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Money Maven Blog by Sheryl Sutherland, Authorised Financial Adviser and Director of The Financial Strategies Group

Recommended Reading

Recommended Reading by Sheryl Sutherland: Girls Just Want to Have Fund$ - Every Women’s Guide to Financial Independence, Money, Money, Money Ain't it Funny - How to Wire your Brain for Wealth, and Smart Money - How to structure your New Zealand business or investments and pay less tax.

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Tuesday, 17 January 2017

Musings & Amusings

The gender pay gap persists almost everywhere – and has done so since pre Victorian times.

On average, women earn 18% less than men, according to analysis by Korn Ferry Hay Group, a consulting firm which looked at more than 8m employees in 33 countries. The pay gap is largely explained by a lack of women in highly paid roles. Women make up 40% of the global workforce for clerical jobs but only 17% of executive roles.  However, the pay gap shrinks when comparing males and females working at an identical level and function within the same company (but still favours men by 1.6%).

In Britain, more than four decades after the equal pay act was introduced, the headline difference between men and women’s pay is still high. A pledge made in 2015 by David Cameron, Britain's prime minister, to “end the gender pay gap in a generation” is an ambitious one. Women only make up around a third of senior management roles there. Workers at the same level but in different companies still face an average pay gap of over 9%.

The United Arab Emirates, on the other hand, has a reverse pay gap. Women at the same level, company and function actually earn 2% more than their male counterparts. This is partly because fewer women participate in the labour force, and those that do tend to have higher levels of education. In 2014 women made up 13% of the labour force; in Britain the share was 46%.

Source: The Economist

Everyday Money

The 7 Habits of Highly Effective Investors

These are the basics of running your financial life.

In a recent study, just 8 percent of college students taking a recent survey gave themselves an A for how well they manage their finances. In a larger, 2014 survey of U.S. adults, 18 percent gave themselves the top grade for their personal finance knowledge.

Many people get stressed even thinking about managing their money, seeing it as just too complicated. But Harold Pollack, a University of Chicago professor, famously fit the basics of good personal finance on an index card.

Here are seven simple ways to increase the odds of getting in and staying in good financial shape.

Once you’ve got these covered, you can explore investment opportunities. 

1. Save early, and automatically
The point is just to get in the habit of saving. Even if you start small, it’s a start. And seeing your money grow can be very motivating.

2. Expect financial emergencies
About 47 percent of respondents wouldn’t be able to cover an emergency $400 expense without selling something or borrowing money. So when you start saving, you may want to set aside money for an emergency fund before saving for retirement. That’s because, in a financial emergency, many people just tap into a retirement fund early and pay a penalty.

3. Set an asset allocation, and diversify
Asset allocation is an investor’s most important decision, said Bernstein. Research by numerous finance professors has shown that the vast majority of returns over time come from asset allocation rather than picking the right security or the right time to invest in the market.
One rough rule of thumb Bernstein uses for setting a stock-bond allocation is that your age should equal your bond allocation. A 50-50 or 60-40 split is a good starting point, he said, but then you need to figure out your risk tolerance and tweak your portfolio to reflect that.

4. Keep fees low
With many people expecting future stock market returns to be muted, it’s more important than ever to keep fees low. Situations in which a retirement saver gets conflicted advice—meaning an adviser gets fees and commissions if the client buys a particular product—lead to returns roughly 1 percentage point lower per year, according to a report from the White House Council of Economic Advisers. The council estimated the aggregate annual cost of conflicted advice on Superannuation assets at about $17 billion a year.

For most people, keeping investments simple is the most cost-effective strategy. Warren Buffett is a longtime fan of investing in low-cost index funds, and in his 2013 Berkshire Hathaway shareholder letter, Buffett shared the advice he gave to his estate’s trustee: 

5. Use a qualified adviser
Late-night television isn’t the place to find financial wisdom. 

6. Spend less than you earn
Spending more than they earn is a pattern for 23 percent of millennials and 19 percent of Gen Xers, according to a 2014 study by the Financial Industry Regulatory Authority’s Investor Education Foundation. So it’s not surprising that only about a third of each demographic has an emergency fund in place.

Part of what can make it tough to build an emergency fund is lifestyle creep. As we (hopefully) earn more, we often ratchet up our spending—we upgrade phones or cars, or take fancier vacations—rather than increasing our superannuation  contributions by 1 percent, or setting a higher amount of savings to automatically be taken out of pay.

7. Maximise employee benefits
Ensure your KiwiSaver contributions match those of your employers.

Source: Bloomberg

Who's Counting?

Gender pay gap in children's pocket money as boys get 12% more than girls.

There was also a gender gap last year but it was just 2%. It’s reasonable to assume that the New Zealand situation reflects that of the UK.

