Wall Street is dropping retired women

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When it comes to a comfortable retirement, women in the United States hold all the cards. New efforts to begin to change that are laudable, yet they still miss the mark because they are shaped by decades of misperceptions.

The inequalities a woman faces throughout her working life – whether it’s earning less or shouldering the lion’s share of childcare responsibilities – build up over the years and make havoc. More than 80% of women believe they will not be able to retire without running out of money compared to 65% of men, according to a recent TIAA study.

While much of the problem is rooted in culture and history — as well as poor American policies — the financial services industry bears its share of the blame. They are the long-neglected women, alienating them with condescending attitudes and outdated thinking, making false assumptions about what interests them, relying on technical jargon and telling them to spend less rather than invest.

Instead, they should work with women to help them overcome the specific financial barriers they face.

There seems to be a glimmer of awareness now, perhaps the banks are realizing that the total pool of wealth controlled by women globally will reach up to $93 trillion by 2023, according to estimates from the Boston Consulting Group. There are mutual funds that only invest in companies that prioritize the advancement of women, banks that conduct studies on women and their finances, and companies that focus on diversifying their teams. wealth management.

Unfortunately, most of these efforts are woefully inadequate, and are unlikely to offer women meaningful help in reversing their disadvantages in retirement. The latest attempt is by BlackRock Inc., which has introduced a new set of model wallets to help women have more money in retirement. The idea of ​​the company is that since women live longer, earn less and may experience job gaps, they could benefit from gender-specific portfolios that put more of their money in stocks.

It sounds good on paper, and the company seems to have put a lot of thought into it, but I’m still disappointed. This is a set of women-only products, while most women don’t want products made exclusively for them.

A 2020 BCG report that looked at wealth management and women points out that companies too often treat women as a homogenous group, ignoring the varying needs and preferences of different customers.

“Women don’t want or need products different from those offered to men. Rather, they want an approach that is personalized and tailored to their financial goals,” according to the report’s authors.

Debra Brede, a financial planner in Needham, Massachusetts, has the right idea: she builds the portfolios of her clients, men and women, as if they will live to 100, using investments from all asset classes.

BlackRock’s model portfolios for women are based on the company’s target date fund framework (but are sold through financial advisors rather than offered through 401(k) for regulatory reasons). So there is some customization that can happen, but it always seems like the wallets aren’t really bespoke, or don’t take into account a woman’s individual preferences and needs.

Perhaps for women with a more modest level of assets, the BlackRock setup may be attractive. Some financial advisors don’t want to bother customizing clients’ portfolios if they don’t have a certain net worth — but if that’s the case, women are probably better off opting for exchange-traded funds instead. low cost. .

It’s dangerous to make generalizations, but if there’s anything that differentiates female investors, it’s that they care more about their investments earning enough money to achieve certain goals than simply outperforming an index. or generate a defined return. This is true at different levels of wealth.

There are also misconceptions about how female investors view risk. Some studies have shown that women are more risk averse and on average have a high amount (40%) of their portfolios dedicated to cash, according to BlackRock. But there are important caveats to this idea.

If women know from the start that they have to take more risk with their investments in order to achieve a specific goal, say, buying a house, then they are comfortable with that. Sallie Krawcheck, co-founder of Ellevest, a wealth management firm for women, calls it being risk-aware rather than risk-averse.

“In my 24s, women are no less likely than men to be okay with aggressive asset allocation as long as we’re all very clear about what buckets of money we’re talking about,” says Stephanie McCullough, financial adviser in Berwyn. , Pennsylvania.

The more assets a woman has, the higher her risk tolerance is often, suggesting that it’s less about gender and more about level of wealth.

It’s important to point out that most women are in a terrible position for retirement because they don’t have access to 401(k)s in the first place. More women tend to work part-time or work in jobs that do not provide access to retirement savings plans.

Even if they do, their income is often too low to leave enough money left to invest for their retirement. About 50% of women aged 55-66 have no personal retirement savings and only 22% have $100,000 or more (compared to 30% of men with $100,000 or more in savings).

This is more of a political problem than one that the financial services industry should be responsible for solving. But it could do its part, perhaps by supporting financial education programs for low- and middle-income women, which have been shown to increase retirement savings.

Helping women be better off in retirement is a tricky business, with deep-rooted and complex issues to resolve. The industry may be stepping up its efforts, but it still has a long way to go.

More other writers at Bloomberg Opinion:

Roth IRAs are a smart way to invest for college: Erin Lowry

ESG is so, so, so yesterday: Elements by Javier Blas

Female CEOs becoming less rare in industries: Brooke Sutherland

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.

More stories like this are available at bloomberg.com/opinion

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