In my decade of working in financial services, my greatest joy always came from helping women achieve their financial goals. I personally believe the more financially independent women there are in the world, the better off we’ll all be (there are studies that back this up as I’ll cite later). I’m passionate about enabling women to become savvy investors as we work to close the gender wage and wealth gaps. But I’ve also been extremely disappointed in the lack of progress we’ve made as a society to address these issues - until now.
But first let me tell you a quick story. A few years ago, I was working for a boutique firm in New York City as an advisor when a woman, let’s call her Jane, came to me looking to move on from her divorce, get out of debt, and start building wealth before it was “too late.”
Jane’s divorce was painful and drawn out. It was also extremely expensive. She paid for the entire thing on one particular credit card. Since her divorce, which was finalized a few years prior, she wanted nothing more than to pay this card off. It was haunting her emotionally. Jane felt like she really couldn’t move on with her life and have closure until this debt was gone. She had also met a new guy with whom she really wanted to enter a second marriage, but with a clean slate. The problem was Jane also had other debt obligations. She was carrying balances on two other credit cards, had a car loan, and felt completely overwhelmed. She wasn’t sure where to focus her efforts. To make matters worse, she was also terrified of the stock market and her lack of investing confidence left her with limited retirement savings as she entered her 50s.
Jane felt stuck. Which cards should she focus on paying first? Shouldn’t she also be saving more aggressively for retirement? What happens if another emergency pops up? How would she pay for it? Jane was trapped in analysis paralysis which led to the complete avoidance of solving any of her money issues. Eventually, it all became too much to handle and she decided to work with a financial advisor for the first time.
My job working with Jane was multi-pronged and nuanced. First, as her financial coach I needed to lay out a plan that would keep her motivated and provide much needed psychological relief from the “divorce debt.” Then as her investment advisor, I needed to beef up her portfolio through an increased savings rate and dollar-cost averaging strategy so she could retire with dignity in her 60s. I also needed to work with her as an educator to make sure she understood how and why we were doing these things and to correct some problematic money behaviors she’d developed over decades (mainly overspending and carrying high interest rate debt). Lastly, I was going to be Jane’s accountability partner through it all. Still, her main problem was that she lacked a clear path for how to pay off the debt and solidify her financial future. When I presented Jane our plan I focused first on paying off the “divorce debt.” This would provide a psychological win for her and be the motivation to pay off the other high interest debts and start building real wealth for herself afterward.
Over the course of our first year working together Jane and I had dozens of calls, Zooms, and email exchanges. Being her coach, advisor, educator, and accountability partner took a tremendous amount of effort on her part and mine, but it paid off. Jane’s net worth exploded after our first year working together. We built and implemented a custom plan for her and we automated all of it to ensure her personal financial infrastructure was foolproof.
Jane remains one of my favorite success stories. I wish I could work this closely with the millions of women who need it, but that’s impossible. I’m only one person. I have limited time and resources, and even at my best I could only take on a few dozen clients at this scope. This isn’t just the case for me and my schedule – scaling financial expertise is an age-old problem, meaning that financial planners and advisors have to charge high fees. Jane paid more than $4,000 per year to work with me. Unfortunately, this is what we see throughout the financial planning and advice industry - it’s extremely cost prohibitive.
Jane had everything going for her - a high income, intelligence, and ever-increasing financial skills. Still, she had trouble making financial decisions and putting them into action. She solved this by outsourcing the decision making to me. But as we said, this came with a hefty price tag. Most people need a similar level of hand-holding but simply can’t afford it. However, advances with artificial intelligence (AI), specifically in decision-making-as-a-service, are bringing costs closer to zero. AI will allow us to provide a high touch and personalized level of service at scale - just like Jane received working with me, the human.
This is the best thing that’s happened to women’s finances. The same careful analysis, coaching, planning, and insightful recommendations a human provides are now available through artificial intelligence. AI doesn’t keep business hours either and will be readily available and always at your fingertips. This is a game changer for those of us who are dedicated to helping women become financially independent and ultimately to close the gender wealth gap.
Artificial intelligence in personal finance will allow us to reach millions of women who otherwise don’t have the time or resources to work with a comprehensive planner, advisor, and/or coach. As of present day, only about 35% of Americans have used a financial planner or advisor. Of the nearly 300 million adults in the US, this leaves almost 200 million people who are not currently receiving financial guidance. We can assume roughly half of these adults are women. This means the reach in the US alone could be ~100 million women who will now have affordable access to financial guidance.
