Support your female clients by giving them the knowledge and tools they need to navigate their own financial journeys.
On Thursday 8 March, International Women’s Day will be celebrated across the globe. The last year has been a particularly important time for women, with female-driven political and social movements such as the #metoo and #timesup campaigns tackling sexual harassment and gender inequality issues.
But despite these developments, there are some areas where women are still struggling to gain an equal footing with men. For instance, women typically face specific challenges throughout their lives that can prevent them from becoming financially secure.
So what does financial empowerment mean for women – and how can they achieve it?
This is the subject of a 2017 Commonwealth Bank whitepaper, Enabling change: a fresh perspective on women’s financial security, which is based on qualitative research of more than 3,700 men and women across Australia. The study presents three important arguments that explain how improving the financial wellbeing of women at an individual level can benefit society as a whole.
1. Female financial security is good for the economy
According to the research, Australia’s workforce includes 66% of women aged 20-74, compared to 78% of men. What’s more, the disparity in average base salaries between men and women is above 17%.
These gaps in workforce participation and pay not only negatively impact women’s financial circumstances during their working lives; they can have a flow-on effect long after a woman has retired. And because women are far more likely than men to take career breaks or drop down to part-time hours to raise children or look after elderly parents, they can also end up with significantly less super at retirement.
Redressing these imbalances presents a range of potential benefits both for women and the broader economy. For starters, closing the pay gap would add $13,577 to the average woman’s annual salary, which in turn would inject $79.9 billion into the economy each year.
In the long term, this would give each woman an average boost of $51,700 to their super by the time they retire. That translates to an estimated $158.8 billion in economic activity and an additional savings pool of $455.7 billion.
2. Women are financially confident, but need to be more engaged
Contrary to what some may expect, women are confident about managing their everyday finances, with around 6 in 10 saying they feel in control. However, there’s a clear disconnection between men and women when it comes to investment knowledge, which often starts from an early age.
Of the women surveyed, only 29% say they were taught about investing when they were young, compared to 41% of men. This lack of early education can have a lasting impact on women’s investment behaviour, especially when it comes to building wealth. In fact, only 1 in 5 women invest directly in shares and other securities, while almost half say they don’t weigh in on decisions about how their super is invested.
It’s clear that standards of financial awareness and literacy among girls and women need to be raised. As more women gain the skills needed to make informed investment decisions, they’ll be better placed to improve their financial position over the long term.
3. The right advice can transform lives
The women surveyed showed a keen interest in learning more about their financial options across a range of topics, from investing in the stock market to running an SMSF.
And while only 23% have consulted a financial adviser in the past five years, those who have are reaping the rewards. Not only do advised women report higher levels of confidence and feelings of financial security, but they also have average household assets valued at around 1.6 times those of women who don’t have a financial adviser.
While this figure may be skewed by the tendency of women who are more affluent to seek advice, it generally indicates the lasting impact that professional guidance can have on a woman’s financial wellbeing. However, almost half of women are held back from seeking advice by the misconception that they don’t have enough income or assets to justify it.
Where to from here?
The Commonwealth Bank’s whitepaper demonstrates how access to the right information and advice can make a real difference at critical points in a woman’s life. By encouraging women to seek financial advice sooner and more often, they’ll be better equipped to invest for the future and take charge of their own financial security.
The research also reveals an opportunity for the financial planning industry to offer more affordable alternatives to traditional advice models. What’s more, both advisers and accountants can play an important role in helping women understand the potential benefits of advice – including for those with lower incomes and fewer assets.
Finally, it’s important to remember that women aren’t a homogenous group; their advice needs will differ depending on their personal circumstances and stage of life. That’s why financial advisers and accountants should aim to identify the key turning points in each female client’s life path, so they can help these women make the best possible financial decisions along the way.
Source: All statistics and survey results referenced in this article are drawn from Enabling change: A fresh perspective on women’s financial security, Commonwealth Bank, May 2017.