Worldwide, women are increasingly making the key financial decisions — yet research shows they are often held back by a lack of confidence in their investment knowledge. Can financial advice help bridge the gap?
It’s been dubbed ‘The Female Economy’1 – the emerging trend of women becoming increasingly more interested in their finances and making the majority of spending decisions.
Women now control around $20 trillion in annual consumer spending globally. In the United States, 80 percent of consumer purchasing decisions are made by women2. Closer to home, women make up 46 percent of Self Managed Super Fund (SMSF) trustees3.
But while women are making leaps and bounds in terms of managing their finances, research shows they are often held back by a lack of confidence in their investment knowledge.
A recent survey showed that just over 20 percent of women feel very confident that they have a good financial plan for the future. At least six in ten worry about their financial future at least monthly4.
This lack of confidence is complicated by broader market factors that can often leave women in a more financially disadvantaged position than men. Women typically earn less than men, yet live longer.
Many also experience punctuated career cycles meaning they are under prepared for retirement. When they do retire, the average payout is 43 percent less than their male counterparts5. For small business owners, the statistics are particularly stark. Around 53 percent of self employed females – that’s 700,000 women in Australia – do not contribute to superannuation6.
This creates a risk that many women may outlive their savings and be unable to manage their current lifestyles in retirement.
Together these factors highlight the need for good planning early on – both to increase women’s confidence in investing and also to achieve financial security that’s on par with that of men.
The role of advice to help bridge this gap is key. Women and families who obtain financial advice are reported to be happier, wealthier and have more control over their finances than those who don’t. A recent survey by KPMG found that Australians who have a financial planner saved more and have a greater investment balance than those who do not get advice7.
Of course, the true value of advice goes beyond a single financial plan. It’s found in the ongoing relationship between the client and adviser – where the adviser guides, mentors and supports their client to achieve their financial and lifestyle goals.
Education is another key ingredient of good advice – the adviser’s ability to make the complex simple and encourage confidence in financial decision making.
The end result — heightened confidence in personal finances — is of course positive for the individual. But it’s also good for the global economy, with full participation from both women and men reported to produce stronger economic growth, social cohesion and prosperity8.
1. ‘The Female Economy’, Harvard Business Review (Blog), 2009
2. ‘Why Women Mean Business’, Wittenberg-Cox & Maitland
3. ‘Female SMSF trustees narrow gender gap’, Financial Standard, 2013
4. Westpac Women’s Markets Survey, 2011
5. Get on board for Super Equality, Fin Review 2012
6. Australian Women Chamber of Commerce & Industry survey
7. KPMG Econtech: Value Proposition of Financial Advisory Networks, 2009
8. ‘Removing barriers to women’s participation fuels economic development’, UN Women