Solving the gender retirement gap

Over the years numerous studies have shown men enjoy higher retirement incomes than women.

The reasons for the disparity are varied and complex; although I’d suggest that the gender pay gap, along with different working patterns, are two of the most significant contributing factors.

However, we wanted to understand more, so we commissioned YouGov to research consumer attitudes towards retirement. The results of our survey (YouGov interviewed 2,005 people over the age of 50) reveal two further reasons for the gender retirement gap:

  • A lack of financial advice: Men are 24.91% more likely to take financial advice about retirement than women
  • Awareness of Pension Freedoms: A significantly larger percentage of women (50.76%) are unaware of Pension Freedoms compared to men (30.25%)

For anyone who cares about the retirement millions of people are facing, these findings are hugely worrying.

Firstly, advice. Research shows that people who take financial advice enjoy higher retirement incomes. It’s therefore concerning that women are less likely to engage with advisers.

Secondly, the Pension Freedoms revolution. The rules, which are now three years old, present many opportunities. Perhaps to retire early, phase into retirement or mould the income profile to better to suit the consumer’s needs. Naturally there are many threats, not least withdrawing too much too soon or making poor decisions about Defined Benefit schemes.

It’s clear to me (but then it would be, I’ve worked in the profession for longer than I care to remember) that financial advice and planning, combined with Pension Freedoms, will help people retire more successfully. In other words, on their terms, at a time of their choosing and with an income which suits them.

It’s not just me saying it either.

Last year’s ‘Winning over Women’ report highlighted a disconnect between female consumers and male advisers. The report concluded that financial institutions have continuously overlooked the needs of female consumers at every stage; from advertising through to the advice relationship. This has led to women having lower portfolio value incomes in retirement, coupled with a greater propensity for holding cash, which we all know isn’t usually ideal.

As a profession we have an ethical and social duty to address this problem. The fact that by 2020 almost half of all investable assets will be held by women provides an additional commercial motivation.

So where do we start?

Addressing the disconnect

We need to focus on people, in this case women, although I’d argue that the same problem applies to millennials. That means going back to basics. We need to understand more about the 51% of people who make up our population:

  • What motivates them?
  • What are their fears and concerns?
  • What do they want from life generally and retirement more specifically?
  • And, most importantly, what is it that we doing to put them off seeking advice?

Once we know the answers we can concentrate on what’s important, addressing their concerns and fears, while helping them achieve their hopes and aspirations, not financial products.

To give an example; do people want to have a financially secure and hopefully comfortable retirement?

Yes.

Do they care whether an adviser recommends active or passive funds?

Almost certainly not.

I’d argue that this shift in mindset is already happening. It’s a grass roots movement right now, driven by financial planners. It’s gaining traction but needs a boost if it’s to penetrate the mainstream public consciousness.

To do that we must get better at demonstrating the need for, and value of, financial planning and advice.

That probably means developing lighter touch propositions to cater for those who don’t need ‘full fat’ financial planning, for example the millions who have been recently auto enrolled into pensions.

It certainly means finding the right way to communicate with, and then engage, those people who don’t plan to take advice.

And finally

Although things are changing, financial advice is still dominated by people who look like me; white, male and middle-aged.

If we are to make advice more accessible to women, we need more female advisers and planners.

That starts with a change of mindset. We need to demonstrate we are truly a profession, which includes moving the recruitment emphasis away from the “how many clients can you bring” approach. Do accountants and solicitors ask young recruits how many clients they can bring? No, I doubt they do.

We need to create a clear pathway to help more women become financial advisers and planners. And no, that doesn’t simply mean trying to turn paraplanners into advisers!

We have to show that becoming a financial adviser or planner is a valid career choice. I don’t know many people who have harboured long-term ambitions to be a financial adviser or planner. That’s such a shame. It’s a great profession, which at its best changes lives. We must find a way of making what we do more attractive to school leavers and university graduates.

Dare to dream for a moment; wouldn’t it be great if young people grew up wanting to be a financial planner, we increased the number of female advisers and planners, while closing the gender retirement gap?

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