The wealth gap

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   By Guest Blogger Tatiana Enhorning

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Women are great investors, that’s a fact. As shown in a recent Fidelity survey of over of five million US investors throughout the last ten years, on average females outperformed males. Women are educating themselves more about financial planning and investing and taking decisive action to reach their financial goals. This along with their propensity to stick to their investment decisions and be less likely than men to day-trade or invest in speculative assets like cryptocurrency, leads to very positive momentum for women.

But, even though female investors tend to do better performance-wise, they still invest much less than men. According to S&P Global, while over 77% of Canadians have investments, only 21% are women and 79% are men. Hence the gender pay gap’s more terrifying and its lesser known sister, the wealth gap. On average in North America, the raw gender wealth gap shows the median wealth of females was just 55 cents for every dollar of male wealth – the difference between total assets and debt.

Needless to say, women are concerned. In October 2022, a survey by Ellevest found that women’s financial health is at a five-year low, and women now spend a significant amount of time worrying about their finances. A majority reported worrying about their finances at least once a week, and a whopping 43% actively worry about money at least once a day. Women reported fretting about finances at a higher rate than men on both a weekly and daily basis, and this is not unfounded. Statistically, by retirement men have, on average, triple the total assets of women.

So why is this? Are women just bad at saving?

Actually, saving is not the issue. The same Fidelity study showed women save 9% of their salary compared to men, at 8.9%. But the pay gap persists, women still earn an average of 75% of what men earn across all full-time workers in Canada and 89% for full and part-time workers combined.

Although women and men do face many similar issues when it comes to financial health, such as inflation and current consumer confidence, there are other circumstances applying only to women which bolster the significant pay and wealth gaps. These include women being under-represented in high paying jobs and having less access to retirement benefits; women taking the majority of parental leave which affects promotions; and women providing more financial support to family members than men. Even if all of those factors were not stacked against women, there is also the longevity factor. If we compare a single man and single woman who have built up the exact same amount of wealth by retirement, the women would still be at more risk of running out of money, as women tend to live longer than men.

Don’t mistake this for a rant. It’s a call to action. Concerted effort and time are required to close the pay gap, but we can start working on closing the wealth gap now. Let’s empower the women in our lives to become more knowledgeable and involved in investing to better prepare for their life goals and for retirement.

Add Exposure: It seems much more common for men than for women to chat openly with friends or family about the stock market or economy. This may seem trivial, but lack of exposure could very well be where lack of investing confidence begins for women. If from an early age, men are exposed to conversations regarding other people’s investing experiences, they are gradually learning and getting used to it all through osmosis. Let’s bring the women and girls we know into the fold to start building their interest and awareness.

Get started: I often hear women say they want to invest, and know they should, but don’t know where to start. Encouraging women to place even $500 into an index fund when they are young can boost confidence just by getting their feet wet and watching the ups and downs of the market while stakes are low. If we can embolden women to start small sooner and learn along the way, this can make a big difference. The cost of waiting to start investing is enormous. The longer we wait, the more daunting it becomes, not to mention the lost years of compounding. If one person starts at age 20, investing $5,000 per year in an ETF earning 6%, they will have $871,667 by age 60. If all else is equal but they wait to start until age 30, they will end up with about half at age 60, $447,726.

Gain Confidence: Research from FINRA suggests 71% of men think they have a high level of investment knowledge, compared to just 54% of women. This translates to 49% of men feeling comfortable making investment decisions for themselves, compared to just 34% of women. If we can help women see themselves as savvy investors through exposure and experience, women will likely invest much more.

Closing the wealth gap is much easier said than done, but we must start somewhere and we can start now. Encouraging women to invest more is a very powerful step in the right direction, and who knows, maybe one day it will lead to more than 15% of Financial Advisors being women as well!

Tatiana Enhorning is a Financial Advisor with Turner Investments. She builds and maintains portfolios for clients across Canada, and has been in the business as an asset manager for more than a decade.