March 8, 2021 is International Day for Women, celebrating the social, economic, cultural, and political achievements of women.1 First observed in 1911, the day also serves as a call to action for accelerating gender parity. This year’s theme “choose to challenge” takes on biases and stereotypes that still stand in the way of women’s equality.
Since 1995, the Presidents of the United States of America have also issued annual proclamations designating March as Women’s History Month.2 These proclamations recognize the specific contributions women have made over the course of American history in a variety of fields.
Women and men alike take a keen interest in celebrating the achievements of our mothers, daughters, sisters, wives, colleagues, friends, and other females who have played an important role in our lives. And all people are welcome to participate in activities to help commemorate these two important holidays. In this context, now may be an appropriate time to reflect on the women you serve as a financial professional – and renew your dedication to helping women achieve their financial goals throughout the year.
Explore the Service Opportunities You May be Overlooking
You may decide that women comprise a segment of your book of business that deserves greater attention from you on an ongoing basis from now on. Here is why.
Women have emerged as an economic powerhouse—earning, controlling, and inheriting more wealth than ever before. A report from the National Association of Women Business Owners estimates that women in the United States controlled 52% of wealth in 2017. The report also projects that wealth controlled by women will only continue to grow, reaching an estimated two-thirds of wealth by 2030.
Indeed, women are adding to their assets a rate of $5 trillion per year globally according to the “Women in Wealth, Managing the Next Decade of Women’s Wealth” published by the Boston Consulting Group in 2020. With this growing wealth comes more financial responsibility and complexity, often intertwined with juggling careers, caregiving, and life’s transitions.
Yet in 2018, only about half of women felt confident about managing investments compared to more than two-thirds of men, based on findings of “Women and Financial Wellness: Beyond the Bottom Line,” published by AgeWave. This disparity remained consistent, even when women and men earn the same scores on financial literacy tests.
Whether by choice or by circumstance, women are increasingly in roles where they must be responsible for their long-term financial security. In fact, most women will oversee their family finances at some point in their lives by choosing to remain single, experiencing divorce or simply living longer than men.
Understand the Unique Challenges to Women’s Financial Security
When helping your clients prepare financially for different stages of their lives, you may use the "go-go, slow-go, no-go" model to help them understand how their spending habits will change over the course of their retirement years. This, of course, is due in large part to physical changes related to aging that people can expect to experience as they get older.
Equally expected to the decline in physical abilities that come with age, and of equal significance to both quality of life and financial wellbeing, Although women have made strides toward social, political, and economic equality, gender-related challenges call attention to the reasons why careful planning may be necessary to meet financial goals.
Women generally earn less than men. This may result in having fewer assets to manage when preparing for the future.
Women may interrupt careers to care for children and/or elderly parents. This may further reduce the assets contributed to retirement plans.
Women can expect to live longer than a male counterpart. This may require more assets to cover lifetime needs.
Women will likely survive husbands and manage the family wealth. This is often overlooked in planning for post-retirement needs.
Furthermore, while women have high expectations for their careers and financial lives, a lack of financial confidence can undermine their planning efforts. And women may often recognize the need for more financial help, yet equally as often fail to make it a priority in their busy lives.
Business Case for Paying Special Attention to Female Clients
For all these reasons, it is important for women to take an active role in their financial lives, whether building a career, working inside the home, partnered, married, divorced, widowed or solo. As an experienced financial professional, you are qualified to help your female clients overcome the obstacles that stand between many women and their long-term financial wellbeing.
Take a careful look at your book of business, and you may see many opportunities to speak with women about their goals and circumstances. When meeting with clients who are married couples, many financial professionals focus more attention on the male partner.
In fact, a study by Fidelity Investments found that among married couples, men are 58% more likely than women to be their financial professional’s primary contact.3 This may be one of the reasons why 70% of women who become widowed leave their husband’s financial professional within one year of their husband’s passing, according to research conducted by Spectrem Group.
So, if you are already talking to your female clients and helping them address what is important to them, good for you. Not only are you doing right for your clients, but you are also taking the right steps to help avoid having client assets walk out the door.
