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It was a brief encounter at the Invest trade fair in Stuttgart that resonated with our author. It was not the first time that she learned how risky men are when investing their wives’ or partners’ money for their pensions without them questioning it.
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“How can I do this now simply explain…” The man in his 40s dragged out his words. I had asked a simple question: how he was building up an additional pension for his wife. Shortly before, he had told me frankly that his wife left the investment to him. He had tried to explain to her how he was investing her money. But she had waved him off and said: “Oh, you’ll do it.” This blind trust in her husband’s financial and asset management skills certainly made me curious.
What was special: He had spoken to me in the blogger lounge of the Stuttgart Stock Exchange at Invest. Invest is the largest trade fair for private investors in Germany. His opening question to me was: Why is there this ‘women and finance’ thing? Finance has no gender!
And so we ended up asking how he was investing his wife’s money for retirement: in crypto money, mainly in . Nothing else.
Pension provision with crypto money and derivatives
His answer left me speechless – and reminded me of the descriptions of a coaching client. She had missed the opportunity to get out of a similar arrangement by breaking up. And so her now ex-boyfriend had been making monthly payments for years. her Money in their Depot. She didn’t understand anything! This made her increasingly uncomfortable. I encouraged her to get the access data to her depot, to do her own research and to insist on explanations. He refused at first, but then laid his cards on the table.
It turns out that he invested her money in options and warrants, i.e. in highly complex derivatives. He was quite successful, and her portfolio was in the black. But derivatives are not a basis for long-term wealth creation. They are gambling. And it was not what my coaching client wanted.
Blind trust leads in the worst case to total loss
What these cases have in common – and I know of a few others – is that the women trust their men to have financial skills and to deal consciously with the risk of loss. They entrust them with their money without questioning their skills. The men confidently retaliate with highly risky investments. Gambling instead of creating value. In the worst case, it ends in total loss.
Scientific evidence shows that men do not rate their financial education significantly higher than women. However, they are more likely to make important financial decisions confidence. And in doing so, they sometimes overestimate their abilities. Behavioral economics calls this behavior “overconfidence.” According to this, people rate their skills in a certain area much higher than they actually are.
Of course, there are husbands and partners who invest the money of their families and their wives wisely and according to scientific principles and create shared value over decades. In my observation, these are men who involve their wives, explain investment strategies, focus on tangible assets and stay away from speculation.
Men are not financially competent by virtue of their gender
Let’s be clear about one thing: men are not more financially educated than women because of their gender. They are just more confident, but they also often overestimate their financial skills. And yet so many women leave existential financial decisions, especially those relating to retirement, to their husbands. Regardless of whether they are married, in a partnership or simply living together.
Is that smart? No. It is negligent in terms of personal responsibility and self-determination. Have you also asked your husband whether he wants this role? That of your investment advisor and asset manager? And what qualifications he has? To be your husband?
Confident chatter does not necessarily mean additional pension
How do you feel? Do you leave your financial decisions entirely in the hands of your partners, men or women? If so, why? Be honest with yourself.
Make sure you consider these points when your husband or partner invests your money:
- What investment strategy is being pursued?
- What goal is defined? In concrete terms, in numbers?
- What is the composition of the assets and how high is the risk of loss diversification in the sense of “not putting all your eggs in one basket”.
- Is financial risk-bearing capacity and personal risk tolerance taken into account in the investment strategy? Women prefer risk-conscious strategies, men prefer risky ones. Has this been considered?
- Do you understand the investment? Do others understand the investment when your husband explains it? If not, stay away. Then the securities are too complex or there is too little knowledge.
Take responsibility for your money and retirement planning
Don’t fall into the romance and supposed financial competence gender trap. If you don’t take care of your money yourself, it can result in significant financial losses. I see getting involved yourself and building wealth as a team as a partnership on equal terms. Otherwise, there will be a power imbalance – and dependency.
Please feel free to write to me and tell me how you handle this partnership- and personally existential issue of wealth creation.
Source: Stern
