Gender matters: advising women on their finances

The changing role of women

Women are becoming ever-more active parts of the US economic and financial landscape.

And, where women today own more than $10 trillion, or a third of all household financial assets, by 2030 women will own more than $30 trillion.  

But while women make up an ever-larger share of the workforce, lasting change in others remains elusive.

The gender pay gap may be narrowing, but women still only earn 78 cents for every dollar a male counterpart would earn.

And exacerbated by the pandemic, the labor force participation rate among women has regressed against its 2002 level, with the majority of pandemic-led job losses affecting women.  

The pandemic has also had a disproportionate impact on the financial security of women and further exacerbated pre-existing trends.

Even though more women are looking for financial advice to help them achieve their ambitions, too often this guidance doesn’t reflect women’s circumstances.

Since 2014, the number of women-owned businesses has grown 21 per cent

An uneven playing field

From retirement planning to investing and saving, women and men need tailored advice that reflects the unique challenges they face. Where financial guidance is too heavily tailored towards money management for men, women are left without effective guidance that reflects their needs.  

Across all generations, statistics show that more women associate money with negative emotions – such as anxiety, dread, fear, and inadequacy – than men do. Women also report feeling less confident in their ability to manage money, and less confident that they will be able to retire when they wish to..  

At the same time, many women also face a more adverse economic environment. Despite both men and women losing jobs at the height of the pandemic, men have returned to work at a much higher rate than women. In fact, an estimated one million fewer women are working today than before the pandemic.  

Women are also more likely to take extended breaks from the labor force, often to have children. This means that many reduce their working hours or leave the workforce altogether, leading to lower lifetime earnings, which could impact their saving and retirement planning. 

Four tips for providing better financial advice for women

Diversify your organization 

Despite many organizations and advisors making efforts to improve the diversity of the wealth management and financial advice industries, these fields remain male-dominated.

Only 14 per cent of financial advisors in the US are women, but with 70 per cent of women preferring to speak to a female advisor, this lack of diversity is standing in the way of more equitable guidance.  

And it isn’t just diversity of advisors that matters. From the language that organizations use down to the graphics and advertisements, it’s important to review your key communications to ensure your financial guidance isn’t skewed in favor of men.  

Understand individual needs 

Tailored financial guidance helps individuals meet their financial goals, whatever their circumstances.

But when it comes to women, too often it can be assumed that not only do the majority want to have children, but that they will also be the ones to take the career break.

Make sure that you understand the personal ambitions and circumstances of all your clients, rather than making assumptions.  

Saving for the future 

Retirement planning for women can need a little more thoughtful planning. On average, American women live five years longer than men, meaning that many women may need a larger pool of savings to count on.  

But due to the gender pay gap, fewer women working in professional and management roles, and more frequent working breaks, women earn less on average over their lifetimes than men.

This can potentially lead to financial stress if not planned for in advance. Depending on the ambitions of your clients, more emphasis on saving for later life at an earlier age can be helpful.

Saving money earlier means that your client’s earnings will have more time to compound, providing an extra cushion for the future. To see exactly how the dynamic of compounding works, maybe take a look at our compound interest calculator to play around with your own numbers!

Understand how women invest 

Although women are less likely to invest than men, women typically generate better returns.

Largely, women have a lower risk appetite and are more likely to invest for the long term, and with stable returns in mind.  

Around 34 per cent of women in the US have not started investing yet, despite the potential benefits and returns.

If your clients are willing and able to do so, it may be worth reminding them that investing for the long term can be an excellent way to develop savings for the future. 

Women are making up an ever-larger share of the workforce, owning an increasing proportion of wealth in the US.

Yet with their own unique challenges and often a general lack of confidence when it comes to managing their money, women are looking for the right financial guidance from advisors they can trust — and you can help.