To say that women are becoming more involved in the financial world is an understatement. While income inequality is still an issue, females are earning higher salaries and taking more agency with their finances than ever. So why aren’t they investing?
Research shows that men are five times more likely than women to prioritize investing. The reasons range from a lack of confidence to a distaste for the male-dominated world of financial planning, but one thing is certain – the needs of female investors aren’t being met.
That’s where Ellevest is looking to make a difference. They claim to offer investment advice customized for women, taking into account female-specific issues and attempting to make the whole experience more comfortable for their clientele.
But is Ellevest filling a service gap or taking advantage of timid or inexperienced investors? Read on to find out what the experts think.
What Ellevest Does & How It's Different
Ellevest is a robo advisor tailored to female financial needs. It recognizes the unique financial difficulties that women experience, including slower salary growth and increased longevity. They also claim to understand and address why women are more hesitant to invest their earnings – a main reason they fall behind in retirement planning.
In seeking to narrow that gender investment gap, Ellevest is dealing with the murky but important emotional aspect of investing. According to some experts, that could mean all the difference.
“The emotional side of investing is more influential than just about anything else,” said CFP Meg Bartelt of Flow Financial Planning. “So, anything that makes women more comfortable with investing and directs them to a tried-and-true investment strategy is a good thing.”
How It Works
Ellevest, like other robo advisors, determines which investments to choose by asking the user questions about her goals, retirement timeline and financial history. It includes how much you’ll likely receive from social security and what kinds of accounts you currently have.
Ellevest charges customers an annual 0.5% fee based on the average daily account balance. For example, if your average balance is $100,000, you’ll pay $500 each year. Similar services from Betterment and Wealthfront charge significantly less at .25%.
That price difference seems small, but consider this – If you contribute $250 a month for 35 years and earn 6.25% interest after fees, you’ll earn $372,814. If you pay 0.25% less in fees, you’ll earn $394,141, or $21,327 extra. The more you contribute, the more important it is to minimize those fees.
“Compared to other robo-platforms, women would be better off using a cheaper services that charges much less,” said CFP Jared Tanimoto. “If they truly want a customizable offering, find a financial planner who specializes in working with women to actually deliver a plan that fits their needs.”
What Experts Recommend
Ellevest remains divisive among financial planners, many of whom think there are better products already on the market.
“I think it's an interesting concept, but I'm just not convinced that investing for women is that different than it is for men,” said CFP Sophia Bera of Gen Y Planning. “I'm more excited by Betterment and the new Premium and Betterment Advisor Network pricing that they just rolled out.”
Other planners say talking to a real human being would be more comforting to women concerned about retirement.
“Women do have a different set of needs and concerns, from unequal pay to a much higher need for long-term care in retirement, but how does an asset allocation model solve that?” said CFP Mark Struthers of Sona Financial. “I don't think it can – only a real fiduciary planner can do that.”
Anyone interested in a financial planner can find one through the National Association of Personal Financial Advisors or the Certified Financial Planners organization.
What do you think? If you're a woman would you give Ellevest a try?
Photo Credit: andreypopov