Special Feature

Special Report on Retirement 2017

In this special feature: keeping clients calm; downsizing the family home; getting the most from spousal RRSPs and much more from the Mid-November 2017 issue of Investment Executive.

Women are very concerned about maintaining support for their families. They also are more likely than men to be single later in life and to have suffered loss of income and capital as a result of divorce or their partner's death

By Leah Golob | Mid-November 2017

Women, on average, have longer lifespans than men and make less money over the course of their careers, according to the Canada 2016 Census and Women and Paid Work report, both released by Statistics Canada. Yet, special considerations for women rarely are made when preparing this unique investor segment for retirement.

In fact, two-thirds of financial advisors surveyed for the Women and Wealth report, conducted on behalf of Mississauga, Ont.-based Investment Planning Counsel Inc. (IPC), said they don't consider female clients any differently from male clients. (Notably, 85% of survey participants were men.)

However, the IPC report concludes, there are significant differences in how women and men approach financial and retirement planning. This requires a personalized approach to retirement planning by advisors. Notably, the report explains that women prioritize financial security over wealth accumulation and investment performance. This is likely because women are more concerned about being single later in life than men are, and women are more focused on gaining financial security by eliminating debt, the report states.

Women surveyed for the IPC report also expressed a high degree of worry about becoming a financial burden to loved ones or being able to maintain the same standard of living for their family if they die or become disabled, which can be a challenge for you when helping a female client prepare for retirement.

"The mistake many male advisors have made when catering to women investors - and this is a generalization - is that they will focus on a sale [of products to the client] or the outcome only rather than the journey," says Paul Wiley, senior vice president for business development at IPC Private Wealth, a division of IPC, in Toronto.

Talk and listen

When speaking with female clients, you should adopt a goals- or values-based approach, Wiley says: "Don't go in with a whole bunch of paraphernalia trying to sell. The job up front is to listen like a doctor does. With a clean piece of paper [on the table before you], just talk and listen. Then begin to formulate some recommendations based on what needs to be done."

IPC's findings are supported by another recent poll conducted on behalf of Toronto-based Canadian Imperial Bank of Commerce (CIBC), which found that women are more cautious investors than men are, identifying portfolio safety as the top priority (72%), followed by growth (58%) and liquidity (33%).

For example, women with a retirement portfolio who were surveyed for the CIBC report invest their retirement savings primarily in guaranteed and savings products (48%); stocks, including mutual funds (37%); and bonds, including mutual funds (14%).

To ensure that a conservative investment approach doesn't impact a female client's long-term savings plan for retirement negatively, considering the idea of safety with a client within the context of her goals is important, says Lana Robinson, executive director, wealth advisory services, with CIBC Wood Gundy in Toronto: "You want to be able to balance risk with what you're hoping to achieve."

That women prioritize financial security is not surprising, given that the 2016 census determined that senior women are more likely than senior men to be in a low-income tax bracket. As well, according to the census, one-third of women lived alone in 2016.

"We haven't [applied] that [single] lifestyle in financial planning," says Jackie Porter, partner and financial planner with Toronto-based Carte Wealth Management Inc. and co-author of Single by Choice or Chance. "We tend to stick to what we know, which is two people retiring together, and you see those glossy ads of them on the beach together. That's not everybody's reality. How are [single women] supposed to navigate their lives confidently on their own when they're not getting a lot of encouragement or support?"

Encouragement needed

Perhaps the biggest issue in preparing single women for retirement is that they need to save more money. A couple, who can share expenses, might need $40,000-$70,000 to maintain their lifestyle, depending on their geographical region. A single person is likely to require $30,000-$50,000 - a significantly higher amount than for someone who has a living spouse would need, Porter says.

For women who may not be able to build a larger nest egg easily, Porter provides strategies such as maximizing a stream of passive income. For example, if a female client owns a home, renting space within that home might be one way to gain additional income for retirement savings.

There are some key differences in how single women approach retirement planning, depending on whether they're single by choice or by circumstance. Women who are single by choice tend to be more financially literate (or want to be) and have more disposable income because they're championing their own careers, Porter says.

Women who are single unexpectedly, on the other hand, are at higher risk of being ill prepared for retirement, especially if their partner was the breadwinner and played a larger role in making financial decisions, Porter says. According to the IPC report, in many cases, widowed or divorced women are confronted with a partial loss of income and a change in the level of capital available to them in future years.

As a result, you have a responsibility to advocate for both parties in a marriage or common-law relationship, not just the client-partner who initiated your relationship, Porter says: "Women are more likely to end up in poverty. As an industry, we have to look at how we can help women who potentially may not have planned to be single, and might not be financially literate or financially confident. What are we doing as an industry to help create better outcomes for people?"

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