Studies seem to pose varying viewpoints on how much wealth women control in the U.S., but no matter which you reference, women can be said to control between one-third and one-half of it. Even though men are still wealthier, the number of wealthy women is growing twice as fast in the U.S. as the number of wealthy men, yet advisors manage a very small percentage of women’s assets compared to men’s on average.
It’s not that women don’t need the help. The fact is, there is still a large gender gap when it comes to women’s financial knowledge—one that has significant implications for why they aren’t seeking advisors’ services or even saving enough for their futures.
The gender gap our recent Financial Finesse research has identified shows some evidence particularly interesting for advisors. First off, there was a large gap in women’s knowledge and confidence about investing:
- 64% reported having a general knowledge of stocks, bonds and mutual funds (versus 84% of men)
- 25% said they felt confident their investments were allocated appropriately (versus 42% of men)
Another big gap was found in women’s knowledge and confidence about basic money management, since this has an ultimate impact on their ability to save for retirement:
- 63% of women said they have a handle on their cash flow so they spend less than they make each month (versus 80% of men)
- 46% of women have an emergency fund in place (versus 61% of men)
This gap is of significant concern since women face more significant financial obstacles than men in planning for retirement and other long-term goals to begin with. Women have longer life spans than men (three to five years on average) which means they must amass even more for retirement. They also earn less on average than men, typically receive a lower monthly benefit from Social Security, and have higher health care costs throughout their lives. Yet women are behind in virtually all areas of financial planning as well as overall financial knowledge. With these obstacles they have even more significant planning and investing needs than men. Those needs are not currently being met which means there is an opportunity for advisors to reach a larger potential client base of women if the problem can be solved.
Gender Gap Consequences
The consequences of having a large gender gap in financial literacy are simply too dire to ignore, both from a directfinancial perspective and from a longer term cultural perspective.
How women’s lack of financial savvy directly affects advisors can be broken down into two key areas:
Issue One: Women Feel They Can’t Retire and Thus Need Advisors’ Help to Do So
This issue has the potential to be a major societal issue that could have a lasting impact on our economy if not solved. Women need advisors’ services to invest and plan for retirement to ensure they are prepared. But today, women are significantly more likely to delay or forgo retirement than men. Sixty-one percent of women age 50-64 indicated they plan to delay retirement versus 45% of men. This number may actually be an underestimate based on the fact that women tend to be much more conservative investors than men. This leaves them vulnerable to choosing investments that don’t grow sufficiently to fund income needs in retirement.
On top of that, most women will be widowed or divorced before they die, which means most women will need to take care of themselves financially at some point in retirement. Women are currently relying too heavily on their spouses to fund their retirements and manage their assets instead of seeking financial guidance for their own assets.