A man is not a plan: a woman’s guide to wealth planning
Women make 83% of household decisions. Sound about right? Yet when it comes to thinking about our future, studies show most of us still leave financial planning to our husbands. Financial planning is still overwhelmingly a man’s domain.
I confess I fall into this category. I have what you might call a low financial IQ: I couldn’t tell you what a bond is, I am incapable of figuring out compound interest. But luckily I know someone who does.
Last week, I sat down with Georgie Loxton, a Wealth Advisor at IFP here in Cayman, who would like to see more women taking control of their futures. Her business now focuses on women, helping women understand how to manage their finances so they can secure the lifestyle they want in the future.
“I hate the word retirement,” says Georgie. “It either feels too close for comfort or too far off to be relevant. But for women, it is even more important to be informed and make educated decisions about this chapter of our life as women typically earn less and live longer than men. In boxing, this would be known as a 1:2 punch, a nasty combination of two blows in quick succession. For women, the reality is that we need to save $126 for each $100 saved by men.”
The statistics behind this 1:2 punch are scary. Women still only earn 77 cents to the dollar compared to men. Typically, it is women who take time out of their careers to care for young families or elderly relatives. Yet, average life expectancy is longer. Even if you work for 40 years, you may live for another 40 after that. Your savings may need to fund half your adult life.
The best time to start is now
“But I don’t have any money to invest” is the most common excuse for not having a savings plan. Yet those of us not rolling in cash are exactly the ones who need to squirrel something away for the future. A visit to a Wealth Advisor like Georgie is a good way to make a start.
“My first job as your Wealth Advisor is to understand you, your lifestyle and your hopes for the future,” explains Georgie. “I like to sit down informally over a cup of coffee and chat, so we can figure out a plan together. There’s no commitment, no fees at this stage – it’s simply a chance to get to know each other.”
Georgie doesn’t believe there’s a magic number, a set percentage of your annual salary that should be put aside. “It should be an amount you won’t notice at the end of the month. Everyone can find something, even if it’s only small. People often think wealth planning is only for the rich, but I have clients at all income levels.”
The longer you leave it, the larger the figure needs to be. On the flip side, it may be easier to save later in your working career, when salaries are typically higher. “The danger is that people succumb to lifestyle creep,” says Georgie. “With every pay rise comes a new kitchen, a bigger house, a boat, more exotic holidays. That’s wonderful, as long as it doesn’t account for all the extra cash.”
Here in Cayman, the 10% statutory pension contributions are capped at CI $60,000. In other words, the maximum going in to your account is $500 per month, even if you are earning are higher (very few companies go beyond their legal requirement and contribute 5% of actual salary). Therefore, if you were able to save an additional $500 per month, you could effectively double your pension pot.
Why choose to invest through a wealth adviser
So what happens next? You’ve figured out a sum you can put aside, but what do you do with that money? If you have an in-depth understanding of the financial markets, experience trading in stocks and bonds and nerves of steel, you may choose to invest on your own. But for the rest of us, it would be wise to go with a professional.
“No one can predict what the market is going to do, not even us,” says Georgie, “but individual investors are more likely to panic. Too often, they sell when the market takes a dive hoping to get out before it hits the bottom. But that is exactly the wrong time to sell. If you take a long term view, you can see that volatility is actually a good thing. When you’re investing over a 20 year period, you’re buying continuously through the highs and lows, including at the bottom when shares are at their cheapest. The best returns come from buying at the bottom and profiting from the subsequent rise in price.”
Women are notoriously risk averse, which after the 1:2 punch, makes it all the harder to reach retirement targets. The return on investment delivered by a low, medium or high risk scheme may only differ by a few percentage points, but it has a significant impact on the final figure when it’s accumulated over 30 years. High risk investments don’t have to be risky if they are in the right hands. For Georgie’s clients, the whole process is relatively stress-free as she does the worrying for them.
When you are choosing a financial planner, you obviously want to find someone you like and trust, but it is also important to choose someone who is competent. This is where Georgie’s 10 years investment experience comes in: she is a CFA with over ten years experience managing equity funds and has been responsible for $70 million in assets.
She is also a woman. It may sound obvious, but it makes all the difference. Studies show that 70% women want to work with a female wealth planner yet only 20% actually do. This might be due to a lack of female wealth planners, but may also go back to the fact so many women leave financial planning to the men in their lives. Here’s another statistic that provides food for thought: 70% women leave their financial adviser within one year of their husband’s death.
“I think women can sometimes feel judged or misunderstood when talking to a man about finances,” says Georgie. “They might feel reluctant to ask questions, worried they would patronised for not knowing the answer. Sometimes women are more comfortable talking to another woman. My goal is to educate and empower my clients so they can make their own financial decisions. I like to think I am more like a compass than a calculator, guiding them towards the future they want and deserve.”
Tuesday 2nd February, 5pm at West Indies Wine Company, Camana Bay – Cost CI$25, includes wine and nibbles
Wednesday 3rd February, 12pm at Brasserie Restaurant, Cricket Square – Cost CI$50, includes 3 course lunch and wine
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Georgie started her career at Rathbone Brothers Plc in London. She then spent seven years co-managing a European equities fund at Overseas Asset Management (Cayman) Ltd where she was responsible for $70 million in assets. She graduated from Oxford University with a first class honours and is a CFA charterholder.