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The Gender Pay Gap Leads to The Gender Retirement Gap

Our industry has been male-dominated, in terms of its professionals and its clients, for most of its history. Over the past several decades, as more women entered the workforce, our industry was slow to respond to the expanding role that women were playing in making financial decisions for themselves, their businesses and their families.

The financial services industry has long viewed women as a secondary market at best — or at worst, as a niche market. However, women now wield unprecedented economic and financial clout — the U.S. Department of Labor reports women make up nearly half of the U.S. work force and frequently out-earn their husbands.

The good news for advisors and their female clients is that women will continue to hold management and professional positions, generating significant incomes. While previous generations of women made significantly less than men for comparable work, the gender pay gap for younger generations is narrowing, according to a study from PayScale and Millennial Branding.

Women will need our services right from the start of their careers as they will most likely have to fund the vast majority of their own retirements. Suffice it to say that the younger generation of women can count on living longer lives. The sooner they start planning and saving for retirement, the better.


What We Know

In addition to the well-publicized gender pay gap, there is another gap that women need to be aware of — the retirement gap.

Because of their lower salaries, glass ceilings and time taken from work for caregiving, women, on average, start retirement with less money than men have, but they need more money to fund retirement than men do. Why? Because they will live a long time and are likely to live some of it alone, as women are four times more likely to outlive their husbands. That’s the word from The Women’s Institute for a Secure Retirement’s 2016 report, “What Women Need to Know.”

Countless studies have shown that retirees’ No. 1 worry is outliving their income. For women, this is a real concern, because longer life spans mean higher spending for everything from meals to health care.

There is a big need to assist people with what might be a 20- or 30-year drawdown of the money they accumulated over the previous 30-40 years. Retirement today isn’t like what your grandparents or great-grandparents experienced. Back then, you could retire at 65 and put all of your money in a certificate of deposit because you might be gone by age 75. Not anymore. Today’s retirees might have a time horizon that could be longer than the time that new parents have to save for their children’s college.

Although everyone needs our help with retirement savings, this is especially true for single, divorced and widowed women. Many of these women need our financial guidance, especially if they alone are responsible for all of life’s expenses as they age.

Following are a few ways that we can help and benefit from a woman-friendly practice. Please know that there are some generalizations here and not all people, be they men or women, act in the same way.


Encourage Savings

Women should be encouraged to start saving as early as they can, and save as much as they can. It is also critical to encourage female clients to increase their contributions each year. I once enrolled a 22-year-old woman in her first 401(k) plan. She told me her plan was to retire at 55. I reminded her that by retiring at 55, she might possibly be retired for longer than she was employed.


Be Patient

If you are a male advisor, remember that women have a more complex and sophisticated decision-making process than men do. Women may ask more questions and want to see more alternatives than men do. Furthermore, women like to see data but also seek out others’ opinions and experiences. These factors all go into their decision-making process. Compare that to men who might look at the bottom line and pick a mutual fund that has the best return over the past year, for example. So, be a patient educator.


Does she have a plan?

Both men and women tend to feel more confident having a game plan. If you don’t offer individual financial planning, maybe consider partnering with an advisor who does. It is critical for women to have a financial game plan.


Longevity Insurance

Women should allocate between 40 and 80 percent of their retirement assets to guaranteed income sources, according to a landmark 2008 University of Pennsylvania Wharton School of Business study. Consider suggesting annuities as part of your clients’ retirement plans.


The Benefits

If you can help your female clients feel more confident, you may reap some of the benefits that go along with helping women. Women make twice as many referrals over the course of a business relationship, according to a 2012 marketing study. Women often make referrals because they feel responsible for helping those closest to them. Keep in mind, it is best to ask for referrals from the standpoint of how you can help the people they care about, not for how it can benefit you.

Women are also the gateway to the next generation. Assets, or the ownership of the business, often go to the spouse before they go to the children. If you do a good job for mom, you’re in a good position to retain the children as clients. So, if you’re working with a male client who is married — even a client who appears to be primarily responsible for managing the couple’s finances and who is your primary contact — make sure you include the wife in meetings, reviews and client appreciation events.

Finally — and this is really a reminder to male advisors — 85 percent of women are gender neutral when it comes to choosing an advisor, according to Penn Mutual’s MyWorth Survey. The three biggest factors that influence women’s choices of an advisor are trust, rapport and competency.

Go through your client list or book of business. Who can you help to better plan for retirement this week?


Michael S. Ross, a 12-year MDRT member with three Court of the Table honors, has been helping clients for the past 23 years. Michael focuses his practice on helping women, families and businesses plan for their financial and retirement needs. He is on the NAIFA-Massachusetts Board of Directors and has served on various MDRT Committees. [email protected].

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