Women gaining financial confidence: survey

(October 13, 2005) Canadian women feel more secure about their financial future, but at the same time may need to assume more risk in their portfolio to achieve their retirement goals, according to a national survey commissioned by TD Waterhouse.

Perhaps reflective of the overall retail investor market, 50% of women consider themselves to be low-risk investors, while 45% say they will accept medium risk. Only 4% classified themselves as high-risk and 80% said their risk tolerance had not changed since last year.

That risk aversion may have to change however, as respondents’ portfolios significantly lag their retirement target. The survey found the average investment portfolio is $105,900, less than a quarter of the average target of $636,900 for retirement. And with an average household income of $60,650, hitting that target might prove difficult without taking on more volatility.

“A low risk tolerance leads to lower investment returns and this can be a problem for women who are living longer and more active lives after retirement,” said Patricia Lovett-Reid, Senior Vice President, TD Waterhouse Canada. “There is still a big gap between [their] new-found confidence and more ambitious retirement goals, and current investment behaviour.”

Sixty-nine per cent of respondents said they considered themselves financially successful, but there was a disconnect between their expressed confidence level and their actual behaviour. Seventy-seven per cent said they were confident in managing investments in mutual funds, stocks and bonds, but only 52% said they actually do so.

That divergence was evident again related to investment advice and service. Ninety-two per cent indicated they were confident of their ability to manage their relationship with a financial professional, but only 63% actually do so. More than half of women (53%) said they have no financial plan, which is up from 49% in 2002.

But there is hope that behaviour will change in the future, as interest in finances was higher among younger women than the overall sample. Sixty-five per cent of women between 25 and 35 years old said they had a greater interest in investing and financial planning today, than five years ago, compared to 53% for the overall population. Another positive sign is that 83% of respondents have a RRSP.

When asked what they would do with a $100,000 windfall, 37% said they would pay down their mortgage or other debts first, while 24% said they would invest it. Only 18% admitted they would spend the cash on a new car, a vacation or a shopping spree. Those over the age of 35 were more likely to invest than the younger crowd, while those earning more than $50,000 were most likely to tackle debt.

“This year’s poll tells us that Canadian women are getting involved and taking control of their future,” said Lovett-Reid. “My advice to them is, ‘Keep going. You’re on the right path — don’t stop now.'”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(10/13/05)