The wealth gap

   By Guest Blogger Tatiana Enhorning

Women are great investors, that’s a fact. As shown in a recent Fidelity survey of over of five million US investors throughout the last ten years, on average females outperformed males. Women are educating themselves more about financial planning and investing and taking decisive action to reach their financial goals. This along with their propensity to stick to their investment decisions and be less likely than men to day-trade or invest in speculative assets like cryptocurrency, leads to very positive momentum for women.

But, even though female investors tend to do better performance-wise, they still invest much less than men. According to S&P Global, while over 77% of Canadians have investments, only 21% are women and 79% are men. Hence the gender pay gap’s more terrifying and its lesser known sister, the wealth gap. On average in North America, the raw gender wealth gap shows the median wealth of females was just 55 cents for every dollar of male wealth – the difference between total assets and debt.

Needless to say, women are concerned. In October 2022, a survey by Ellevest found that women’s financial health is at a five-year low, and women now spend a significant amount of time worrying about their finances. A majority reported worrying about their finances at least once a week, and a whopping 43% actively worry about money at least once a day. Women reported fretting about finances at a higher rate than men on both a weekly and daily basis, and this is not unfounded. Statistically, by retirement men have, on average, triple the total assets of women.

So why is this? Are women just bad at saving?

Actually, saving is not the issue. The same Fidelity study showed women save 9% of their salary compared to men, at 8.9%. But the pay gap persists, women still earn an average of 75% of what men earn across all full-time workers in Canada and 89% for full and part-time workers combined.

Although women and men do face many similar issues when it comes to financial health, such as inflation and current consumer confidence, there are other circumstances applying only to women which bolster the significant pay and wealth gaps. These include women being under-represented in high paying jobs and having less access to retirement benefits; women taking the majority of parental leave which affects promotions; and women providing more financial support to family members than men. Even if all of those factors were not stacked against women, there is also the longevity factor. If we compare a single man and single woman who have built up the exact same amount of wealth by retirement, the women would still be at more risk of running out of money, as women tend to live longer than men.

Don’t mistake this for a rant. It’s a call to action. Concerted effort and time are required to close the pay gap, but we can start working on closing the wealth gap now. Let’s empower the women in our lives to become more knowledgeable and involved in investing to better prepare for their life goals and for retirement.

Add Exposure: It seems much more common for men than for women to chat openly with friends or family about the stock market or economy. This may seem trivial, but lack of exposure could very well be where lack of investing confidence begins for women. If from an early age, men are exposed to conversations regarding other people’s investing experiences, they are gradually learning and getting used to it all through osmosis. Let’s bring the women and girls we know into the fold to start building their interest and awareness.

Get started: I often hear women say they want to invest, and know they should, but don’t know where to start. Encouraging women to place even $500 into an index fund when they are young can boost confidence just by getting their feet wet and watching the ups and downs of the market while stakes are low. If we can embolden women to start small sooner and learn along the way, this can make a big difference. The cost of waiting to start investing is enormous. The longer we wait, the more daunting it becomes, not to mention the lost years of compounding. If one person starts at age 20, investing $5,000 per year in an ETF earning 6%, they will have $871,667 by age 60. If all else is equal but they wait to start until age 30, they will end up with about half at age 60, $447,726.

Gain Confidence: Research from FINRA suggests 71% of men think they have a high level of investment knowledge, compared to just 54% of women. This translates to 49% of men feeling comfortable making investment decisions for themselves, compared to just 34% of women. If we can help women see themselves as savvy investors through exposure and experience, women will likely invest much more.

Closing the wealth gap is much easier said than done, but we must start somewhere and we can start now. Encouraging women to invest more is a very powerful step in the right direction, and who knows, maybe one day it will lead to more than 15% of Financial Advisors being women as well!

Tatiana Enhorning is a Financial Advisor with Turner Investments. She builds and maintains portfolios for clients across Canada, and has been in the business as an asset manager for more than a decade.


The process

So the dollar tumbled by almost a percentage point Tuesday. Seventy-three and half Yankee cents now. That slide came after we heard about the economy.

Growth came in at 2.9% in the latest quarter. Less than before – no surprise. Vastly higher than analysts had predicted – big surprise. The interesting part: exports, non-residential and business investment were up strongly. Housing investment and household spending plopped. Wage gains fizzled far below inflation. And as spending dropped, saving increased – the savings rate jumped to 5.7%.

Whazzat mean?

