The average woman in the US can expect to outlive her husband by several years. This leaves her in sole control of their joint finances and potentially vulnerable due to age-related health costs. Yet the financial advice landscape is overwhelmingly male. Many women report feeling shut out of the advising relationships their male partners enjoy. How can women take a greater role in investing for their financial future? How can financial advisors build relationships with them that will last after their husbands have passed away?
On August 24, Advice Chaser will host a webinar on women and investing, which should be informative for both women and men who care about them. In the meantime, however, let’s talk a little about the challenges women face and a few solutions.
Financial Challenges for Women
According to a 2019 report by the Bureau of Labor statistics, women only make about 82 cents for every dollar men make. This puts them at an investing disadvantage from the start. If you earn less, you obviously have less to invest, and thus less to collect compound interest. By the time our average woman and average man reach retirement, the wage gap has grown into a savings chasm.
To make matters worse, women on average live five years longer than men. They need to plan how to make fewer dollars stretch over more years. Meanwhile, actuarial calculations take this increased longevity into account and give women lower payouts on annuities.
Women are also far more likely than men to take on caregiving roles, whether that be for children, aging parents, or other relatives. This takes them out of the workforce for years at a time, putting the brakes on retirement savings and hindering career advancement.
On average, women suffer greater financial consequences from divorce than men do. Given the divorce rate in the U.S., this problem undoubtedly has ramifications for a significant cohort of female retirees.
Investing Successes for Women
The above factors paint a rather bleak picture of the prospects for our average woman upon retirement. However, it isn’t all bad news.
Women overall have a lower risk tolerance than men and tend to report lower levels of confidence in their investing strategies. Despite this, women consistently net higher returns than men. Their discomfort with playing the stock market means that they leave investments alone for longer periods of time. This allows the money to grow, whereas constant trading does not. It would seem that women are not excessively timid investors; rather, men might be excessively bold.
Changing the Financial Advice Landscape
One of the best ways for women to increase both their confidence and their success in investing is to practice. But there are a number of institutional barriers making it difficult for women to simply call up a financial advisor and get started making money.
Only a very small percentage of financial advisors and fund managers are themselves women. This can promote an “old boys’ club” mentality where advisors assume female clients won’t be interested in learning about their investments. This in turn can make women more reluctant to seek out an advising relationship.
Instead of being stuck in the past, advisors should work to find out what’s relevant and interesting to their clients and connect with them on a personal level. This will encourage women to venture into the investing world more and more. It benefits the advisors as well since they’ll be less likely to lose a client as soon as the male half of a couple dies!
Learn More About Investing for Women
Women face a number of special concerns when it comes to saving and investing. However, the financial industry is often designed to shut them out rather than including them. For more information about pitfalls and solutions for women’s investing, sign up for our webinar at 1 p.m. Eastern Time on August 24. Our host, Joe Okros, is a financial planner specializing in long-term strategy, with a heart for helping women overcome their unique financial challenges. Get ready to close the investment gap!