Boys received almost 12 per cent more weekly pocket money compared to girls, according to the Halifax’s annual pocket money survey of more than 1,200 children and 575 parents.

The gender gap grew from only 2 per cent the year before.

In 2016, boys between eight and fifteen received an average of £6.93 per week, compared to girls who got an average of £6.16.

“The big increase in the pocket money pay gap doesn’t bode well for the future. If we’re ever going to get pay equality in the workplace girls need to be empowered with the confidence to drive a hard bargain and learn to be unafraid to ask if they think they should be ‘paid’ more; this needs to start at home," said Hannah Maundrell, editor in chief at Money.co.uk.

"Teaching your kids the value of money and the importance of negotiation when they’re young will really set them up for success when they enter the real world," she added.

On average, eight year olds receive £5.06 with 15 year olds receiving £7.85 - the highest level recorded since the onset of the financial crisis in 2007.

Giles Martin, head of Halifax Savings said it is “reassuring” to see that the average pocket money amount has reached a nine year high.

“Some parents are clearly not feeling the pinch in the same way as they have done in recent years, when weekly pocket money dipped as low as £5.89”, Martin said.

“It’s likely it’ll be a few more years until we reach the dizzy heights of £8.37 in 2005 though, when we saw the highest average pocket money since our records began ,” she added.

Despite the pocket money pay rise, 42 per cent of children still believe they should receive more cash than they do, up 1 per cent from last year.

Children living in London receive the highest amount of pocket money with youngsters in East Anglia getting the least.

Source: Independent UK

Finance & Investment

Finance industry fails to attract female investors

Women savers alienated by ads for ‘older rich men.’

The finance industry is failing to attract cash from female investors who feel “alienated” by jargon-filled marketing campaigns designed to appeal to wealthy older men, given my experiences in that industry can’t say I’m surprised.

Advertisements used by the investment industry are confusing women rather than inspiring confidence, a new study has claimed, citing this as one reason women are more likely to hold their savings in cash rather than invest them in funds.  Read Girls Just Want to Have Fund$ for more on this.

“In a workshop we held, women were literally shrieking at the investment and financial services advertisements we showed them,” said Deborah Mattinson, founding director of Britain Thinks, the consultancy that conducted the research for the Financial Times. She added they were described as “alienating, overly complicated and riddled with jargon”. The least successful ads assumed a level of knowledge that women did not have, including the “profit hunter” campaign by Artemis Fund Managers, which women thought was aimed only at “older men” who had a “substantial amount to invest”. If women were featured in adverts at all, they tended to be “yummy mummies with idealised lives” which women felt “did not reflect their reality”, Ms Mattinson added. Previous studies have found only 10 per cent of British women have a stocks and shares Isa, compared to 17 per cent of men, meaning they are missing out on long-term growth potential. Women were more likely to describe themselves as “less knowledgable about investing” than men, and rely on their male partners to come up with investment ideas, according to a survey of 2,000 male and female investors conducted on behalf of the FT by Britain Thinks. Personal Finance Why do most women fear the stock market? Why women lack the confidence to invest — and what to do about it Senior women in the asset management industry believe a substantial marketing makeover is needed to help address this, with new methods — such as videos and online tools — as well as a broader message. “Asset managers are extremely good at talking to each other, but extremely bad at talking to anyone else,” said Diana Mackay, chief executive of MackayWilliams, the research house. Recognising that many women tended to sit on cash as they were “terrified at the thought of investment”, she urged fund managers to “start talking in a language the end investor can understand” adding that this would benefit both sexes. Sue Noffke, a senior fund manager at Schroders, said she believed it was a lack of confidence, rather than competence, that was holding women back. The investment trust she manages is using videos to broaden its appeal. “There really is a market opportunity for financial services firms,” Ms Noffke said. “Women are a large part of the market. Financial services firms are not doing what is required to access that market opportunity.”

Source: Financial Times


Women bosses boost female places in boardroom

Having a female boss makes it more likely that there will be more women on your board, according to new research.

Headhunter Spencer Stuart, which compiles an annual report reviewing governance at the UK’s largest listed companies, found that boards have significantly more female directors where the chief executive or chairman is also a woman. The proportion of women serving as non-executive directors at the UK’s top 150 public companies has reached 29.9 per cent, up from 17.5 per cent in 2011. On the six boards where there is a female chairman, such as Shire, led by Susan Kilsby, Land Securities and St James Place, just under 40 per cent of non-executives are women. In companies where there is a female chief executive, 35.4 per cent of executive committee members are women. In 2016, 30 per cent of non-executive directors were women, but only 8 per cent of executive directors. The data support persistent concerns that appointing more women to boards has had little effect on the gender imbalance at senior management level. 

