A new study spotlights the uphill climb females and their financial advisors face while planning for retirement.
Just 18 percent of retirement-age women are informed on how to make a nest egg last in retirement (compared to 35 percent of similarly-aged men), according to The American College of Financial Services’ 2017 RICP Retirement Income Literacy Gender Differences Report.
“Even more worrisome” is that despite low retirement literacy, the majority of women (55 percent) are still extremely confident that they and their spouses would have enough money to retire comfortably, the college noted.
“Women face considerable challenges when it comes to preparing for retirement, and lacking financial literacy certainly does not help the cause,” said Jocelyn Wright, assistant professor of women’s studies at The American College. “This is a problem, especially when a female at age 65 can expect to live another 20 years on average, two years longer than the average man. With this in mind, women cannot depend on their spouse to hold the keys to their retirement.
“It’s time to get smart on how to navigate this complex and extremely important stage of life,” Wright said.
‘Some Distinct Differences’
How can retirement-minded women, ideally working hand-in-hand with a trusted financial professional, up their retirement savings game? With some discipline, increased awareness, and a dose of creativity, experts say.
“While all investors desire to grow their wealth, there are some distinct differences in how many women approach investing,” said Min Zhang, CEO and co-founder of Totum Wealth, a provider of digital client engagement and institutional-quality analytics for financial advisors.
To begin with, women are often less aggressive than men when it comes to investing, Zhang pointed out.
“Studies have attributed this to a range of different factors ranging from biology to maternal instincts to the effects of the of the pay gap,” she said. “In reality, women should be more aggressive when it comes to investing due to the fact that they typically live longer and will have longer health care needs.”
Another key factor in working with women investors is building trust, Zhang added.
A Charles Schwab study of women in investing concluded that, “high-net-worth women favor performance over planning, though planning is still very important,” she said. “They prefer shared decision-making versus sole control.”
Additionally, the gender of an advisor matters less than age, and face time is more important than email.
“In other words, to win the trust of female clients, there needs to be a deeper understanding of their life, relate to their feelings and let them share their stories,” Zhang said. “All this connection might need to happen before a pitch of performance, goals and numbers.”
There has also been a rise of investment software targeting women, such as ElleVest and WorthFM. As tech-savvy as women are, Blackrock Investing reports that millennial women report overall lower interest in robo advice than men (45 to 72 percent).
The biggest reason? A belief that they don’t have enough money to seriously invest. As an advisor, it is crucially important to take help female investors identify financial life goals and build a plan to get there, Zhang said.
A big concern for advisors is that Wall Street seems to keep missing the mark in adequately engaging with women on financial matters.
“We conducted ground breaking research that found all of the assumptions about gender and finance is wrong,” said Joe Duran, founder and CEO of United Capital, a financial services firm with $19.3 billion in assets and 84 offices nationwide. “Our industry needs to recognize where we need to improve, and women seeking a financial adviser need to know what qualities to look for in a wealth partner.”
Tips for Investing
Duran outlines a few tips for female investors when they are seeking professional guidance for their wealth:
Look for a firm that values your time. “Our research found that one out of every three frustrations reported by women had to do with time while less than 8 percent had to do with money,” Duran said. “Women have high standards, and that often leaves them feeling like they have to do everything themselves. Finding an adviser that can answer the question ‘Am I okay?’ quickly and efficiently is an adviser that values your time.”
Look for an adviser/firm that takes the time and energy to make sure things are done right. “When searching for a financial adviser, ask the hard questions and make sure you’re surrounding yourself with people who live up to the same high expectations you hold for yourself,” Duran said.
Choose someone who doesn’t see you as a category. “Most advisers mistakenly assume that women’s daily frustrations or elations are gender-specific,” Duran said. “This couldn’t be further from the truth. In fact, 87 percent of women feel either patronized or insulted when professionals treat them differently because of their gender.”
Obviously, the financial advisory sector has much to do to earn the trust of female clients. The benefits to both sides warrant putting in the work to do just that.
Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms, including CBS News, The Street.com, and Bloomberg. Brian may be contacted at firstname.lastname@example.org.
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