When it comes to achieving financial wellbeing, preparing for retirement and building wealth, women are still faced with a significantly greater challenge than men. A 2021 study Women and Financial Wellbeing in New Zealand by the Financial Services Council (FSC) with the support of Trustees Executors has found that women experience lower financial confidence and wellbeing than men, and are impacted by lower lifetime incomes. Four in five women rate their own financial well-being as being moderate to very low. The study also found that women worry about money more than men throughout their lives, and suffer more in terms of their overall well-being as a result.

At the same time, however, other studies have shown that women tend to invest more successfully than men, outperforming them in investment returns by 1.8% per annum. This is true in spite of the fact that women are less likely to have worked with a professional financial adviser than men. For financial advice providers like Trustees Executors, this may represent an opportunity to help. By working to promote greater financial literacy and boosting investment confidence among women, financial advisers may be able to help women more easily overcome persistent barriers to financial success.

Lower lifetime incomes are holding women back

Women still earn less than men over the course of their lifetimes, because of the gender pay gap and because women are more likely to forgo full-time work for some part of their lives. While the pay gap has slowly shrunk over the past 20 years, it is still 9 per cent, down from 14 per cent in 2000. Sixty per cent of women reported that they were not working, working only part-time or casually, compared to 40 per cent of men. On the other end of the spectrum, just 6 per cent of women indicated that they were high-earners with incomes over $100,000 compared to 15 per cent of men.

Taking time off work to raise a family can have long-term effects on women’s career trajectories and earnings. While the gender pay gap is at 9 per cent, findings from the Ministry of Women’s Parenthood and Labour Outcomes, found that mothers earn 12.5 per cent less than fathers of the same age – a figure referred to as the “Motherhood Penalty” by Global Women New Zealand.

Focusing on the financial aspect of this issue, it’s easy to see why it is that women have less money to save or invest. As a result, women are more likely to live in a financially precarious position that ultimately hampers their ability to save money, build wealth, and prepare for retirement.

Women have a harder time saving for retirement

This FSC report shows men and women share the same top financial goals, with both pursuing home-ownership and aiming to build their savings at almost exactly the same rate. Achieving those goals is significantly harder for women, though. While half of the male respondents indicated that they were “reasonably” or “well” prepared for retirement, just 38 per cent of women said the same.

Because they tend to earn less, 42 per cent of women report that they aren’t able to save enough, compared to just 29.6 per cent of men. Besides this, women are also more likely to suffer from excess debt, emergency spending, overspending, and other potential barriers to achieving their financial goals. That, in turn, makes it even more difficult to save and invest, as more money is spent on servicing debt that would otherwise go toward preparing for the future.

While the study didn’t examine the issue thoroughly, these higher barriers are likely also part of the reason that women feel less financially literate than men—even though their investment results suggest otherwise.

Women feel less financially literate despite investment success

Women are far more likely than men to rate their own understanding of financial risk, diversification, asset allocation, and market trends as poor or very poor. Just under 60 per cent consider themselves to have limited or no investment experience. Despite that, Warwick Business School performed a study that found women actually outperform men by 1.8 per cent per annum in their investments.

While men invest more than women do, the difference isn’t as drastic as the difference in their self-perceived financial literacy. Women are more likely than men to invest in KiwiSaver and also edge out men in property investment. The biggest difference among the respondents was rather in how men and women tended to invest.

Women invest more conservatively than men

Women are risk-averse investors, and this serves them well. Just 11.2 per cent of women indicated that they would be willing to tolerate a “moderate to a high level of risk” for higher returns, compared to 19.4 per cent of men. This is expressed particularly in the popularity of high-risk cryptocurrency trading. Very few women – just 3.1 per cent – reported trading in cryptocurrencies. The rate for men was five times higher at 15.7 per cent.

It’s unclear whether this is the only reason why women outperform men in investing. Their success alone suggests that women are no less financially literate than men, but rather that they’re less confident in their literacy. Because of this, working to improve that confidence might be one way for the financial industry to help.

Use financial advice to bridge the gap

One way that women can improve their financial situation, both in terms of planning for retirement and boosting investment returns further, is to work with a financial adviser. This is particularly relevant as fewer women than men receive professional financial advice. The structural barriers that women face in the gender pay gap and unpaid work in the home put them at a significant disadvantage. A professional financial adviser can not only help you to grow your savings and prepare for retirement, but they can also help by validating your existing financial knowledge and helping you to make financial decisions with confidence.

Financial advice could boost women’s financial security further

Receiving advice can significantly boost your potential to accumulate and protect the financial assets you need and it may be the fastest and simplest way to help women overcome the financial barriers they face. An earlier 2020 FSC study, Breaking through the Advice Barrier, showed that, on average, people who work with a financial adviser receive an additional 4 per cent in investment returns, save 3.7 per cent more of their income, and hold 50 per cent more in their KiwiSaver accounts than those who do not. This is because even a relatively small difference in performance will compound over time, resulting in significantly greater lifetime returns.

At Trustees Executors, we want to help improve women’s financial wellbeing. This includes providing advice to improve women's financial confidence and ability to invest successfully, building financial security and helping achieve financial goals. Our advisers are here to help. If you’d like to learn more about exactly how a financial adviser can help you, reach out to us today.