Making Financial Sense: Cultural Change

James C. Knapp, AIF®

The weather is changing and becoming warmer as the days progress. Appreciating this, we also approach two other dates where we can show our appreciation. It’s Mother’s Day on Sunday, May 12 and Father’s Day on Sunday, June 16.

I couldn’t begin this article without acknowledging my parents, James & Linda. I don’t say it nearly enough; THANK YOU for all you’ve done for me at every phase of my life. Your guidance, encouragement and love has never steered me wrong. To my wife Katie, you have given me three beautiful children and priceless memories along the way. You make me smile every day and every night.

As a parent, I work diligently to protect my children from catastrophic harm; to help educate them so they can adapt to change. The same principles can also be applied to women and investing.

Several relatively recent cultural changes that have made it essential for women to adapt the way they deal with financial matters are:

  • 1974 Equal Credit Opportunity Act

  • 1981 Kirchberg vs. Feenstra Supreme Court Case

Prior to the passing of the 1974 Equal Credit Opportunity Act, discrimination against women applying for credit (such as a home mortgage) was common. Typically single, widowed or divorced women were required to have a male co-signor on credit applications regardless of income. Banks also typically required a male co-signor for banking accounts (eg. checking or savings accounts). The 1974 Equal Credit Opportunity Act eliminated this inequality and allowed women to take control of their own financial affairs.

Prior to the 1981 Kirchberg vs. Feenstra Supreme Court Case, a husband had the legal right to unilaterally take out a second mortgage, home equity loan, etc on a property held jointly with his wife without her consent. Following this 1981 Supreme Court ruling, a husband could no longer take out a loan without his wife’s knowledge and consent; therefore providing women an increased role in financial decisions.

Imagine the learning curve that women of this generation encountered! These cultural changes made it essential that all women take a greater role and more control of their financial affairs. This transition made it vital to gain applicable knowledge in short fashion to navigate within this new environment.

Adam Smith (Scottish philosopher and economist renowned as the father of modern economics, and a major proponent of laissez-faire economic policies) said “If you don’t know who you are, the stock market is an expensive place to find out.”

Relatively recent cultural changes have provided women the chance to participate in financial decisions. As women embrace these cultural changes, they begin to prepare and plan for future life events. As such, education is critical to developing your financial philosophy and protecting your investable assets. This educational foundation should be the backbone of your financial independence.

I believe gaining financial independence starts with determining your investment objectives in order to build an investment process which will help you achieve your investment goals. Your investment process defines your portfolio, not your emotions, which can steer you off course. I have seen it all too often that when markets experience downturns, an investor’s emotional reaction can lead to poor decision making. While this may make you feel comfortable in the short run, it rarely is the most effective way to drive financial independence. A diligently followed investment process can help streamline your focus and investment objectives. A great relationship with your wealth advisor is crucial so he or she can openly and without recourse discuss the ramifications of decisions made that may deter you from attaining your financial independence.

I believe protecting your investable assets for large, unrecoverable losses should be a top priority. Negative returns & high volatility are typically destructive to wealth building. I suggest beginning your investment journey by establishing strategies focused on ways that aim to preserve your hard earned assets. From my experience advising clients toward their financial independence, you will feel losses more than you will feel gains. Painful feelings may impair you from making rational decisions during times of market volatility. Think about purchasing a new vehicle. You would consider taking steps (e.g. purchasing a warranty or appropriate insurance coverage) in an effort to help mitigate a large loss from an unforeseeable event. Most investors aren’t aware that a similar approach can be applied when managing their wealth.

Rather than trying to predict future market movements, focus on risk. For investors, understanding investment risk is a vital concept as it is a function of loss. For example, the more portfolio risk that is taken, the greater the loss may be when markets move negatively. We tackle this phenomena by applying educated assumptions in an attempt to avoid catastrophic damage over time. This is in the same vein of virtually every professional field; eg. a surgeon speaking to probabilities, not certainties. These potential outcomes are based on historical data and events, statistics, trends, sentiment, etc. in an effort to control portfolio risk and avoid permanent loss of capital.

If you seek clarity in developing your investment process, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or view more educational resources at

Thank you for reading. Now go call your mother and father!

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.