Guest Post By: Ratehub.ca
Recently, Ratehub.ca conducted a survey of over 1,100 Canadians to explore their attitudes towards financial services. The survey aimed to discover people’s attitudes towards the use of FinTech products and platforms like robo-advisors, investing overall, and bank fees. The intent is to understand behaviours and preferences to help Canadians find financial solutions that better suit their lifestyles, wants and needs.
The results, specifically the responses regarding robo-advisors, were both interesting and also a bit worrisome. Here’s the breakdown of the survey results.
Who is using robo-advisors?
Robo-advisors are disrupting the traditional investment industry as the solution for Canadians who want more from their investment portfolios. Digital wealth management overall provides quality investment services at significantly lower fees than its traditional competitors.
And by comparison to the cost of mutual funds, whose management fees are among the highest in the world, Canadians are seeing the value in choosing an investment option that doesn’t sacrifice a significant part of their wealth. Over time, those lower fees alone can add up to a significant difference in the size of a person’s retirement savings.
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The survey results reported that adoption of robo-advisors is relatively small but growing. This could mean that investors are learning more about the investment opportunities they present. Interestingly in Canada, adoption remains significantly lower than average in one specific category—among women.
Women and the investment gap
Our research indicates that women in general were only half as likely to have a robo-advisor account than men (4.5% vs 10.5%). The statistics become more telling for older generations as well, with the number of female baby boomers (aged 55+) with a robo-advisor account dropping almost to zero.
Women face a number of concerning issues when it comes to their money. Women are faced with a wage gap, with studies showing they are earning less than their male counterparts. This earnings gap impacts debt repayment and investing habits—which Nest Wealth defines as the investment gap.
Quantifying the investment gap
The impact of the investment gap can be multiplied through paying excess investment fees from traditional investment options. In this case, women are being especially penalized. With lower adoption of low-fee investment choices means that women are likely to be paying larger amounts in fees over time with their current wealth offering.
And what about once you’ve factored in the power of compound interest? More money spent on fees leaves less money in accounts to save or use for other priorities. Perhaps it’s easier for us to consider account fees when it comes to no-fee chequing accounts, but harder to do when it comes to our investment accounts. Why could this be the case?
Investing habits are likely to be more structured and even automatic (think recurring contributions), so we can assume Canadians might be more forgiving when it comes to paying fees for their investment accounts. Chequing and savings accounts are more commonly used on a regular basis, so it could be a lot easier to become more engaged in bank fees when you’re using and tracking your use as part of your daily routine.
Even more worrisome is the fact that older generations of women have lower adoption rates when it comes to digital wealth management. People accumulate savings for retirement over time, so as people get closer to retirement, their investment accounts are expected to become larger. And the higher the account balance means that paying a high percentage fee takes a proportionally larger bite from your wealth. That’s why it’s best for investors to consider their wealth management options. There are different pricing models available that can help Canadians retire with more. Nest Wealth for example, charges one low capped monthly management fee. That means that regardless of your account size, you’ll only ever pay up to $80 a month in management fees. To learn more, you can visit Nest Wealth’s fee breakdown to see how much you can be saving in fees alone.
Why you should care
The investment gap isn’t the only thing impacting women, either. There’s a wage gap that should be considered and is a contributing factor to the reason why we find more women stress about their financial status.
The wage gap has been talked about for decades, so while unfortunate it isn’t a surprise. So, why should you care about the investment and wage gaps?
It has to do with expected lifespans. In general, women live longer than men, meaning that women statistically would need to prepare to save more for their retirement. According to the World Health Organization, the average lifespan of a woman in Canada is 84 years, with the average lifespan of a man coming in at 80 years.
That’s why it’s important to question what investment options are available to you and what best suits your personal goals. To learn more about women and the investment gap, you can read Nest Wealth’s blog post, The Investing Gap: The True Cost Of Being A Woman for more information.
Ratehub.ca hosts five million unique users per year and helps Canadians get the best deals on their mortgage, credit card, insurance and investments. Ratehub.ca is a product of the people behind our company and our commonly-held beliefs on financial transparency, product innovation, entrepreneurship and community.