The 2015 Gender Gap in Financial Wellness report is out and once again the findings suggest women are found to be falling behind men when it comes to retirement preparedness.
"The cost of goods and services does not change based on your gender," Financial Finesse CEO Liz Davidson said discussing its latest report. "Women need to know that they fundamentally will have to save more, on average, to adequately fund retirement compared to their male counterparts."
The report from the California-based financial educator suggests four areas where women need to do more if they want to close the gender gap when it comes to financial wellness.
One of these problems – a lack of confidence in their asset allocation – if handled poorly by advisors could result in them being shut out of a very lucrative market.
Neither men nor women are very confident when it comes to asset allocation with just 34% of women (14 percentage points less than men) claiming to be confident about this very important aspect of money management.
Studies suggest that women are better investors than men primarily because they tend to take less risk. Given industry data suggests that 34% of women invest 100% of their portfolios into target date funds, advisors might consider putting clients into these funds which take care of the asset allocation process to and through retirement.
The biggest gap when it comes to investing and money management has to do with general investment knowledge where 84% of men surveyed were confident about this subject compared to just 67% of women.
A 2014 Prudential study found that only one in five women believes the financial services industry actually cares about their needs. Advisors can help make their clients more confident about their investment knowledge by providing jargon-free communication and looking after their best interests.
There’s a 15 percentage point gap between women and men when it comes to having an emergency fund. According to Financial Finesse’s report just 48% of women surveyed had savings set aside specifically for an expected event or emergency.
Vanguard suggests that women are slightly better savers than men putting aside 7% of their salaries as opposed to 6.8% for male counterparts. The TFSA was designed specifically for just this use.
When it comes to paying off credit cards in full each month there’s a gap of 17 percentage points between men (67%) and women.
Advisors should routinely analyze a client’s cash flow and debt management situations whether male or female. Without a proper plan in place to monitor and control both of these important aspects of a client’s financial well-being it becomes increasingly difficult to grow their savings.