The affordability of professional financial guidance is also a massive issue AI will soon correct. The fact only 8.4% of women make $100,000 or more means a whopping 92% of adult women are earning a middle or lower income. Opening up the world of personalized financial services to millions of women across income ranges will be life changing.
As we’ll subsequently discuss, AI can help us address the main areas of concern with women’s finances - the confidence gap, the wage gap, and the wealth gap. The media has focused mostly on the potential negative effects of artificial intelligence on women’s finances thus far, so we will discuss the ways in which AI is actually the best thing to happen to women’s finances in decades.
The confidence, wage, and wealth gaps have only seen small incremental improvements over time. In fact, the wage gap has been somewhat stagnant over the past two decades and the wealth gap is getting worse. The use of AI in personal finance will help women achieve financial independence for themselves and their families which will lead to the closing of these gaps faster than ever before. AI for personal finance is not a detriment to women, but an opportunity we must seize.
Did you know that it wasn’t until 1974 that women could open their own bank or credit accounts? Until 1978, women could be fired from their jobs for becoming pregnant. It wasn’t until 2009 that women could sue companies for pay discrimination past the six months statute of limitations. All this is to say, the improvements to women’s financial quality of life have been fairly recent. The state of women’s finances has never been better, but we are still a far cry from where we need to be to reach financial parity with our male counterparts. We still have not come close to equity with men’s finances in terms of net worth, income, and investing participation.
First, I need to acknowledge there are substantial systemic issues working against women on a societal level. This paper isn’t ignoring these problems, but each issue is complicated, nuanced, and deserves its own attention that we simply can’t achieve in this one paper alone. Systemic issues negatively impacting women’s wealth include:
In terms of net worth, there is a widening wealth gap between men and women. For every $1 dollar a man owns, women own approximately .32 cents. Black and Latina women fare far worse, owning just a penny compared to the average man’s dollar. The wealth gap is the wage gap compounded over the course of our careers. For many reasons, women haven’t grown their wealth through investing like men have. First, women don’t earn as much throughout their careers which we’ll discuss more momentarily. Secondly, only 48% of women invest compared to 66% of men. Over the course of decades women have less money to invest and aren’t as likely to invest as much of that money which exponentially grows the wealth chasm between men and women.
Secondly, the wage gap has been widely discussed and documented. Women now earn on average 82% of what our male counterparts earn. This is the narrowest the wage gap has ever been, but unfortunately the wage gap has remained relatively unchanged since 2002. The gap has also closed more for white women than it has for Black and Hispanic women. The recent pandemic created what was also called a “she-cession” as millions of women left the workforce due to the types of jobs that were being eliminated and increased pressure on parents with limited childcare options. This unexpected migration out of the workforce will further exacerbate both the wage and wealth gaps.
Lastly, there is a confidence gap damaging women’s finances and it’s contributing to both the wage and wealth gaps overall. The confidence gap is simply women’s perceived ability to be a good investor. You may have heard the statistics where men apply for jobs if they’re 60% qualified, whereas women will not apply for the same job unless they feel they are 100% qualified. This is the confidence gap and it seeps into many areas of our lives including money.
As we mentioned earlier, only 48% of women invest compared to 66% of men. Fidelity found that of the women who do invest only 33% actually consider themselves an “investor.” Furthermore, BNY Mellon found only 1 in 10 women feel they fully understand investing and only 28% of women feel confident investing their money.
Funnily enough, women are statistically better investors than men. Fidelity also found that women investors outperformed men by an average of 40 basis points. Women investors tend to favor buy and hold strategies whereas men are more apt to buy and sell their investments with greater frequency. Female investors often are more aware and cautious of the risks of investing and thus will hang on to their investments for longer periods of time. This strategy, called “buy and hold” historically performs better than more active trading strategies.
Artificial intelligence has been a part of personal finance for years now, particularly in investing, but its uses are becoming broader and more impactful with the rapid development of generative AI. All aspects of personal finance - cash flow management, saving, investing, debt repayment, and so on - are approaching a level where the money is self-driving.
Artificial intelligence according to Andreesen Horowitz: “the much-discussed topic of ‘self-driving money’ finally has a chance to achieve its potential. Imagine a platform that can move your money to optimize your balance sheet. In the past, this wasn’t possible from a technical standpoint, as products were stuck in ‘read only’ mode. They could generate information or analysis, but couldn’t take action on your behalf – which is arguably the most important step.”
The future of self-driving money via AI will provide people with insights, spending forecasts, coaching, and summarization of their portfolio and overall money situation.
This technology is the biggest breakthrough for women’s finances since we started entering the workforce in droves during World War II, attending college at the same rates as men, and owning our own accounts in the 1970s.
