Although we’ve made great steps forward for women in the workplace, there’s still a gender pay gap and a gender pension gap. We have shared parental leave now, but its take-up is relatively low, so women still tend to be the ones taking time out of work to look after young children. Older generations need looking after too and that responsibility also tends to fall on the shoulders of women, taking them out of work again. Plus, women tend to outlive men. These factors all lead to the accumulation of fewer assets which need to last for longer.
Men and women also have very different attitudes to their own finances. Women are less willing to take risk, choosing cash over riskier stocks and shares, while the reverse is true for men. Women are also 1.3x more likely to have savings than men, but if their savings are in cash, the potential for capital growth is perhaps prohibited or reduced. It was clear from our research that women are less financially confident than men.
Our research also found that men and women have very different interests and priorities. Men tend to concentrate on macro themes, such as inflation and geopolitics. Whereas women tend to focus on mental wellbeing and physical wellbeing, the potential of losing their jobs, and the fallout from the covid pandemic. We need to be aware of these differences too.
As financial planners, what can we be doing? First and foremost, we must talk about it and recognise there are differences between the way men and women manage their finances. It helps too if we use plain, jargon-free language and offer financial education where relevant. It’s also important to bear men and women’s divergent interests in mind to make sure we remain as appealing as possible to both genders. Effective communication can bridge a lot of gaps.
A robust financial plan is critical for everyone, but perhaps especially for women due to their potentially inconsistent income, where building a buffer is even more important. A secure financial plan really does allow people to sleep easy at night, in the knowledge a lot of eventualities are planned for. It also helps put risk into context by looking at the long-term picture. Taking risk can be painful in the short term (we’ve all seen what has happened in markets this year) but in the long term, the right amount of investment risk can be crucial to hitting financial goals.
Age is a crucial aspect of financial planning too, and there are societal influences at play here too. Baby boomers have benefited from defined benefit pensions, house price increases and received broadly better pay in relative terms. Those factors have created a lot of wealth for that generation. Although it isn’t all bad for millennials. They’re much more likely to have gone to university, and because of automatic enrolment are more likely to have private pensions. The internet has made financial services more accessible, and there’s wider gender inclusion in the workplace too. It isn’t necessarily good to be old or young, it just presents different obstacles and challenges.
Age groups have also different experiences which leads to divergent behaviours and attitudes to investing. Moves in markets as you’re going through your formative years stay with you for the rest of your life. Those that went through the stagflation of the 1970s or even the war or the Great Depression, tend to be more cautious throughout their entire lives. Markets have boomed over the past 10-15 years, and millennials have learnt about investing through TikTok and cryptocurrencies. Their view of risk can be quite different to previous generations.
How can our industry adapt to these differences and challenges? We found about 20% of our older female clients like to have an advisor of a similar age, but some prefer to have a younger adviser who will stay with them throughout their whole life. Roughly 35% of our younger female clients would prefer a female adviser of a similar age to them, so we need a range of advisors to suit everyone. We need to be able to level up across the generations and provide our continued service to an entire family. £293 billion is expected to be inherited by future generations, and if we’re not there to support, there’s a real chance that wealth can trickle away or end up in the wrong hands. Sharing an adviser across a whole family means planning is joined up and can be discussed openly.
As advisers, we need to be adaptable to the challenges we face, communicate clearly and be aware that everyone has different financial requirements; there’s no ‘one-plan-fits-all’ solution. It’s important to reflect that in a diverse workforce so that we reflect the clients we’re representing. Understanding the differences between age and gender is key to providing a financial planning service that’s higher touch, bespoke, and gives our clients confidence about their future; a good financial planner should be able to deliver just that.
This note is for general guidance only and does not constitute, and should not be construed as, investment advice or a recommendation to engage in any investment activity. For further information, please contact your usual Adviser or one of our team.
Saunderson House, a wholly-owned subsidiary of Rathbones Group Plc, is authorised and regulated by the Financial Conduct Authority.
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