“This reflects the fact that the majority of companies at the top of the FTSE have a truly global footprint and boards have long understood the importance of having directors with knowledge and experience of strategic markets,” the research said. A quarter of chief executives are foreign, as are 17 per cent of chairmen. Fifteen companies have both a foreign chairman and a foreign CEO. Mr Dawkins said the Britain’s exit from the EU was unlikely to diminish the international scope of FTSE 150 businesses, and thus the need for foreign expertise on domestic boards. “The signs are, from the thinking we see among nominations committees in the FTSE 150, that the proportion of non-UK directors will continue to rise, in line with the businesses’ increasing foreign exposure, possibly spurred by the weakness of sterling,” he said. Only 23 directors at the top 150 FTSE companies are black, Asian or from another minority ethnic group, representing just 1.6 per cent of all directors. Fifty other directors were from BAME backgrounds, but were not British citizens. The question of broader ethnic representation has come under greater scrutiny with the release of Sir John Parker’s review into board diversity this month. Just nine people of colour hold the role of chair or chief executive at FTSE 100 companies and more than half have no minority ethnic directors at all.
New Zealand boards still have a long way to go.

Source: Financial Times


The struggle of women in science is written in the stars.
In her 1968 poem, Planetarium, the poet Adrienne Rich wrestles with the crisis of female identity through the lens of astronomy. Rich wrote the poem after learning about the case of Caroline Herschel, an astronomer born in Germany in 1750 who discovered eight comets and three nebulae, and drew praise from the King of Prussia and London’s Royal Astronomical Society. Yet Caroline remained obscure compared with her brother, William, who discovered the planet Uranus.

To this day, astronomy remains one of the only scientific fields that relies so heavily on ancient Greek and Roman mythology for its naming conventions. Cosmology and mythology have been interwoven throughout human history, so it’s not surprising that modern-day astronomers have inherited this tradition. But classical mythology is deeply misogynistic, and using it to identify celestial bodies contributes to a scientific culture that diminishes the achievements of women like Caroline. Male deities and figures reign with nearly unlimited power, while their female counterparts suffer violence and humiliation.

Among the myths we have used to name and claim the heavens is Cassiopeia, a constellation in the northern hemisphere. It is named for a mythical queen of Aethiopia, whom Poseidon punished for her vanity by lashing her to her throne. Cassiopeia’s daughter, Andromeda, was also made to suffer for her mother’s sins by being chained naked to a rock, where she waited for the sea monster Cetus to rape her. In the myth, Perseus saved Andromeda and took her as his wife, but as a constellation, she still waits chained to her rock.

The Pleiades, also known as the Seven Sisters, is a cluster of stars in the Taurus constellation. The Seven Sisters were once women who danced together under the night sky, but Orion desired them, so he hunted them for seven years. To help the sisters escape, Zeus turned them all into stars – but Orion, another constellation, still chases them night after night.

Male astronomers, when they look at the sky, can find more uplifting role models. The constellations named after men tell stories of heroism and conquest, not submission and subjugation. Even today, NASA continues to recycle the names of mythological figures and great men of history when naming spacecraft and missions. Orion, a crewed spacecraft meant to facilitate travel to Mars, is named for the same Orion that hunted the Seven Sisters. Kepler, Galileo, Copernicus, and Cassini – names pulled from the scientific establishment that excluded women like Caroline – are all unmanned spacecraft sent to explore the cosmos. Even spacecraft with seemingly gender neutral names are coded male: Voyager and Pioneer evoke the men who heroically left home and hearth on voyages of exploration.

There are exceptions. Sojourner, a Mars rover, was named after Sojourner Truth, the escaped slave who became a women’s rights activist and abolitionist. But it’s telling that this name was suggested by a 12-year-old girl in an essay contest, rather than originating in the scientific establishment. ARTEMIS, a spacecraft in orbit behind the Moon, is named for the Greek goddess of the hunt, virginity and childbirth. Yet this too has gendered implications, since Artemis is associated with purity and motherhood, two features of classical femininity. Juno, an unmanned spacecraft, is currently observing the planet Jupiter; in Roman mythology, she was Jupiter’s wife, and had the ability to see through the clouds of mist that he used to conceal his infidelities. Juno the spacecraft will attempt the same thing – and so even now, when we send a female-named spacecraft to investigate the cosmos, the mission invokes a domestic metaphor. (Alice Bowman, NASA’s Mission Operations Manager for the New Horizons’ mission to study the outer edges of the solar system, is commonly referred to as ‘MOM’.)

Today, the skies are still filtered through this tradition of mythic misogyny. Naming conventions for spacecraft and constellations are a subtle but significant way that the discipline of astronomy perpetuates a male-dominated culture. Simply giving more celestial bodies female names is not the solution. Rather, change must begin with the recognition that astronomy’s self-image is built upon an age-old habit of telling stories about the abuse of women.

Source: Aeon