Your el­derly fe­male clients face dif­fer­ent fi­nan­cial chal­lenges than men do.

Investment Executive - - CONTENTS - BY LEAH GOLOB

women, on av­er­age, have longer life­spans than men and make less money over the course of their ca­reers, ac­cord­ing to the Canada 2016 Cen­sus and Women and Paid Work re­port, both re­leased by Sta­tis­tics Canada. Yet, spe­cial con­sid­er­a­tions for women rarely are made when pre­par­ing this unique in­vestor seg­ment for re­tire­ment.

In fact, two-thirds of fi­nan­cial ad­vi­sors sur­veyed for the Women and Wealth re­port, con­ducted on be­half of Mis­sis­sauga, Ont.based In­vest­ment Plan­ning Coun­sel Inc. (IPC), said they don’t con­sider fe­male clients any dif­fer­ently from male clients. (No­tably, 85% of sur­vey par­tic­i­pants were men.)

How­ever, the IPC re­port con­cludes, there are sig­nif­i­cant dif­fer­ences in how women and men ap­proach fi­nan­cial and re­tire­ment plan­ning. This re­quires a per­son­al­ized ap­proach to re­tire­ment plan­ning by ad­vi­sors. No­tably, the re­port ex­plains that women pri­or­i­tize fi­nan­cial se­cu­rity over wealth ac­cu­mu­la­tion and in­vest­ment per­for­mance. This is likely be­cause women are more con­cerned about be­ing sin­gle later in life than men are, and women are more fo­cused on gain­ing fi­nan­cial se­cu­rity by elim­i­nat­ing debt, the re­port states.

Women sur­veyed for the IPC re­port also ex­pressed a high de­gree of worry about be­com­ing a fi­nan­cial bur­den to loved ones or be­ing able to main­tain the same stan­dard of liv­ing for their fam­ily if they die or be­come dis­abled, which can be a chal­lenge for you when help­ing a fe­male client pre­pare for re­tire­ment.

“The mis­take many male ad­vi­sors have made when cater­ing to women in­vestors — and this is a gen­er­al­iza­tion — is that they will fo­cus on a sale [of prod­ucts to the client] or the out­come only rather than the jour­ney,” says Paul Wi­ley, senior vice pres­i­dent for busi­ness de­vel­op­ment at IPC Private Wealth, a di­vi­sion of IPC, in Toronto.

Talk and lis­ten

When speak­ing with fe­male clients, you should adopt a goals- or val­ues-based ap­proach, Wi­ley says: “Don’t go in with a whole bunch of para­pher­na­lia try­ing to sell. The job up front is to lis­ten like a doc­tor does. With a clean piece of pa­per [on the ta­ble be­fore you], just talk and lis­ten. Then be­gin to for­mu­late some rec­om­men­da­tions based on what needs to be done.”

IPC’s find­ings are sup­ported by an­other re­cent poll con­ducted on be­half of Toronto-based Cana­dian Im­pe­rial Bank of Com­merce (CIBC), which found that women are more cau­tious in­vestors than men are, iden­ti­fy­ing port­fo­lio safety as the top pri­or­ity (72%), fol­lowed by growth (58%) and liq­uid­ity (33%).

For ex­am­ple, women with a re­tire­ment port­fo­lio who were sur­veyed for the CIBC re­port in­vest their re­tire­ment sav­ings pri­mar­ily in guar­an­teed and sav­ings prod­ucts (48%); stocks, in­clud­ing mu­tual funds (37%); and bonds, in­clud­ing mu­tual funds (14%).

To en­sure that a con­ser­va­tive in­vest­ment ap­proach doesn’t im­pact a fe­male client’s long-term sav­ings plan for re­tire­ment neg­a­tively, con­sid­er­ing the idea of safety with a client within the con­text of her goals is im­por­tant, says Lana Robin­son, ex­ec­u­tive direc­tor, wealth ad­vi­sory ser­vices, with CIBC Wood Gundy in Toronto: “You want to be able to bal­ance risk with what you’re hop­ing to achieve.”

That women pri­or­i­tize fi­nan­cial se­cu­rity is not sur­pris­ing, given that the 2016 cen­sus de­ter­mined that senior women are more likely than senior men to be in a low-in­come tax bracket. As well, ac­cord­ing to the cen­sus, one-third of women lived alone in 2016.

“We haven’t [ap­plied] that [sin­gle] life­style in fi­nan­cial plan­ning,” says Jackie Porter, part­ner and fi­nan­cial plan­ner with Toron­to­based Carte Wealth Man­age­ment Inc. and co-au­thor of Sin­gle by Choice or Chance. “We tend to stick to what we know, which is two peo­ple re­tir­ing to­gether, and you see those glossy ads of them on the beach to­gether. That’s not ev­ery­body’s re­al­ity. How are [sin­gle women] sup­posed to nav­i­gate their lives con­fi­dently on their own when they’re not get­ting a lot of en­cour­age­ment or sup­port?”

En­cour­age­ment needed

Per­haps the big­gest is­sue in pre­par­ing sin­gle women for re­tire­ment is that they need to save more money. A cou­ple, who can share ex­penses, might need $40,000-$70,000 to main­tain their life­style, de­pend­ing on their ge­o­graph­i­cal re­gion. A sin­gle per­son is likely to re­quire $30,000-$50,000 — a sig­nif­i­cantly higher amount than for some­one who has a liv­ing spouse would need, Porter says.

For women who may not be able to build a larger nest egg eas­ily, Porter pro­vides strate­gies such as max­i­miz­ing a stream of pas­sive in­come. For ex­am­ple, if a fe­male client owns a home, rent­ing space within that home might be one way to gain ad­di­tional in­come for re­tire­ment sav­ings.

There are some key dif­fer­ences in how sin­gle women ap­proach re­tire­ment plan­ning, de­pend­ing on whether they’re sin­gle by choice or by cir­cum­stance. Women who are sin­gle by choice tend to be more fi­nan­cially lit­er­ate (or want to be) and have more dis­pos­able in­come be­cause they’re cham­pi­oning their own ca­reers, Porter says.

Women who are sin­gle un­ex­pect­edly, on the other hand, are at higher risk of be­ing ill pre­pared for re­tire­ment, es­pe­cially if their part­ner was the bread­win­ner and played a larger role in mak­ing fi­nan­cial de­ci­sions, Porter says. Ac­cord­ing to the IPC re­port, in many cases, wid­owed or di­vorced women are con­fronted with a par­tial loss of in­come and a change in the level of cap­i­tal avail­able to them in fu­ture years.

As a re­sult, you have a re­spon­si­bil­ity to ad­vo­cate for both par­ties in a mar­riage or com­mon-law re­la­tion­ship, not just the client-part­ner who ini­ti­ated your re­la­tion­ship, Porter says: “Women are more likely to end up in poverty. As an in­dus­try, we have to look at how we can help women who po­ten­tially may not have planned to be sin­gle, and might not be fi­nan­cially lit­er­ate or fi­nan­cially con­fi­dent. What are we do­ing as an in­dus­try to help cre­ate bet­ter out­comes for peo­ple?”

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