More women are managing their household finances than ever before, but many still face a significant retirement funding gap due to lower average lifetime earnings and longer life expectancies. Consequently, women often feel insecure about their financial decision-making abilities.
The right adviser and access to appropriate planning tools can make a major difference, but too often women, pressed for time as they juggle work and family, do not receive the services they need to meet their unique financial situations.
More than half of the respondents in a recent "Women, Money and Power Study" from Allianz Life Insurance Co. characterized themselves as the chief financial officer of their household, and 37% of married women report being the primary breadwinner of the family, up from 31% in 2013. Additionally, 53% of women report they either have a "great deal of responsibility" or they "do it all" when it comes to managing the household's long-term savings and investments.
"I see this concept of women taking control of the household finances as the norm for my clients," said Lazetta Braxton, a fee-only planner and founder of Financial Fountains in Baltimore. Her clients range from young professionals to retirees. "The common factor is they want to do better and they believe they can if they have access to a competent financial planner."
While both men and women encounter challenges on the road to retirement, women face more obstacles and often follow a circuitous path. Women's average earnings remain about 21% below those of their male counterparts. Lower lifetime earnings translate into reduced Social Security benefits and smaller retirement account balances. Factor in time off for caregiving duties and the result is that women tend to have about 42% less income in retirement then men, according to a new report from Prudential Retirement.
Not only do women start out with less retirement savings, but they must make them last longer. Because of longer life expectancies, women tend to spend their final years alone due to widowhood or divorce. Some never marry. Consequently, a woman's retirement could last 30 years or more, often relying on a single income. It's no wonder there is a retirement confidence gap, with just 55% of women expecting a comfortable retirement compared to 68% of men, according to an annual survey by the Transamerica Center for Retirement Studies.
An outdated service model of the financial services industry, designed largely by men for men, is partly to blame. A recent study by the Family Wealth Advisors Council entitled "What Do Breadwinner Women Want?" suggests the industry has not evolved to meet the needs and desires of this new generation of women.
A majority of working women who participated in the breadwinner study said that they prefer a financial adviser who coordinates services with other professionals, such as accountants and attorneys, and that advisers should be able to explain employer benefits and provide charitable-giving strategies. Yet many advisers do not offer these services. "It's no wonder that most breadwinner women are not satisfied with their relationship with their financial adviser," the study said.
Heather Ettinger, co-author of the study and an adviser and managing partner at Fairport Asset Management in Cleveland, recently launched a new division targeting affluent women. Luma Wealth Advisors will provide wealth planning and investment management, as well as social and educational events aimed at connecting women who face similar situations.
The Luma team, which includes seven female advisers and what Ms. Ettinger describes as seven "enlightened" men, places a strong emphasis on helping clients through transitions, both planned and unplanned. As a current client with three school-age children is negotiating the details of her divorce, the Luma team is working closely with her divorce attorney to run multiple financial scenarios and to offer guidance on an appropriate mix of liquid assets and longer-term retirement investments.
In other situations, the team helps clients figure out if they can afford to accept a lower-paying job with a nonprofit organization while still funding their retirement dreams or help pay for their grandchildren's education or their parents' long-term care needs.
"I feel very strongly that if you give women financial knowledge and acumen and savvy, you will make them more confident and they will be the agents of social change," Ms. Ettinger said.
Sometimes, the problem comes down to communication style — or lack of it.
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Since moving from Buffalo, N.Y., to Phoenix a decade ago, Denise and Stephen Briscoe, both now 60, hired a succession of investment advisers. "I was hoping to find that person that would give me the confidence that we would be able to retire," said Ms. Briscoe, who has always handled the family's finances. "Our investments would go up and down and I was told not to worry, but I never got an explanation about what I should be worried about."
Then about three years ago, Ms. Briscoe saw an ad for a class on financial planning at a local community college taught by Cristina Acosta and Nancy Fromm, co-owners of Money Wise, a Scotts- dale, Ariz., firm that specializes in retirement income planning. She and her husband both attended and soon became clients.
"They spoke in plain English and offered a whole lot of information, not a sales pitch," Ms. Briscoe said.
The Briscoes now have a comfortable mix of liquid assets, mutual funds for growth, annuities to provide future income and a life insurance policy with a long-term care rider. With a goal of paying off their mortgage before retirement, the advisers suggested that Denise, a nurse, contribute only enough to her 401(k) to capture her employer match and redirect excess funds to reduce the mortgage balance. Meanwhile, Stephen, an advertising executive for a car dealership, would continue to fully fund his company retirement plan.
"Most clients come to us with a bunch of investments, but what they really need is a plan," Ms. Fromm said. "The No. 1 concern we hear, particularly from women, is how do I replace my paycheck?"
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The Money Wise team typically creates an integrated plan that addresses investments, annuities, tax planning and health care, and outlines the need for various legal documents. They can refer clients to local attorneys and accountants.
They present the client's "life plan" in a three-ring binder so clients can see where their money is coming from and how long it is likely to last. And if assets fall short, the Money Wise advisers discuss alternatives such as working longer, delaying Social Security benefits, downsizing from a big home to something less expensive or taking out a reverse mortgage.
"Nancy and I have committed our practice to transforming the way women are treated in the financial services industry," Ms. Acosta said. To that end, the two advisers recently launched a new division, Woman's Worth. The marketing platform and coaching program is the brainchild of Jeannette Bajalia, a financial adviser based in Jacksonville, Fla. Ms. Fromm and Ms. Acosta are among the first dozen advisers taking the Woman's Worth concept nationwide.
"Most women don't care about investment returns," said Ms. Bajalia, who is also president and principal adviser of Petros Estate & Retirement Planning and author of "Retirement Done Right: Don't Just Invest … Plan." "They want safety, protection and predictability. Money is just a means to get that."
Ms. Bajalia said she generally meets with prospective clients three or four times to learn about them and their families, their goals and what keeps them up at night before discussing their finances and creating a comprehensive plan to address their needs.
"Jeannette not only wants to transform how women clients are treated by the financial services industry, but how female advisers are treated," Ms. Acosta said. "This is our time to shine."
While women may be naturally more nurturing and empathic, it doesn't mean that male advisers can't connect with female clients. They just have to try harder.
George McCuen, president of Napa Wealth Management in Napa, Calif., said the secret to his success with clients, particularly women, is he asks a lot of questions and listens intently to their answers. "My goal is to get to know what is important to them," he said.
"While men often want to talk about investment returns and how to beat the index, women tend to talk about quality of life and experiences they want to share, such as helping their children buy their first home or taking trips with their grandchildren," Mr. McCuen said. "Our investment discussions tend to be very short. We talk about how to get them to where they want to be with the minimum of risk."
For many women, improving their financial security begins at work. The Prudential Retirement income gender gap study suggests plan sponsors can make a significant difference in retirement outcomes by improving plan design and providing holistic financial wellness education. Adding an automatic enrollment feature has been proven to increase participation in workplace savings plans, particularly when paired with an automatic escalation feature that gradually increases contribution rates and the use of target-date funds as a default investment option to take advantage of diversification and rebalancing.
Interactive technology can help employees better understand their retirement needs, monitor their progress and learn how their retirement savings will translate into retirement income. As women tend to seek advice before making a decision, worksite-based counseling, whether in person, on the phone or via a video chat, can help improve retirement outcomes.
Just as past investment performance is no guarantee of future returns, the advice industry shouldn't rely on outdated business models to serve a new generation of women who control an increasing share of assets and who are not satisfied with the status quo.