Women are climbing the corporate ladder and entrepreneurship is growing. Women are rising in affluence and now hold an equal, if not greater, influence on wealth in the family compared to males. In fact, recent Strategic Insight data showed the share of wealth controlled by High New Worth (HNW) women with more than $500,000 in investable assets is estimated to hit $2.1 trillion by 2024 – and that is up significantly from $940B in 2014.
Studies over the years have highlighted men and women think differently and invest differently, and that's okay. Women can be more reserved, more thorough in their research, focus on the big picture while looking to build relationships and plan for the future, while men tend to focus on building and accumulating wealth. There was a time when women thought wealth was like a pool that could be depleted – once it was gone it was gone for good. Men on the other hand looked at wealth like a stream that could be replenished.
The lines are blurred today and while women are demonstrating an ability to amass wealth, they continue to be exposed to unique concerns associated with longer lifespans and the risk of being a single-income earner, while at the same time being the primary caregiver of parents or other loved ones.
I reached out to the Investment Planning Counsel and asked Marie Phillips, financial advisor at IPC Securities Corporation in Ancaster, Ont. , why there are still differences between men and women when it comes to investing.
1. What are the potential financial risks unique to women?
“I think that the demographics of women are changing and it is important to note that there tends to be a gap in financial literacy between the older generation (who relied on their husband to be providers and those who ran the budget/household) and the younger generation. The older generation needs more training in cash flow management and could outlive their money if they don’t understand the importance of planning. This translates to divorcees as well the “suddenly single” syndrome.
“Women tend to live longer than men and are traditionally more risk-averse than men. (Although, I think this is changing with women emerging as business owners). Women typically find that they are not saving enough or that they don’t have the social network to provide them with support as they get older.
Women also tend to be the caregivers, regardless of their work situation. According to an (old) StatsCan study in 1997, there was a 62 per cent chance of an interruption of work for women compared to 27 per cent of men. This means lost wages.”
2. How should women approach investing and financial planning differently than men?
“I don’t think that women should approach anything differently, but perhaps recognize the unique risks inherent as a result of a different social role. Budgeting awareness, cash flow planning. Also, as women seem to be more ‘caregivers,’ I’ve noticed a reluctance to protect inherited assets from future marital breakdown – i.e. women tend to blend these assets into the marital property more so than men.”
3. What are the key financial planning needs for women?
“Because of the financial security issues related to living longer, or divorce (and not accumulating the same degree of career stability (or wages potentially due to the gender gap), because of interruption of work due to caregiving roles, women need more values and goals based planning.
Women are no longer the “stay-at-home” individuals. A BMO Institute study shows that now 40 per cent are breadwinners in the U.S. (30 per cent in Canada).
They need to feel more secure in their decisions and plan for the future. In divorce and death, the income could drop by 50 per cent or more but expenses do not fall as much."
4. How can women confidently plan for their financial future?
"Talking through their situation with a financial advisor who asks the soft questions and drills down to what is important to them. This is not just a risk /reward question /scenario. Who will be affected if they don’t meet their goals? What philanthropic goals do they have? Do they have the investments and savings to meet any hurdles due to health or marital issues/interruptions in savings?"