Conversations to Have with Female Clients This Year
Based on anecdotal reports from financial professionals, academic research and an RBC Wealth Management study titled, “The influence of women on building the family legacy,” published in collaboration with Scorpio Partnership, here are five topics to consider addressing with your most valued female clients.
For each topic, listen for the following questions and consider using the information provided in your responses. Or better yet, prioritize these topics for each female client and address the potential questions before they come up.
1. Achieving financial goals
Research for RBC’s “Influence of Women” paper shows that women well-versed in financial matters and focused on the long-term financial health of their families are both empowered and empowering. The study found that high net worth women are ambitious, both for themselves and for the next generation.
How do I save for retirement and college for the kids?
Many well-intentioned parents, especially mothers, prioritize their children’s college education ahead of their retirement savings. Discuss the advantages of maximizing retirement savings first and developing a college savings strategy with other funds. Also, encourage women clients to start saving for both goals as early as possible.
Can I afford to make a major purchase?
Investors may occasionally want to liquidate portfolio assets for a major expense. Maybe it is a home remodel or vacation property. Perhaps it is a once-in-a-lifetime trip for the family. Or maybe a luxury car. When women clients ask about financing wealth management goals, consider prudent use of securities-based lending to help fund major purchases without interrupting progress toward long-term goals.
How can I best support my family?
The decision about whether one parent should stay home with the children is complex. Most families depend on what the mother provides. Indeed, mothers are the sole or primary breadwinners for 42% of U.S. families, with another 22% earning 25–49% of the family income.4 Talk with women about the advantages and drawbacks of employment outside the home, as well as the value they may contribute as the primary homemaker, Chief Finance Officer and Chief of Staff of the family.
Is owning a business right for me?
Women-owned businesses comprise 31% of all privately held businesses—and 20% of businesses with revenues of $1 million or more.5 Discuss the financial considerations, which may include sourcing start-up funding, managing substantial risk and coping with unpredictable income. A securities-based line of credit may be on solution for multiple business-related financial goals.
How can my wealth help me lead a fulfilling life?
Many women see their wealth as a way to initiate positive change. It grants the freedom to support worthy causes and gives a sense of making a real and significant difference. In fact, 62% of high-net-worth women cite social impact as being very or extremely important, compared to 50% of men surveyed.6 Charitable trusts and donor advised funds may be two tools that women clients would like to explore with your help as an investment professional.
2. Accumulating wealth
With generally longer life expectancies, women may need to both accumulate more assets and invest for more growth potential over time. Considerations women may face include potentially lower income levels and possible time away from work to raise families and care for older parents.
What is my investing style?
Women tend to be more risk-aware with their portfolios. Risk-aware investors are less likely to suffer losses from chasing performance or trading too often. However, they also choose lower-risk investments that may produce lower returns. Helping your women clients understand their risk tolerance relative to their time horizon, asset allocation and the potential impact of inflation and taxes may help make appropriate decisions.
Am I taking full advantage of my employer-sponsored retirement plan?
The median retirement account value for women is 34% less than men.7 Many employers match employee contributions, to a certain level. To maximize savings, recommend that women clients take advantage of employer match, if available; contribute more if possible and consider boosting contributions when earnings increase.
3. Protecting wealth
Many women want to live independently while caring for their loved ones during their later years. Taking appropriate steps to protect wealth may help preserve individual autonomy and help offer peace of mind about future financial security.
Are my current protection needs being fully met?
All women need a survivor plan to help provide financial security for themselves or for their spouse and potential dependents in the event something happens to either person. Women who are employed or own businesses need to be able to replace that income. Women who are homemakers and who take care of others need to be able to replace the cost of those important contributions to their family’s wellbeing.
What are my future protection needs?
Seven of 10 retirees will need some form of long-term care.8 Seven of 10 nursing home residents are also women.9 Medicare covers brief periods after qualifying hospitalizations. Medicaid is intended for those with extreme financial need. Talk to women about potential long-term care expenses and how to prepare for them.
What can I count on from my spouse or domestic partner?
