Women have distinct financial planning needs

Marie Philips

By Marie Philips

Special to the Financial Independence Hub

The financial assets controlled by Canadian women as well the income earned by women is projected to grow significantly over the next decade.

This increase in wealth will result from a greater overall participation in the work force, higher level professions, an increase in female entrepreneurship and being the beneficiaries of a large share of the $1 trillion wealth transfer that is underway in Canada.

By 2026, women in Canada will control close to half of all accumulated financial wealth, roughly $900 billion in financial and real estate assets. That’s a significant increase compared to a decade earlier, when the share was closer to one third.

Yet according to a recent white paper published by IPC Private Wealth in collaboration with Strategic Insight, almost two  thirds of financial advisors (85% of whom are men) do not believe a female client should be viewed in any different light than a male client.

If we look at some of the concerns women have, we can see that there are distinct financial planning needs for women compared to men. Life expectancy at birth now means mortality in 2015 is 84 (80 for men).  Women live longer and are likely to have interrupted careers as a result of family responsibilities (children and caring for elderly parents) which all lead to potential lower available savings for retirement income.

Caregiver women more likely to end up in poverty

Research shows that women caregivers are likely to spend an average of 12 years out of the workforce raising children and caring for an older relative or friend.  According to the Women’s Institute for a Secure Retirement (WISER), women who become caregivers for an elderly parent are two times more likely to end up living in poverty than if they are not caregivers.

Women are typically more concerned about running out of money, losing their health or having a deteriorating capacity condition (so insurance for health and long term care are important considerations).

One widower for every four widows

For every four widows there is one widower. In 2011, the average age of a widow was 56! The fifties are key accumulation years with many couples no longer facing the financial burden of mortgages and funding children’s education. Some reports indicate that within five years of becoming a widow, newly single women experience a 40% decline in income and the rate of poverty among elderly widows is consistently three to four times higher than that of elderly married women.

Financial advisors also need to address that women over 65 tend to have a lower level of financial literacy.  A survey in the US in 2014 shows that more than two thirds of female investors indicated no one had educated them about investing in the stock market. They tend to have a lower level of understanding about basic financial concepts such as inflation, registered vs non registered accounts and compound interest.

The same concern about such a drastic decline in income can be extended to divorced women. Often, women don’t wish to sell the family home, or wish to keep it as part of the equalization of assets process, but there may not be enough income there to sustain their retirement as a result.

Divorcees need 30% more income to maintain standard of living

Divorced women need more than a 30 % increase in income to maintain the same standard of living they enjoyed prior to their divorce.

Women have also indicated that they have specific philanthropic or legacy goals and are more concerned with ensuring that they have assured outcomes than reaching certain investment performance goals.  As they are usually more risk averse than men, these are all key considerations that  planners need to keep in mind when having the financial planning conversation with women.

Download the full report on Women & Wealth.

Marie Phillips is a Wealth Advisor at IPC Securities Corp.

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