Tags: International Women's Day, Women in finance
Category: Thought pieces

As we approach International Women’s Day, our Chartered Financial Planner Ella Davies considers why women are less likely to engage a financial planner when they really should and how the financial sector needs to evolve to serve all of its clients.  

When it comes to women’s finances, there is a lot of talk and numerous publications – about the gender pay gap, the savings gap, the pensions gap and the motherhood penalty to name a few. We are well versed on what these issues are, but sometimes it is difficult to comprehend the long-term impact they can have on women’s finances.

The 2021 Women and Retirement Report commissioned by Scottish Widows, confirmed that young women will need to save an average of £185,000 more during their working life to reach the same retirement income as men. This figure is a direct result of a savings shortfall (£100,000 difference), an increased life expectancy (£50,000 difference) and higher care costs (£35,000 difference).

Almost half of the savings and pensions gap is driven by working patterns after starting a family. A lot of women have career breaks after having children and when they do return to work they may work reduced hours, which over the longer term can impact earnings and the capacity to save.

In addition, global life expectancy figures estimate women will live five years longer than men. This in turn means women typically have longer retirements which in turn means our pensions must last longer. The cost of long term care is also likely to be higher as a result.

Whilst there has been a shift in dynamics of late, with couples sharing maternity leave, for example, the fact women live longer and carry children will inherently always affect our long term financial plans.

A research paper published by Fidelity (Global Women and Money Study 2021) confirmed that in the UK a woman’s pension fund has an average 51% lower value than her male counterpart. The same paper also concluded that over a quarter of women don’t save for their retirement because they don’t know how best to do so.

The number of female entrepreneurs in the UK has hit an all-time high at 1.7 million, yet more than a third of women are saving nothing for their retirement. The Scottish Widows report confirms that even those who are saving for their future, are not regularly saving enough for a comfortable retirement. So why is this?

The rise in the female economy, therefore, hasn’t fully translated into women’s finances. Again, why is this?

We have discussed the hard facts surrounding the imbalance, but there are other less tangible reasons for the disparity…

Men are from Mars, Women are from Venus

The famous book written by relationship counsellor John Gray can perhaps shed some light on this. Gray suggests that ‘each gender is accustomed to its own set of emotional balances, cultures, and values, or, metaphorically speaking, live on different planets’.

Many women don’t see themselves as investors, which can impact their finances over the long term. When women do invest, we are typically more cautious with our approach, and minimising losses tends to be a priority over maximising gains. Without actively deciding where to save or invest, the concern is that the value of any cash savings could be eroded over time due to increasing inflation. Delays in investing are quite often a direct result of a lack of confidence.

Self-esteem and confidence are unavoidable aspects of the human psyche and how these two emotional attributes play out for women is yet another reminder that women respond and are shaped by a different set of influences and criteria. This ultimately adds a richness to our approach, but it also confirms the need for women to be recognised differently and respectfully.

For example, investment performance is valued by both men and women, however, women are more likely to push back and ask questions to better understand its impact on their short and long term goals.

Whereas men tend to accept a positive performance figure on the face value that their investments are doing well, without necessarily asking any further questions on what this might mean for their long term goals.

Women often end up bearing the responsibility of caring for elderly relatives and children. This could mean a reduction in working hours or becoming a full-time carer affecting their earning capacity. Either way, the clear trend is that focusing on our own finances can sometimes take a back seat.

Financial services has traditionally been a male-dominated industry, perhaps because it was previously seen as a sales role. This needs to change. To be successful, it needs to attract the very best talent possible and better reflect the clients our industry serves.

38% of next gen women want more attention paid to succession and family matters

38% of next gen women want more female wealth managers.

In my experience, women like to deal with women (perhaps because we are on the same wavelength having navigated the plains of Venus together!), and in the absence of many female Chartered Financial Planners, the lack of engagement from female clients could be a direct result of the lower numbers.

62% of women feel less financially secure

40% of women want less jargon

72% of women in the UK feel they are not understood by the finance industry

The WealthiHer report summarises their findings as follows:

• Women in the UK still think that the financial services industry is a man’s world.
• Women do not feel understood by the financial services industry.
• Women need more clarity from their advisers and jargon is offputting.
• Overlooking women leads to a lack of trust and the loss of client potential.
• Women want to see more women in the financial industry.

*Statistics taken from WealthiHer Network – The Changing Faces of Women’s Wealth 2021 Report.

The Confidence Gap

Having reached out to my network, many of my female connections reiterated the same reason for not engaging with a financial planner. Put simply, it was the lack of confidence in that particular environment and the fear of asking a stupid question due to lack of knowledge. This meant the family’s finances tended to be looked after by their partners or the lack of confidence led to inertia and no action was taken.

Knowledge is power. I’m hoping some of the facts quoted here will empower women to take control of their finances. The key is education, which will then bring confidence, which will then bring change.

It is easy to feel overwhelmed and bury your head in the sand when it comes to your own finances, but in my experience, this only makes the feeling of not being financially secure much worse.

I appreciate we have used he/him and she/her pronouns within this article, this is purely to demonstrate the differences between the ‘traditional’ male/female approaches. We encourage all our clients (regardless of pronouns or gender) to start small but start today – think about how you want your money to work for you, ask the questions, educate yourself on investing and do some basic cash flow planning. The more you feel in control, the more confidence starts to blossom. Taking stock at any stage of your life is worthwhile, and becoming more involved in the family’s finances is the best advice I could give.

Take professional advice, it will be money well spent.

Here at Clarion, we pride ourselves on providing holistic financial planning advice and involving all members of the family. We encourage both spouses to engage in the planning and in time, any children or wider family members too. Our client meetings focus on a family’s goals and objectives, the aim being to open up the conversation and spend time really getting to know our client’s priorities, where they are looking to get to and how they want to live their life. Once we understand these softer facts, we can then formulate a plan which is reviewed at least annually to make sure goals remain achievable.

Experience true lifelong financial planning at our cost: email [email protected]  to book a free initial consultation meeting, which is backed by our Clarion Guarantee. Following the production of your lifelong financial plan, you can walk away with no fees to pay in the unlikely event that you do not value our advice or services.  

If you’d like more information about this article, or any other aspect of our true lifelong financial planning, we’d be happy to hear from you. Please call +44 (0)1625 466 360 or email [email protected].

Click here to sign-up to The Clarion for regular updates.