First, AI will address the confidence gap in a way which has never been done before at scale. Artificial intelligence will take action for women. The confidence gap delays or prevents women from taking action with their finances - self-driving money solves this. AI acting as a financial coach will also provide enhanced financial education through just-in-time learning. According to a study done by FinanceBuzz, women tend to value advice from others. AI will do just that but at a fraction of the cost of traditional professional advice. AI’s advances are such that it can coach women on money behaviors to help them overcome feelings of financial guilt, shame, and fear in money management. Be it through a “conversation” or another generated medium.
Secondly, AI will be able to provide female users with compensation data and market rates for their jobs which will enable us to ask for raises that are in line with what we should be paid, and more importantly, what our male colleagues are being paid. The technology can also provide scripts for negotiating and assist in searching for higher paying jobs.
Lastly, AI will close the gender wealth gap through the creation of tailored and automated plans for its women users. If the money is self-driving, investing and saving will be prioritized and implementation will not be further delayed. The investment strategies will be based on personal risk tolerance and capacity. And spending plans created through AI will be based on the woman’s values and habits. The obstacles to building wealth are essentially removed through artificial intelligence.
There will be other improvements to women’s finances through artificial intelligence as well. Affordability and accessibility of professional financial guidance are the main among them. Traditional financial planners charge a percentage of assets under management, normally in the 1% range. More comprehensive financial planners often also charge flat annual fees ranging between $2,000-$7,500. AI available through personal finance apps and platforms will allow middle and lower income women to gain access to expert advice for small monthly subscriptions or fees. The gates that kept millions out of financial services for decades are now open.
Artificial intelligence in an app is also available at all times and isn’t restricted to Monday-Friday business hours like traditional advisors and planners. This is hugely helpful for busy working women and mothers who often don’t have the time or bandwidth to look at their money until later in the evening or early in the morning.
Well built artificial intelligence should also eliminate human bias in areas such as lending. No longer will loans and their terms be determined based on someone’s gender or race. AI provides a level of information transparency not yet seen in lending, banking, and investing.
Finally, AI will lighten the load for women in other areas of their life. The average human makes somewhere around 35,000 decisions a day. This leads to decision fatigue which impacts our ability to properly manage finances. Women are also the majority of the household managers around the world. Furthermore, according to Boston Consulting Group: “Many women shoulder a disproportionate burden of home and family care, responsibilities that can impede their ability to invest in demanding careers…We may still be far from an AI-powered robot that completes our chores for us, but there are ways that AI technologies could alleviate the mental load: for instance by automating household procurement, appointment scheduling, and family calendar management. In the future, AI could help reduce the burden of managing multiple interfaces, serving as interpreter and central coordinator of the many apps and platforms that power a household…Ideally such technologies will reduce the stresses of balancing home and work obligations…”
It is our responsibility as women and as leaders in the AI industry to make sure the potential negative impacts of AI are minimized (such as bias). AI is not perfect and will need continual fine tuning to ensure these positive influences are realized. One important factor in a positive outcome for women using AI is employing more women in artificial intelligence industry roles. Currently only 30% of AI roles are held by women.
Overall, AI will be beneficial to women’s finances - particularly women who have been ignored or shut out from financial services in the past - due to increased affordability and accessibility. This will lead to more women becoming financially stable and independent. Families will fare better and be lifted out of poverty. Entire economies will benefit from women having more money. Women will gain more power and influence and thus we’ll see greater societal changes. The positives are plentiful. According to the UN: “women’s economic empowerment boosts productivity, increases economic diversification and income equality in addition to other positive development outcomes.” The UN continues, “recent studies by the International Monetary Fund have provided evidence that more egalitarian societies can sustain greater and more sustained economic growth.”
Financial equity will lead to the solving of other pressing societal issues. As women gain financial equity and autonomy, we’ll see more opportunity and justice for women and girls around the world. Economic inequality is also “associated with a greater number of social problems, such as higher rates of violence, murder and substance abuse, incarcerations, teenage pregnancy, as well as psychological and mental health issues,” according to the UN. For these reasons it is imperative that AI be beneficial to women and their money.
Life satisfaction for both men and women will improve as women gain financial independence. According to a study conducted by The London School of Economics found that “residents of countries with greater gender equality are, on average, more satisfied with their lives than are residents of societies with less gender equality…this research indicates that gender equality benefits society as a whole and presents practical steps towards building a better, more satisfying life for all.”
AI will help us achieve all of these important milestones in a way which has never been done before.
