Note: This article is part of Morningstar Canada's Women in Investing Special Report
Women are more involved in their finances than ever before. With this, comes the need for advisors to offer advice fit for an emerging client demographic. But how can female investors get that relationship rolling in the most suitable direction?
“It’s amazing how on the ball women are these days when it comes to their finances,” says Michelle Munro, Director of Tax and Retirement Research at Fidelity Canada, who adds that more women she’s meeting at events are engaged and educated in terms of the road ahead to retirement.
However, despite a clearer view of the horizon, women still have an uneven passage. They have a longer time to plan for, more people to care for, and often lower incomes to work with.
“Many women have had to take a step back from their careers as well, needing to take care of loved ones,” adds Munro. On top of the need for financial care, they are often involved in child care and elder care, and as they get older, they face their own set of health issues.
Couple these challenges with women having a different approach to investing than men, and financial planning for retirement becomes particularly complex for women. “That’s why it’s important to come up with a unique plan and to work with a professional,” says Munro.
Am I comfortable with this advisor?
“Think of your future planner as a type of therapist,” says Jackie Porter, Financial Planner at Carte Wealth Management. She suggests women should look for planners that are authentic, comfortable, accessible and relatable, because if you’re not comfortable sharing your present financial situation and its challenges, you’ll have difficulty finding solutions.
She also recommends you shop around. “Have at least five interactions with potential advisors and watch your gut feeling,” she says.
“Don’t worry about being judged,” says Amy Dietz-Graham, portfolio manager and investment advisor at BMO Nesbitt Burns. The advisor will be evaluating your situation and begin diagnosing your challenges, but they won’t be expecting you to ask the right questions. “It’s the advisor that should be asking the right questions.”
“There needs to be good dialogue. And frequent dialogue,” adds Alan Desnoyers, Senior Vice President at BMO Private Banking.
Who is my advisor?
Your focus should be on the background of the advisor and whether the necessary trust can be established, says Ilana Schonwetter, Investment Advisor at BlueShore Financial. “Look into their education, experience and compensation. This information will start to give you insight into the relationship.”
It is important to understand the person behind the advice. Are they qualified? How long have they been doing this for? What is their compensation structure – or simply, who pays them, you or the financial services companies?
Does my advisor know or care about what’s important to me?
It’s important that the advisor knows where you’re coming from with your goals, and how you perceive progress on your way to achieving them.
“Women tend to articulate their goals differently than men. They might say, it’s important for my children to start their career without debt. Whereas some men might say, I should be saving up for my children’s education,” says Munro.
“Women are more focused on the outcome, whereas men are more focused on the performance of their investments,” says Schonwetter.
The outcome-oriented approach has implications for investment selections as well. Women may care about the final market value of their investments, but they are also concerned with the social and ethical values of their assets along the way, says Schonwetter. “Women want to know about ESG factors in the companies they are holding, whether it’s polluting or whether there is diversity in the board of directors. They want a peek behind the curtains.”
How can my money make money?
Women also have different risk tolerances, generally, when compared to men when working towards their goals, says Dietz-Graham. But there needs to be enough risk to reward a comfortable retirement.
“Women tend to be more conservative when it comes to their investment selections,” says Dietz-Graham. But they shouldn’t be shying away from taking calculated risks. “That retirement savings needs to last longer for women, so they’ll need a proper plan and to be ready to bridge the gap between comfort and understanding.”
“Think about what you want, what you know, and what you don’t know,” says Munro. With that longer retirement to plan for comes the risk of running out of capital. There’s a careful balance to be stuck and there needs to be more education around it so that women aren’t stuck with a portfolio of only GICs, says Schonwetter. And after that, risk needs to be experienced to be fully understood.
“Take a different lens, look at the big picture,” adds Schonwetter. Compare short-term risks of stock value losses to the long-term risks of a slow-growing portfolio. And you shouldn’t need to ask the advisor for this perspective.
