Out of Balance: Women Need Advisors-and Life Insurance

Women Need Advisors-and Life Insurance-to offset the earning and longevity imbalance.

It’s no surprise that women plan an important role in our economy. During the past few decades, women have made significant strides in the workplace while also serving as the key financial decision-makers at home.

Women hold 51 percent of all management and professional jobs, own 41 percent of all privately held firms and now control 51 percent of the private wealth in the United States, according to the US Bureau of Labor Statistics.   Their median incomes have risen 63 percent from 1970 through 2002.  The Center for Women’s Business Research reports that women make or influence 85 percent of all consumer purchases, and handle 75 percent of household finances.

Despite these compelling statistics, gender disparities exist that can affect a woman’s retirement preparedness and financial security.

Case in point- while female GenX and GenY workers have steadily helped to narrow the income gap in recent years, women as a group still earn an average of 20 cents less per dollar than their male counterparts, according to the US bureau of Labor Statistics.  This alone can result in women contributing less into savings, such as their 401K or IRA, every year.

Many will agree that woman have also been underserved by the financial services industry.  Research from the Boston Consulting Group identified that women were more dissatisfied with financial services than any other industry, both on a product and service level.  This study underscored a hard truth – practitioners and financial providers alike mist find better ways to connect with, and actively engage, women in retirement planning.

Comparing the Numbers

One area of opportunity is to help more women address their retirement savings shortfalls by understanding the financial realities they face.  Research shows that working women continue to save significantly less for retirement than their male counterparts.  Woman’s total retirement assets, both in and out of the workplace, averaged less than 70 percent compared to men, a recent study by the ING Retirement Research Institute found.

A much higher percentage of women (47 percent) than men (31 percent) reported having less than $25,000 in their employer retirement plan.  Meanwhile, fewer women (67 percent) than men (76 percent) confirmed they were receiving the full employer-matching contributions.  These factors suggest that more female workers are not maximizing crucial savings and compounding opportunities during their careers .

Part of the problem is that women are earning less, therefore having fewer dollars to contribute toward their savings plans.  The Center for American Progress fount that the average female worker loses approximately $434,000 in wages over a 40-year period as a direct result of pay inequities.

Women also tend to spend more time than men out of the work force because of caregiver responsibilities. This not only reduces their earnings and savings potential, but it also lowers their Social Security benefits.

The need for women to prepare themselves for retirement is magnified by longevity trends and health care concerns.  The good news is that the average lifespan for both men and women has been expanding due to advances in health care and medicine, and experts predict it will continue to increase.  The downside for women is that they are also exposed to greater financial risk.  Data shows that women, on average can expect to live five years longer than men.  That means more women face a greater number of their retirement years alone.  Accordingly, they are more likely to need greater financial resources to provide for the rising costs associated with health care needs as they age.  A January 2012 study from the Insured Retirement Institute reported that a healthy 65-year old woman can expect cumulative health care expenses, including premiums, to top $417,000, nearly 13 percent higher than those for men.

Life insurance coverage, a critical component of long-term financial  and retirement security, is another area where women fall behind their male counterparts.   ING’s study found that women purchased and average of only about three times their salary in life insurance, compared to men who had average policy coverage of approximately four  times their salary.  Plus, only 39 percent of mothers have life insurance equal to four or more times their salary, compared to 54 percent of fathers.  While every couple’s insurance needs are different, the unfortunate death of a spouse can quickly drain a family’s hard-earned savings.  Evaluating lifestyle needs and securing enough insurance coverage for each partner is an essential way that women can help protect their families and preserve valuable retirement assets.

Guidance and Support

Many studies indicate that women claim to have less knowledge and confidence when it comes to retirement planning.  ING’s research found that a much smaller percentage of women (36%), compared to men (49%), calculated how much money they would need to maintain their current lifestyle in retirement.  Similarly, fewer women (25%) than men (33%) also reported having a formal investment plan for retirement.  Not taking these important planning steps may be the reason why ING’s study also found more women (42%) than men (31%) said that they did not know how to achieve their retirement goals.

Women are looking for ways to become more educated about planning for retirement and are seeking support from family, friends and trusted sources such as financial advisors.  In a 2011 study by the Insured Retirement Institute, 50 percent of women reported the need for some level of help in managing their finances – up 33% percent from a similar study completed in 2004.  In this same study, a slightly higher percentage of women confirmed they had consulted a financial planner for retirement than men.  The good news is that women are inclined to ask for professional guidance, which can lead to greater confidence in being prepared for their retirement.

Making a Difference

According to the Center for Women’s Business Research, women are the primary decision-makers in 77 percent of life insurance policies and 69 percent of retirement plans.  These statistics are telling – and should serve as a wakeup call for financial professionals who what to refine their approach with female clients.   The following suggestions could go a long way in meeting women’s financial needs and purchasing preferences, ultimately improving advisor’s business relationships:

1: Understand What She Values Most

For most women, financial success is not about accumulating money and power or beating the market – it’s bout caring for loved ones and securing their future.  Women are eager to minimize anxiety and want to feel confident about facing a future crisis should one arise.  Women tend to be more risk=averse and trade less actively than men.  They approach finances from a realistic perspective – and want their advisor to do so as well.

2: Take Time to Listen – And Answer Her Questions Thoroughly

Generally, women put in much time and effort researching investment decisions and selecting a financial advisor.  They will ask a lot of questions – and will look for specific and thorough answers to those questions before feeling confident to make a decision or finalize a plan.

3: Offer Plan Options That Address Her Personal Needs and Concerns

Some industry studies indicate that widows and divorced women will change financial advisors after the death of or divorce from their spouse – perhaps because those women feel that their husband’s financials advisors have not taken the time to listen and build a relationship with her.  Women are looking to financial advisors for knowledge and guidance.  Offering plans that response to her concerns will demonstrate that you have listened to and respects what she has to say, and are committed to finding the right solutions to serve her needs.

4:  Appreciate her Influence.

Here’s another reason to pay attention to women:  future customer referrals.  Life insurance industry research indicates that, over their lifetime, women provide an average of 28 referrals compared with 15 for men.   Helping women become more educated and actively involved in making decisions about life insurance and retirement might just translate into future business growth.  That’s something every financial services professional could really use right now.

By Delia deLisser for June 2012 InsuranceNewNet Magazine.  Delia is director of women’s marketing at ING US.  

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