Paulette Filion knows an advisor who once had what he believed to be a successful meeting with a client couple. During the meeting the advisor tailored his comments for the husband, who eventually agreed to invest in the product the advisor was proposing, says Filion, vice president of marketing at Burlington, Ont.-based AIC Ltd.
and a former independent marketing consultant.

But shortly after the couple had left, the advisor’s phone rang. It was the client, telling him to cancel the deal: his wife wasn’t comfortable with the investment.

That experience is not unusual and it is only one example of the ways in which women are often misunderstood by advisors. This gulf can have a huge impact on overall financial planning for women, but it is keenly felt in retirement planning, in which women face different challenges than men.

Advisors can take steps to help women overcome these setbacks and plan a financially secure retirement. To do so, they need to understand the financial disadvantages women face, as well as how they process information and make important decisions.

Among the fundamental challenges women face in retirement planning is the fact that, on average, they earn less than men.
Furthermore, they tend to retire younger; most women prefer to retire when their husbands, who are usually older, retire. And women tend to live longer.

“A woman, because she retires earlier and lives longer, is going to spend longer in retirement than a man, on average,” says Monica Townson, a Toronto economist and author who specializes in retirement and pension issues. “And they have to combine paid and unpaid work over their lifetimes in ways that most men don’t.”

When women take time out from the workforce to bear and raise children, they are limiting their ability to save for retirement.
Although women on average are not taking as much time as they used to for this purpose — most women who take time off to have children are back at work within two years, Townson says — this is still time during which they are without income, or on a reduced income, and are less able to save. Also, they are probably not contributing to the Canada Pension Plan or other employer pension plans.

And as the population ages, Townson says, more women are taking time out at the end of their paid working life — in many cases, retiring early — to take care of aging relatives. “The problem is women need to plan for a longer retirement but are at a real disadvantage in doing so,” she says.

Women entrepreneurs — Canada has the largest per capita rate of female entrepreneurs in the world — face a special difficulty posed by the manner in which the federal maternity benefits system works.

Maternity benefits are a form of employment insurance. But business operators who own more than 40% of the shares in their own company cannot make employment insurance contributions. They cannot receive employment insurance benefits and, therefore, do not qualify for maternity benefits.

“This has a huge impact on [affected women’s] ability to save for their retirement and basically just manage on a day-to-day basis,” says Joanne Thomas Yaccato, a founder of the Thomas Yaccato Group, a Toronto-based marketing consultancy.
“Often what they end up doing is accessing their RRSPs to fund maternity benefits. So you see more women than men making RRSP withdrawals before retirement.”

A study by TD Waterhouse Canada Inc.
released in January pinpoints the impact of these impediments. Women lag behind men in saving for retirement, it says, and are less confident in their ability to reach their retirement goals. The study reports, among other things, that women investors were making significantly lower RRSP contributions than men in 2004 — on average, $3,450 vs $6,130.

Compared with men, the report says, women investors have more worries about maintaining their lifestyles and accessing health care upon retirement. They find investing stressful and do not know how much they will need in order to retire comfortably.

The survey also suggests that women are more conservative, risk-averse investors than are men. Fewer women own mutual funds than men (52% vs 59%, respectively) or stocks (33% vs 40%). The study looked at a random sampling of 1,003 investors across Canada, aged 25 to 64, roughly split between men and women and with no breakdown in age or income levels.