Higher interest rates and swelling mortgages have apparently turned the tide. Real estate sales have crashed by a third or 40% in most markets, prices have fallen as a result and there’s more property pain coming as rates rise again in seven days. Remember that this economy is more than 60% driven by household spending – which is fuelled by debt. So when the cost of money rises, when income gains drop and lettuce costs double, people turtle. The economy changes. And this is exactly what the central bankers have been looking for.

Will rate hikes mollify sooner? Maybe. That’s one reason the dollar sold off (higher interest rates attract capital, bolstering a currency – and vice versa). Of course, the tightening cycle is not over yet and unless we get a stinker of a recession next year (not happening) mortgage and bank rates will stay put throughout 2023. It could make for one of the most interesting spring real estate markets in memory, starting in about 90 days. Never before have we had frustrated demand, a 7.5% stress test hurdle and low levels of inventory. If lots more people decide to sell, prices could cascade.

Meanwhile, what’s government doing? Raising real estate taxes exponentially while spending billions to increase the supply of houses. Classic suck-and-blow. Blog dog Shawn gives us a local glimpse into why this is a failed policy:

I started working part time in new home construction in 1994 (for my father) part time for a couple of years and then full time from 97 to 2002 and again 2006 to 2010. Never would’ve imagined this kind of fever pitched frenzy and prices in real estate. I was talking to my brother in law John yesterday – he still works for some contractors around the area where I was raised. John informed me that he estimated roughly 90% of housing developers had offers and clientele just vanish – “it’s like someday just flipped a switch”, he said. Developers tarping over poured foundations, things coming to a complete stand still; one developer even took the For Sale signs off of 5 or 6 houses and started renting them out (because of the lack of offers). This is in the Belleville, Trenton, Stirling area. I think you’re bang on when you said it’s an affordability issue and not a supply issue.

Yes, we are correct. There are lots of houses for sale. Months-of-inventory numbers in major markets are heading steadily higher. Mortgage origination volumes at the big lenders have plummeted. The country’s largest builder has seen sales fall 65% and closed development sales centres. Real estate boards in Vancouver and Toronto report deals have tumbled by about 45% year/year, and are running drastically below 10-year levels. It’s evident there’s more inventory than there are buyers. The market is wobbling because of demand, not supply.

What’s likely to happen next?

The Re/Max puffsters and LePage harlots swear housing will revive in 2023 because, well, because. But this is an unlikely outcome.

First, rates will inflate a little more, then stick. There’s little reason to believe a pivot is coming, and none to believe we’ll return to 3% home loans. The stress test is staying stuck at a level which materially chops the amount of money people can borrow. Second, the economy will slow. Probably not go into reverse, at least for long. But growth next year will be elusive, having an impact on consumer confidence and household spending. Third, incomes will fall further behind inflation as unemployment ticks higher. Home ownership costs keep escalating. Affordability keeps falling.

So the real estate market hasn’t hit a floor. Prices must fall further in order to compensate for mortgage hikes. The fact it’s started was the big news in today’s economic stats. Lots more to come.

Now let’s check in with Matt, newly moved (with his squeeze) from Nanaimo to Victoria.

We sold our house in Nanaimo and now have $800k in the bank.  We are living in a basement suite, which my wife is not thrilled about.  Housing in Victoria is expensive and I think we should wait to buy, but our Nanaimo realtor told my wife that the market is at the bottom and should rebound in 2023. Although condos are a lot cheaper, my wife is set on a house.  How long should we wait?

Your Nanaimo realtor is high on hopium, Matt. Without a serious rate drop (not coming) the housing market won’t jump, even in delusional, self-worshipping Victoria. Give it a year, at least.

And move out of the damn basement, which is only fuelling your wife’s house lust. Also get the eight hundred grand out of your chequing account. Even dumping it into a brain-dead, one-year GIC at 5% will give you the equivalent of $3,250 a month to help defray the costs of renting a whole house while preserving the principal and your relationship. Then wait. Watch. Shop. Be patient.

Like love, this is a process. Let it evolve.

About the picture: “A smart friend of mine introduced me to your blog 3 years ago,” writes Jeff. “and this is Charlie when I asked her for the first time: “want to hear what Garth has to say today?” She was interested for a moment but likes naps and playing with her banana more than advice from a blog. I don’t blame her. Thank you for for keeping a steady hand on the ship, wave after wave. I look forward to learning from your posts daily.”