The Heller School for Social Policy and Management, Brandeis University

National Program on Women & Aging

Study Summary -- May 1998
Financial Challenges For Mature Women

Introduction

Charting a course in planning for a secure financial future can hardly be described as smooth sailing.  Increasing individual responsibility for retirement savings and an ever expanding choice of financial options has created an extremely complex environment.

Prior studies show that both men and women lack knowledge about financing retirement.  Traditional gender roles, lower incomes and less wealth create special challenges for midlife and older women.  To learn more about these challenges, the National Center on Women and Aging interviewed 500 women across the country.  (The sample was composed of women 50 years of age or older, a majority with household incomes of more than $50,000 and just over half with experience using a professional financial advisor.  More details can be found in the full report).  In-depth telephone interviews covered:

Preparations for Retirement

Financial Knowledge

Sources of Information

Written Financial Plans

Seeking Advice from Professional Financial Consultants

Satisfaction with Financial Consultant Services, and

Why Women Did Not Seek Professional Advice.

To follow are highlights of the study findings.  To order a copy of the 54-page report Financial Challenges for Mature Women:  Creating Financial Plans and Evaluating Financial Planners, please contact the National Center on Women and Aging.
 

Key Findings

"No one trusts anybody anymore.  When you are young you think day to day. You get around forty and you think, 'Oh my God!'  Women don't have the skills or don't think they do."

The study reinforces the widespread belief that most midlife and older women lack education in the basics of investing.  Although the majority of women surveyed said they understood certain investments -- for instance, CDs or Savings Bonds -- they knew less about the mutual funds, corporate or municipal bonds, stocks, or annuities.  A very high proportion were unable to correctly identify how effectively various types of investments historically had provided inflation protection.

This lack of knowledge suggests that most women are not getting adequate information about specific types of investments or that changes in the format or content of the information currently provided are needed.  When asked about sources of information they use to help make their savings and investment decisions, a majority reported turning frequently to newspapers and magazines (61%)  and/or to relatives and friends (59%).  Women who had used a professional financial consultant were more likely to turn to industry-related sources of information such as: investment seminars, stockbrokers, mutual fund salespersons, and/or financial newsletters and publications.
 

Women with lower household income and less education were at a greater disadvantage in planning.  They were less confident about their ability to make investment decisions and were more concerned that professional planners would be uninterested in or would defraud them.  Yet, personal experience with a financial consultant increased a woman's knowledge of key financial facts.  Women with a written financial plan also were more likely to know more.

Concern about their future financial status motivates many women to have a written plan.  Two out of five women initially developed a written financial plan to address their future financial and retirement needs; or specific planning needs -- such as estate planning or a change in marital status.  What can we say about the characteristics of these women who had written financial plans?  The data indicate that women with higher incomes, more assets, and more education were more likely to have such a plan.  Additionally, written plans were more likely among women near or at traditional retirement ages compared to those who were younger or older.
 

 "We decided to get the advice in order to understand where we were and where we needed to go.  We needed education as to the different products that are out there, so we used a financial planner."

Women rely on the recommendations of relatives and friends in making investment decisions and in finding a financial planner.  Almost one out of four women said they sought the advice of relatives or friends when selecting a financial planner.  Other sources mentioned were scattered among many different groups -- the most common being:

 Banks 17%

 People at work 13%

 Investment firms   9%

 Lawyers   7%

Finding a planner one can trust is a big concern.  Many (56%) said stories about scams and fraud that they have heard in the media or from friends made them wary.  Half or more of women without prior experience with a financial professional do not know how to check the expertise and credentials of a "professional planner."

Nor do they know how to select someone who is likely to give them  good, competent advice.  Predictably, experience with professional financial consultants significantly reduces these concerns.  Together with a lack of experience and little education in financial matters, these attitudes prevent many midlife and older women from getting help.

Women don't thoroughly investigate a planner's background or certification.  More than half of the women in the survey (55%) had consulted with someone they considered "a professional" in order to get financial planning advice.  Very few (9%) women choosing a financial consultant sought specific background information on a planner's prior investment law violations.  Few (5%) checked a planner's certification or accreditation.

In fact, a number of women (14%) did not even know whether or not their planner was certified or chartered by an accrediting organization, and another one-quarter (25%) were not sure.  And of those women who thought their planner was certified, 72 percent did not know the specific nature of that certification.

Many women have difficulty understanding how planners are paid.  Almost one out of five women (17%) did not know how her current financial planner was paid.  Forty-three percent of the women (who could remember) said they had not discussed compensation of the planner before the work began.

While a majority of women reported a high level of satisfaction with the financial planning services they were receiving, many reported some dissatisfaction.  Ninety-one percent of women seeking professional advice reported being "reasonably" or "extremely" satisfied with the services received, but more than four in ten reported some dissatisfaction -- with the quality of advice, problems with impersonal service, communication problems, and issues relating to fees and sales pressure.

Many women do not know where they would turn if they were to experience a serious problem with a financial consultant.  About one-third of the women surveyed said that they would report any serious problems to a government agency (such as the Securities and Exchange Commission) or another regulatory agency (34%), yet almost as many were uncertain about what to do (30%) or said that they would have to look into the matter further by seeking advice and information on the best plan of action (20%).

On average, women spent one to two hours with the financial advisor working on the initial review and recommendations.  In the period following, most women (80%) continued a business relationship with the advisor, with 21 percent of the women in the survey reporting a relationship of more than 10 years (46% said 5 years or more).

We asked how often these women met in person or had an in-depth telephone conversation to discuss their financial plan or situation.  More than half met on a regular basis ó often quite frequently.

Many women who had not yet consulted a financial planning professional wished to do so.  Over half of the women (52%) who had not yet seen a professional financial consultant said that they would like this type of help.  These women wanted a consultant to bring a high level of expertise to their planning; help increase or protect their assets; confirm their goals or plans; and/or provide needed knowledge about the financial market and financial products.

Most women who did not want such help thought they were able to and preferred to plan themselves.

"I don't really trust people with my money."

"People contact me all the time.  I just say, 'Sorry,  she's not here.'  And she never will be here."