avoid Bag Lady Syndrome — a condition that is anything but irrational.

“Women typically live longer than men, so they need more retirement savings,” says Drucker in a press release. Compounding the problem, women often make “less for the same job as men,” he adds, and “many have fewer earning years” than male counterparts because they exit “the labor force for a time to have and raise their children.” In sum, these factors mean advisors must take a thoughtful approach to female clients’ specific needs. They can start by creating budgets for women clients that take account of fixed, variable and one-time costs and building “a cash cushion that will cover six to nine months of fixed expenses” — all while addressing the client’s financial pain points as well as her objectives. These can be uncovered with open-ended questions about fears and aspirations, such as: What keeps you up at night? What worries you most about your money? What do you want to do with the rest of your life? The goal here, according to Drucker, is “to create an income stream” that can support the client’s needs and wants over time.

Next, get more granular with the client. “Create a balance sheet of savings and investments” that includes the client’s “savings account, stocks, bonds, mutual funds, investment real estate, cash-value life insurance, annuities,” retirement set-asides and other assets,” Drucker suggests. “Then further break it down by pretax and post-tax accounts.” Then go over insurance needs and coverage — with particular emphasis on long-term care. “Younger and healthier women may be tempted to overlook the importance of this step, but failure to anticipate potential health issues can be very expensive.”

Finally, apply the same rigor to the client’s estate-planning needs. Here questions revolve around wills, powers of attorney, health care proxies and making sure beneficiary designations are updated on retirement accounts.

“Women’s needs are different from those of men, and the financial industry isn’t meeting them,” according to Drucker. Though he doesn’t say it explicitly, his checklist may help advisors underline their value to prospects and clients who have good reason to worry more about their security in retirement.

By Thomas Coyle