Building a better financial future for female clients
The financial landscape for women has been completely transformed over the past 20 years. But in spite of much progress being made, gender inequality persists due to a mix of structural and behavioural issues. It is because of this that the gender pensions gap could take another 20 years to close at our current rate of progress.
The pace of change must quicken as we simply can’t sit back and wait another two decades. Without further action, the gender pensions gap will never be closed.
The reality of imbalance
Looking at the data, the imbalance is stark.
Our research1 reveals that two fifths (42%) of women are not on track for even a minimum lifestyle in retirement, compared to 35% of men. Women are less likely to attain a comfortable retirement lifestyle (28%) than men (35%) which the PLSA standards highlight as £43,100 per year for single individuals and £59,000 for couples.
Furthermore, women are still projected to have a retirement income that is 30% lower than men’s, and two in five (42%) face poverty in retirement compared to 35% of men - an average retirement income difference of £5,000pa (£17,000pa for men vs £12,000pa for women)2.
And while ONS data reveals a significant drop in the overall gender pension gap from 52% to 33% between women and men aged 50-64 since 2008, women in this age group are still likely to retire with private pension pots that are 33% smaller than men’s on average3.
Fewer than two in five women invest outside of their pensions i.e. in stocks and shares, property, government bonds and other investments. This compares to more than half of men. And this gap is particularly big for young women – only 34% of women aged 18-24 say they invest, compared to 64% of men aged 18-24.
Women are also less likely to feel that investing is for people like them, and they are less likely to feel sufficiently supported to learn more about investing. It’s also notable that only 56% of women are on track to receive retirement income from a private pension, compared to 68% of men – and fewer women are on track for retirement income from long term savings than men.
All this paints a pretty bleak picture.
Advice appetite
Understanding how and why women are using advice is a critical piece of the puzzle.
The extent to which women lean on financial advisers’ is not, in fact, wildly different to their male counterparts. Around 39% of female investors have never used a financial adviser compared to 45% of men. And a similar trend is seen among those with over £100k in assets - 21% of women in this cohort have never used an adviser compared to 27% of men.
But what is particularly interesting is that among those that have used an adviser, women are much more likely to utilise one off advice - 57% of women vs 47% of men. This may be because life events are more likely to be the trigger for women to seek advice.
So while both men and women say retirement is the biggest prompt to seek advice, beyond that, there are very clear differences in priorities.
Our research has revealed that men are more likely to look for advice around optimising investments, such as managing their money tax-efficiently and making sure their existing investments are sensible. Women are, however, more likely to seek advice following life events such as getting an inheritance or experiencing significant changes like divorce or redundancy. And when they do use advice, personal trust in their advice source is more important for women. Men, alternatively, tend to utilise the more tech-driven options.
The adviser imperative
For advisers, it’s imperative that they recognise not just the different financial circumstances, but the different requirements and expectations of female clients too - and adjust their approach and advice accordingly. Crucially, women don’t particularly care their adviser is a man or a woman - it’s the nuances in advice they want to meet their needs and financial goals.
That means that advisers should look to make a more concerted effort to build that relationship with their female clients, making sure that they are well placed to help them prepare for and navigate those key life events.
Women value regular communication, trust, and good relationships over measurable outcomes such as performance and ‘value for money’. It may also be that advisers would benefit from adjusting their communication style - when, how often, and how. This would better establish trust and create a long-lasting relationship with current and future female clients to help them flourish and make the most of their finances.
As an extension of this communication shift, the benefits of joint financial planning should undoubtedly be on the radar for those clients in relationships. Providing a greater level of transparency around financial decision-making, this approach helps ensure that women do not lose out e.g. when their partner is buying an annuity or in the event of divorce.
Looking more broadly, it is clear that serious work remains to be done to help break down the perceived barriers of affordability, and build up understanding of how and where to find an FA for clients. Advisers would benefit hugely from leaning in to the opportunities offered by word of mouth referral and holistic family planning with current clients to reach women who would benefit from advice and helping them take those first critical financial planning steps.
The advice community has the technical expertise and experience to support the closure of these gaps. We just need to all work together to do so.
Sources:
1Scottish Widows, ‘Women and Retirement Report’ 2024
3Frontier Economics analysis of the Wealth and Assets Survey, ONS