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This summer when a former Russian beauty queen emerged ebullient from a London courtroom after winning an attractive divorce settlement from her ex-husband, a wealthy American lawyer, I was pleasantly surprised. To be honest, I expected the judge to reduce the award for Ekaterina Fields when the cad-designer mother of two insisted she could only live in a Kensington or Chelsea neighborhood. But why shouldn’t she continue to enjoy the same living standards as her husband? The settlement is a big win compared with divorce in the ‘80s and ‘90s when women often downsized with their children to a smaller house or townhouse.
Elin Nordegren, the former wife of pro golfer Tiger Woods, teed up even better when the one-time nanny walked away with $110 million from her divorce. Tiger has been on a losing streak since the divorce and needs to pay up $54 million by January 2016. Elin tugged at our heart strings as she publicly tried to save her marriage and family over taking the huge settlement. Today, Elin is single and reportedly holds a lien towards the unpaid amount on one of Tiger’s homes.
Women are not only coming out of divorces financially stronger. They are quickly closing the wealth gap with men. Women now have decision-making power over 39% of the $28.6 trillion in investible assets in the United States, according to the Center for Talent Innovation. This wealth is increasing as women continue to live longer than men. Female wages are also rising, although they still lag behind those of men.
Despite their growing financial wealth, when it comes to retirement savings
women fall short of men. Women about to retire face a shortfall of $63,000 versus $34,000 for men, according to a 2015 Employee Benefit Research Institute survey. True, women are serving more time as caregivers as part of the sandwich generation juggling college-aged children and aging parents – traditionally, a major reason for their income shortfall. But these family obligations still do not explain the shortfall in female retirement plans.
After you read about the superior investment performance of women, you may want to fire your financial advisor.
Levelling the Financial Advisory Playing Field
Did you know that women are more successful investors than men? According to most measures, women outperform men as investors. Even on a risk-adjusted basis, more conservative female investors outperformed male investors, 4.7% versus 4.2% in 2014, according to SigFig’s survey of its clients. Women even paid more in fund fees! So why do we not have a larger investment portfolio?
As women, evidently, we need to not only be more aggressive in the divorce courts, but also in the financial advisory field. Changing your attitude towards wealth management can change your fortunes. Consider Singapore women who demand and receive wage equality with men and also save the same amount for retirement.
Here are more reasons why, as the more astute investor, your investment advisor should be helping you increase your retirement savings.
Women:
Are More Risk Adverse Than Men – Risk aversion is a proven and winning female trait in business. Women are two-thirds more likely to be successful in starting a business and growing assets due to their more cautious approach to risk management.
Focus on Wealth Preservation – A lower risk and passive investment strategy helps female investors outperform males who prefer active trading in higher growth stocks. Men turnover their stock holdings 50% more often than women and are 25% more likely to lose money, finds SigFig.
Save More – Women put more money in savings and cash equivalents (e.g., government treasury bonds and certificates of deposit), while men place more money in the stock market. Women need to do more of both. Whether you are in your 30s or 60s, you are healthier than previous generations. But like many female investors you likely bought into a retirement plan in your 20s more suitable to your grandmother’s generation. These plans were not developed for the scenario in which you work into your 70s and live until the age of 90 or 100.
Are you aware that single women – including divorcees – live even longer than married women (a little known upside of divorce :) Back to how to cover sthe retirement shortfall. It is never too early to divert some of the money you spend on $80 yoga outfits to your retirement plan to cover your longer lifespan. Some savings should also be allocated to higher returning passive and value investments.
Continue to Do Good – Women are the largest investors in socially responsible investments (SRI). Like value investing, owing to the stricter investment criteria, SRI investments should outperform the overall market. Naturally, you may be asking why you are generating average returns. One drawback has been a smaller universe of ethical investment choices, but as companies place more emphasis on SRI practices to attract the growth in ethical investors, this disadvantage is disappearing.
When planning for retirement, exercise your growing financial clout. Choose a wealth manager who works with other upwardly mobile women. Your wealth manager needs to put you on the same wealth track as male clients. Ask to see samples of female portfolio returns.
Recent triumphs in the divorce courts are a sign of the change in women’s attitudes towards money. Women deserve and are winning payouts to support the same living standards as men. Demand no less from your retirement planning.