We can't talk about women and investing without discussing the pay gap that continues to exist. And we need to talk about it because the challenges women face -- earning less and living longer on average than their male counterparts -- greatly affect how they invest and what they're looking for in a planner.
Data from Pew Research Center shows that women continue to earn less than men despite the fact that more women are working today than ever (46.7% in 2010, compared to 38% in 1970) and more women than men are earning bachelors degrees (36% of women ages 25 to 29 in 2010, compared to 28% of men in the same age group).
Since 2004, the womens-to-mens earnings ratio has remained around 80%, according to Pew.
Not only is there a gap in earnings between women and men, there is also a gap in their income arc.
Female college graduates initially earn around $31,900 on average, while their male counterparts earn around $40,800, according to recent data from compensation research firm PayScale. As women and men grow in their careers, both genders see a salary growth of around 60% by the age of 30.
However, the growth rate shifts at the age of 30, slowing for women, while continuing to rise for men. By the age of 39, the average womans income has grown by less than 20% in those 9 years. For men, income grows by around 45% by the age of 48.
On average, womens pay peaks at age 39, with a median income of $60,000, according to PayScale's research. Men, on the other hand continue to see salary growth until the age of 48, with a median income of $95,000.
Although women are increasingly participating in the workforce, they still struggle to earn as much as men throughout their careers. When working with female clients, its important to offer resources on salary negotiation and career skills that can help them decrease the earnings gap. Offering referrals to corporate recruiters and career coaches can help your women clients earn more, and invest more, over the course of their careers.
Additionally, family circumstances may cause women to leave and reenter the workforce more than their male counterparts. Providing resources for career guidance and compensation package analysis can help your clients make the most of these transitions.
Along with earning less, women typically outlive men, meaning their accumulated wealth must last longer.
Coupled with the reality that the majority of men die married and the majority of women die single, this puts a heavy burden on a womens retirement savings. It is no wonder that many female clients are more concerned with saving and investing conservatively than male clients.
Acknowledging these challenges and emphasizing comprehensive planning in advance may help alleviate your female clients' concerns and make them feel more confident in their financial futures.
Beyond the concrete challenges women face, there are also more subtle, indiscernible differences between men and women -- in particular, how they think when faced with a decision.
Research suggests that men enjoy finding solutions, whereas women prefer exploring concerns and discussing possibilities.
For men, the priority tends to be finding a solution in a timely manner and creating an action plan. Women, on the other hand, often focus on collecting data and determining possible opportunities. They are more likely to think further about other factors that may affect their decisions and take time before developing an action plan and making a choice.
Why is this? Some research suggests that women and men view the world differently. Men tend to organize things into defined categories while women view things on a broad spectrum. In one study, women and men were asked to determine if 50 objectives belonged, didnt belong, or partially belonged in a certain category (for example: Is a horse a vehicle?). In this study, men were more likely to see an object as either entirely belonging or not at all belonging to a category. Women more often determined that objects only partially belonged.
A study from the University of California, Irvine goes a little deeper, looking at differences in men's and women's brains.
Mens brains have approximately 6.5 times more gray matter than womens, and womens brains have nearly 10 times more white matter than mens. Because gray matter characterizes information processing centers and white matter facilitates the connections among those centers, scientists theorize that those differences might explain why men tend to excel in tasks that depend on sheer processing while women show relative strength in tasks that call for assimilating and integrating disparate pieces of information.
EDUCATION & CONVERSATIONS
What does this mean for you? Women want a lot of information to make decisions. When offering financial services to women investors, it is important to provide plenty of information -- and time -- for them to make informed decisions.
For a financial advisor marketing to women, this means education and conversations. Provide information about the solutions available to prospective women clients and be ready to support them in their decision-making process.
Marketing financial services to women should also include a deeper understanding of the challenges women face in the workforce.
Think through common issues among your female clients and get creative with the resources you can provide to can help address them. Top advisors often provide resources to women executives that can make their lives easier, facilitate career transitions and help them understand their financial choices and make educated decisions.
An advisor that offers ongoing education, resources, and information will be a valuable asset to women investors.