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Financial Equality for Women Will Benefit All

by on February 04, 2018 5:00 AM

From the Women’s March to the #MeToo movement, 2017 was a watershed year for women, and in these times, I decided a refresher on women investing, earning and retiring would be a good idea.

I actually met with a young lady just starting out in my business this week. She had previously sought guidance from a male advisor and industry veteran who said something like, “You will find it harder in this business because you are a woman.” I think she might find it easier in the financial arena if there were fewer opinions like this.

Not only is gender equality a matter of eliminating discrimination but it also creates opportunity for countries, companies and the economy. Studies and models suggest that improving gender parity can result in significant economic improvement.

The World Economic Forum estimates that gender parity could add $250 billion to the GDP of the UK, $1.75 trillion to the U.S. GDP and $2.5 trillion to China’s GDP. Research by the nonprofit organization Catalyst shows a strong link between not only the presence of women on boards and corporate reputations, but also between advancing women into C level positions and higher return on sales. A 2015 study of the UK, the U.S. and India found that companies perform better when they have at least one female executive on the board.  Sadly, only one in 10 companies had female board executives in those countries in 2015.

The phenomenon is so striking that mutual funds and ETFs track women in business for investment purposes. For instance, Pax Ellevate Global Women’s Index (PXWIX) has a four-star rating from Morningstar and invests in the “highest rated companies in the world for advancing women through gender diversity on their boards and in executive management.”

The gender pay gap exists and is going nowhere fast. For those who wish to check out the resources, see AAUW’s The Simple Truth about the Gender Pay Gap Report (Fall 2017)  and The Global Gender Gap Report 2017 by The World Economic Forum.

In the United States, women make on average 80 percent of what their male counterparts do. This is not because of time off for family, etc. -- it is an issue women face right out of school. Sadly, The World Economic Forum found gender parity took a step back in 2017, shifting in reverse for the first time since 2006. The global gender gap went from 31.7 percent in 2016 to 32 percent in 2017, meaning women around the world make approximately 68 percent of what men do. This means the time needed to fully close the gender gap is now 100 years in the future -- a lifetime.  

The gender income gap haunts women through their working years into retirement. Due to women’s lower income, their social security benefits, which are based on 30 years of income, and pensions, which are typically based on years of service and income, also tend to be lower. Women save less in their retirement 401k’s or similar plans because of less discretionary income. The double-edged sword is the fact that women make less, can typically save less for retirement but live, on average, five years longer than men. That results in fewer resources that need to be spread over more years to make a successful retirement.

Lifestyle factors also are leading to retirement shortfalls. First, women are having children later, making the cost of education and retirement competing priorities. In addition, this generation is called the sandwich generation and women usually are their parents’ primary caregivers. Between careers, children and parental care, women’s resources, both financial and personal, are stretched across many different goals.

Given these demands on women’s resources, it’s important to maximize what they have. Studies, however, show women feel less confidence in the financial arena. Women handle $14 trillion in U.S. wealth and 90 percent of women will need to handle their own finances at some point in their lives. The good news is women have good reason to be confident. Women show higher savings rates for retirement (needed for a longer life and lower income) and enjoyed better long-term investment returns than men when they did take control of their finances. That lack of confidence? It means they do their homework because they are less confident and less inclined to believe they know more than they do. Women are also less likely to take big risks and double-down on bad investments.

Hopefully, gender parity and diversity will continue to improve. As of the fall of 2014, women accounted for 55 percent of undergraduates in the United States. Better education can lead to higher paychecks. Another way women can obtain parity in pay is to go where the money is. The occupational gender gap is definitely holding wages down for women. Women are underrepresented in engineering and technology, two high-paying areas.

When I spoke at Penn State last year, a female in finance asked me about how to handle herself in the male-dominated classroom. What do I say? She will be faced with it the rest of her life, just like the young lady entering the industry who I mentioned earlier. Moving forward, male-dominated industries need more women in them to ever make a change and to pave the way. Men and women can help that by encouraging rather than discouraging their interest.

One final note for women: This week Janet Yellen stepped down from the Federal Reserve. She was the first woman ever to serve as chair of the Federal Reserve, arguably the most powerful financial position in the world, and her success is visible in economic statistics.

Despite her tangible success and the fact that she was the most qualified Fed chair to ever hold the position, she is also the first in 40 years not to be reappointed for a second term and is being replaced by a former investment banker who lacks a doctorate in Economics (all prior Fed chairs have held this degree).  In the end, it’s the old story of three steps forward then two steps back for female equality.

Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.



Judy Loy, ChFCâ, is a Registered Investment Advisor and CEO at Nestlerode & Loy Investment Advisors, State College, Pa. A graduate of Penn State University, Loy has been with the firm since 1992, assisting clients with retirement planning, brokerage services and investment advice. She can be reached at jloy@nestlerode.com.
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