Financial planning is about gender equity

[ December 4, 2015 ]

Women access financial planning less than men, earn less than men, accumulate less than men and retire with less than men. But they live a lot longer than men.

One third of women receiving an age pension live below the poverty line.

Single women who do not own a home suffer the most. They are all below the poverty line.

You owe it to your female clients to let them know the obstacles they face, and the extra strategies they need, to make sure this does not happen to them.

Start with the gender income and wealth accumulation bias. It’s caused by:

  1. educational decisions and opportunities. Schoolgirls study lower income subjects, not maths and sciences, and university women continue the trend, tending to courses aligned with low income occupations
  2. occupational income bias. Women are paid less for the same work. This is across all industries and professions. Female university graduates earn on average 4% less than males, and the gap widens as their career’s progress. Some say the gap is as much as 18%, and over a working lifetime that really hits hard
  3. greater engagement in unpaid work, greater absences from paid work, due to child bearing and rearing responsibilities and greater other family care responsibilities eg aging parents and parents in law
  4. the continuing sex based stereotype within the family that men should be the full time main bread winners and women’s roles are complementary and supportive and
  5. the phenomena of earlier retirement, whereby women retire before men despite significantly longer life expectancies.

The answer is not a pink PDS, a glossy photo and an invitation to a cocktail party hosted by a fund manager. Most female clients will be too busy looking after the kids to get there.

You have to do better than that.

You have to reach out to your female clients. It’s easy. Just e-mail them. If you send it they will read it.

You have to inform your female clients. Advocate for them. Coach them. Educate them.

It starts with a strict insistence on equal rights in the workplace and all family and personal relationships. Let your female clients know if they are underpaid. Coach them through salary increases. Coach them through up-skilling programs. Further education programs.

Encourage your female clients to start businesses.

It includes extra super from an early age to compensate for the employment gaps; spouse super transfer strategies to equalise super benefits; smarter career choices; active career management; life plans emphasising direct asset acquisition strategies for properties and shares, and smart tax planning.

It includes assertiveness training and attitude sharpening. Nil tolerance for gender discrimination, and a preparedness to move on whenever it is encountered.

It concludes with a preparedness to work harder, smarter and longer so a given physical effort creates a greater financial reward, successful financial husbandry to avoid over-spending (particularly on dependants) and implementing sound and safe long term investment strategies.

It’s not hard. An extra $75 a week every week to super will more than close the super gender gap over a working life. An extra $75 a week to rapid home loan repayments will push your client well ahead in the wealth accumulation stakes. But encourage your female clients to do even more.

Those stakes are high. The future poor will be women, particularly single women who do not own a home. Most will be retired for well over thirty years. Retirement near or below the poverty line is not fun.

Your strategies should focus on assertive workplace behaviour to avoid gender underpayment, skills creation and maintenance, home ownership strategies and super, as much as possible as young as possible. Health management is critical: staying employed in the greying years is critical to the economics of retirement. Working part time for an extra ten years makes a huge difference once fully retired.

The big thing is financial planning education. Educate all your clients, but particularly educate your female clients. They need it more. They are otherwise destined to earn less, live longer and die poorer. Your female clients have a heightened need for financial planning advice and action at all stages of their lives.

Buy them books. E-mail relevant press articles. Paint pictures and tell tales of success. Get into their heads. They have to do more, sooner, for longer.

Products are of limited value. They have a role to play but products alone cannot bridge the gender gap. The only way to bridge the gender gap is to permanently change female financial behaviour.

Women tend to be more risk averse than men, and this plays out in their investment strategies. They skew to the conservative, so in the long run their investments compound slower than average. Female clients should invest more assertively, less conservatively, better tolerating risk, and achieving better long term results.

Virginia Woolf wrote her essay A Room of One’s Own in 1928. If she could posthumously reprise it I bet she would call it “A Positively Geared Share Portfolio of One’s Own”, and include a new eighth chapter on the need for women to become financially independent to be socially independent and relationship independent. And equal.

Suffragettes need super. And financial planners.

Society works against women’s financial independence. They are encouraged to spend, spend and spend. The average cost of a wedding is just under $40,000 (source: ASIC’s Smart Money Website. The average female super fund balance is just over $40,000 (source: Australian Super Women and Super).

Think about that for a moment.

Female health management is critical. A woman cannot work longer and harder if her body and mind won’t take it. Women in their fifties should consult their GPs for active health management plans designed to keep them working, at a pace and in a space they control and enjoy, well into their sixties.

GP health plans can include Medicare funded psychology services.

You can read an excellent article by Catherine Robson on the value of educating your female clients here: How a financial planner saved Book Club host Jennifer Byrne’s life.

Interested in learning more about women and financial planning? Educating your female clients? Getting a better handle on the phenomena of women in financial planning? These documents will repay reading:

  • In 2015 the ANZ released the “ANZ Women’s Report Barriers to Achieving Financial Gender Equity”. You can download this report here: ANZ Women’s Report Barriers to Achieving Financial Gender Equity.
  • In 2012 The Australian Institute of Superannuation Trustees published “Super-Poor But Surviving. Experiences of Australian Women in Retirement” and it seems even more relevant in 2016. You can download this report here: Super poor but surviving.

Another suggestion: send this on to your female clients and invite them in for a meeting to discuss what they should be doing now to make sure they are fiercely financially independent in later life.

Ask your clients to pass it on to friends and family, with an invitation to contact you for specific help and advice.

The Dover Group