A new survey from asset management giant, BlackRock Inc., warns about a “gender gap” in saving and investing; it observes that women earn less, invest less, and are less engaged with their finances.
BlackRock released the results of a global investor survey today, which found a significant gap between men and women when it comes to income, saving, and attitudes to money. The Canadian component of the global survey found the average personal income for women was 25% less than men, and their household saving and investments were 46% lower.
One reason for the disparity is that female respondents to the survey were significantly less likely to be working. Those who are employed are much more likely to be working part-time, notes the report.
“The income gap for Canadian women is real and many are faced with greater obstacles to achieving their long-term financial health,” said Karrie Van Belle, managing director, BlackRock Asset Management Canada Ltd.
“Women spend a bigger proportion of their income on necessities like mortgages, rent and utilities, and have less to put aside for investing,” she added.
However, income is only part of the equation, noted Van Belle. Women are also found to be less engaged than men in their savings and investments.
The survey found 41% of women say they know how much income they will need in retirement, as opposed to 51% of men; and only 39% of women know how much they must save to meet their retirement goals, compared with 46% of men.
Moreover, the participation rate in retirement saving vehicles, such as registered retirement savings plans, tax-free saving accounts and workplace retirement plans is lower for women.
The survey also states that women who do have a workplace plan are far less engaged, with 46% of women who are in defined contribution plans saying they never adjust their investment allocations, compared to only 18% of men. Also, 42% of women say they have no idea about the maximum contribution of their plan while 18% of men say the same thing.
Additionally, the survey found that women report being more risk averse than men with 62% of women saying they are not prepared to take any risks with their money, compared to 49% of men. Slightly more than one-fifth of women say they would be willing to take on higher risk to achieve higher return, compared with 37% of men.
BlackRock says this heightened risk aversion translates into less aggressive asset allocation decisions. It reports that 66% of Canadian women hold more of their assets in cash investments, compared with 59% of men. And, it says that women are less confident about their asset mix, with 21% of female respondents saying they are “not confident” about their portfolio, compared with 14% of men. The survey notes the primary reason for this is that women are uninformed about portfolio construction.
It was also found that women are less likely to be interested in improving their financial knowledge. Slightly less than half of women say they want to learn more about investing, compared with 54% of men.
Canadian women are also less likely to view managing their investments as a positive activity than women in other parts of the world. While 29% of Canadian women enjoy managing their investments, 41% of women surveyed around the world stated the same.
“When you look at our survey results, a picture emerges of women investors who feel that they do not have the knowledge or the money to take control of their finances and who are ‘turned off’ from taking a greater interest in doing so,” noted Van Belle. “That is leading them to risk-averse behaviours like holding too much cash, which over the long term is highly unlikely to provide the returns needed to fund a comfortable retirement.”
There is a need for investor education that addresses Canadian women in a compelling and useful way, added Van Belle.
In anticipation of International Women’s Day on March 8, BlackRock calls for a closing of the gender gap in retirement planning and investing.
“International Women’s Day is about helping women to have bright and rewarding futures,” said Van Belle. “And much like empowering women in other aspects of their lives, we believe it is critical to increase the engagement and education levels of women investors. Women’s lack of engagement in their finances seems to be driving greater pessimism about their futures.”
BlackRock highlights a subset of female respondents that are much more engaged, and more successful in saving and investing. It refers to these women as “smart savers” and reports these women have saved $145,000 as opposed to $31,700 for the average Canadian woman. This is despite the fact that these women are earning $49,700 per year, which is significantly less than men reported as earning $70,900.
BlackRock says other Canadian women can learn from these smart savers. It calls on them to become more engaged about money, make retirement saving a priority, diversify, and plan and seek advice.
“The examples set by these smart savers show that even with lower incomes than men, women can achieve substantial financial health if they take a greater interest in their money,” said Van Belle. “Even for those women who are struggling with setting aside money for retirement, adopting the behaviours of these women may help them get started in the right direction.”
The BlackRock Global Investor Pulse survey interviewed 27,500 respondents in 20 countries. The Canadian sample included 1,000 respondents. No income or asset qualifications were used in selecting participants, making the survey a representative sampling of each nation’s entire population. The survey was carried out with the support of Cicero Group, an independent research company, in August 2014.