How Can Advisors Play a Role in Closing the Financial Literacy Gap with Women Clients?

An older woman smiles with a row of bookshelves behind her. She wears a pink shirt.

It is important that advisors understand that women may present different educational needs and retirement planning strategies than men. Your female clients may not be aware of the contingencies related to the cost of long-term care and other factors that could affect retirement income.Nearing retirement is supposed to be an exciting time, the start of a new chapter of life, but all too often those nearing retirement may be more stressed than ecstatic about this life transition—especially women.

Compared to men, women are less likely to have calculated or estimated their retirement savings needs, and are shown to have less understanding of retirement savings plans, such as 401(k)s and IRAs, than their male counterparts. Financial advisors and agents need to understand the concerns of clients and act as a trusted, knowledgeable resource for any knowledge gaps.

With your help, your clients can fill in the gaps of their financial literacy and feel confident and supported in their retirement planning.  How can you help close the financial literacy gap for your clients?

Address the Unique Challenges Related to Income Strategy Planning for Women

Agents and advisors who are educated in the different challenges that women clients face the more effective you can be in building a retirement strategy that educates, informs, and supports clients.

Simply put, retirement planning for women can be different. As a trusted advisor, before your client comes to you, you should be aware of the fact that women of all ages and backgrounds can face different challenges before they even start to plan their retirement. These challenges are related to financial literacy, a wage gap and less savings, long-term care needs, and often finding themselves in caregiving roles which can further impact earning potential and retirement savings.

A lack of a strong financial foundation on which to make informed financial decisions has led many clients, women include, to not conduct a calculation or estimate of their retirement savings needs accurately.

Emphasize the Importance of Saving for Retirement and Calculating an Accumulation Goal

More than 4 in 5 women claim to have a plan for where their income will come from in retirement; however, only 1 in 3 women report having a formal, comprehensive, written retirement plan.  This planning gap does exist among men as well but at a much less prevalent rate and suggests income plans are either far less formal or not well understood.

One in three women under the age of 65 believe estimating how much to save for retirement is the most important for retirement planning, more so than those 65 or over who feel that estimating monthly income in retirement is the most important.

This combined misunderstanding of tax treatments for these plans or why an individual might want to invest and annuitize 401(K) assets suggests advisors should educate near-retirees and retirees about developing an effective retirement plan with a clear accumulation goal.

Understand How Women Invest: Diversification and Retirement Equity Allocation

In the US, half of women have a conservative investment risk tolerance, and women over 65 with assets below $500,000 tended to be even more conservative investors. On the other end of the spectrum, only 30 percent of men shared this same sentiment. Although the stock market fluctuates and carries some level of risk, women tend to invest more cautiously than men, especially after retirement. Advisors should help demystify concerns regarding investing and encourage diversification of portfolios.

According to the Nationwide Advisor Authority Study, nearly 6 in 10 women or 59% of women would like to invest a portion of their portfolio in an annuity to protect against market risk.  Additionally, 55% of women of retirement age prefer to invest in an annuity to protect against outliving their savings. Annuities are a product that advisors may recommend to help navigate client concern about stability of retirement during uncertain times.

Advisors should also be aware that COVID has also changed how women feel about investment risk. The pandemic in particular impacted how women of retirement age perceive their financial security and future economic stability resulting in a changed financial priorities. In our Women in Retirement Series of blog posts, we dedicated an entire post to this topic.

Provide Educational Resources & Play a Role in Financial Literacy

The majority of women ages 50 to 75 and with assets of at least $100,000 work with a financial advisor and are more open to professional financial advice than men. Additionally, more than 9 in 10 women with partners or spouses equally share or lead financial and investment decision-making for their households. DMI has an entire library of client facing brochures on a wide variety of topics that we will co-brand to your business, including our new Women in Retirement materials.

Women in Retirement Brochure Mockup

These materials can help bridge the financial literacy gap, start conversations or continue the conversation with your clients. For access to our client facing library, contact your DMI Sales Representative.