Work with women clients and couples to find out what legal and financial arrangements have been made should one spouse outlive the other. Make sure all wills and living trusts are in order and updated, and that all beneficiary designations are correct, especially if either spouse has been married previously.
4. Turning wealth into income
Women are far more likely than men to face financial hardship during retirement. The typical income for women 65 and older is 25% lower than for men, and that gap widens to 44% by age 80 and older.7
Will I be able to retire comfortably?
Consider developing a retirement income plan for your women clients’ circumstances and goals. Plan to cover living expenses (such as housing, groceries, and health care), as well as lifestyle expenses (like hobbies, travel and entertainment).
How much can I expect from Social Security?
Women who are widowed, divorced, over age 70 and have household incomes of less than $80,000 rely on Social Security benefits for most of their income.7 Claiming benefits before full retirement age reduces the amount, while delaying benefits past full retirement age increases it. Include Social Security claiming strategies in your conversations with women clients.
Am I entitled to a portion of my ex-spouse’s employer-sponsored retirement plan benefit?
As part of a divorce or legal separation, a portion of a former spouse’s retirement benefit may be obtained. In most private-sector plans, this is done using a qualified domestic relations order issued by the court. Ask your women clients who may be divorcing to contact their spouse’s plan sponsor to request a copy of the summary plan document and review it with your women clients to help better understand her options.
Am I entitled to any employer-sponsored retirement plan benefits if my spouse dies?
The surviving spouse of a defined benefit plan (e.g., a pension) may be entitled to receive a survivor benefit when the enrolled employee dies. The rules may be different for a defined contribution plan (e.g., a 401(k)). Work with your women clients to consult the summary plan document or the plan administrator about spousal rights to death benefits.
5. Transferring wealth
Women are likely to inherit wealth from grandparents, parents, and spouses. This may be why research for the RBC “influence of women” study found that providing a financial legacy for loved ones is an important goal for many women. Be certain your women clients understand the following details and help them make appropriate choices regarding wealth transfer.
How can I ensure my legacy wishes will be fulfilled?
A will allows recipients of estate assets to be designated. Beneficiary designations on financial accounts supersede wills. Without a will, estates are settled according to state law. Trusts can provide additional instructions, such as when beneficiaries receive assets and how assets may be used.
How can I maintain my family’s privacy?
Estate settlement of a will is conducted in probate court and is a matter of public record. It can also be time-consuming and costly. Assets transferred by trust are not subject to probate publicity or delay. Life insurance proceeds also offer privacy and speed without legal fees or taxes.
How can I minimize my estate tax liability?
Taxes may be due on estate assets above the federal estate tax exemption. To leave more to intended heirs, consider reducing a taxable estate by making gifts to charities and heirs during lifetime or by moving assets into a trust, either during life or at estate settlement.
How can I share my wealth during my lifetime?
Gifts to qualifying charities can lower income tax and reduce estate tax liability. Other gifts exceeding the federal gift tax exemption may be subject to gift taxes. Gifts to third parties for the benefit of the recipient (e.g., paying tuition directly to a school) may not be subject to a gift tax.
International Women’s Day website.
Women’s History Month website.
Fidelity Investments “Couples and Retirement Study.”
Center for American Progress, “Breadwinning mothers are increasingly the U.S. norm,” December 2016.
National Association of Women Business Owners, women business owner statistics from Womenable report commissioned by American Express, “OPEN State of Women-Owned Businesses 2015.”
“U.S. Wealth Report 2014,” produced by Capgemini and RBC Wealth Management.
National Institute on Retirement Security, “Women 80% more likely to be impoverished in retirement,” March 2016.
U.S. Department of Health and Human Services, National Clearinghouse for Long-term Care Information, , February 2017.
American Association for Long-Term Care Insurance, 2014.
Infinity Financial Services is a national, independent Investment and Wealth Management firm, founded with a vision: help enterprising financial professionals to grow truly independent, successful practices, leveraging leading-edge technologies and firm support. Based in Oakland, California, with branch offices around the U.S., Infinity's financial professionals offer an array of asset management, brokerage, insurance, financial planning, benefit plan, insurance, and risk management services. This article provides information for investment professionals. It is not intended for use by the general public.