Are financial planners listening to women?

Earlier this year, a series of though-provoking ads ran on billboards across the UK.

The posters, featuring slogans such as ‘Imagine a CEO. Is it a man?’, challenged some common gender stereotypes and got me thinking how far the world of financial planning has to go in breaking down some of its own outdated labels. 

As an industry, listening more to what women have to say is the best place to start.

What’s the difference between men and women investors?

There are two commonly held beliefs about how men and women invest:

1)    Men are the ‘risk takers’. More likely to take the big swings and gamble on investments with promises of bigger returns (but less certainty of success).

and

2)   Women are ‘risk averse’. They choose the safer option, where there’s greater confidence in a positive outcome, but the returns won’t be as large.

Naturally, there’s a lot of truth to the above. For instance, there’s research that shows women are more likely to keep their money in cash rather than investing in stocks and shares. 

But as is often the case, the reality isn’t quite as straightforward. 

For me, as a financial planner (and particularly as a male financial planner), it’s vital that I take the time to understand what makes clients tick. You can’t just assume everyone thinks and acts in the same way:

Women are still under-represented

Finance still has the image of being a very male domain. One UK survey estimated only a third of women invest their money (compared with nearly half of men[1]). This is partly the reason there’s such a huge gender investment gap. Women aged between 21 and 53 are thought to have half the amount set aside of men in the same age group. 

In some ways this doesn’t come as a surprise, women still earn less (in the UK, they’re currently paid 90p for every £1 earned by man). Then there’s the so-called ‘motherhood penalty,’ potential earnings lost from taking a career break to look after children (women are still the more likely in a partnership to do this). All this can mean a lower starting point when it comes to saving up.

Another factor often raised in investor surveys is confidence. In a male-dominated industry, women are often more likely to sit on the investment side-lines[2]. One investment survey from Kantar found most women asked were less confident and believe they were less competent at investing, “put off by an aggressively masculine approach to what can be complex and daunting transactions.”[3]

But could this era of male dominance finally be declining? According to Nutmeg, more women are exploring investing since the pandemic, wanting to ensure they have a financial buffer against other unexpected future events.

Women are also more likely to follow their values

As I mentioned earlier, research often shows women are much more reluctant to take financial risks. But painting all women investors as simply ‘risk averse’ isn’t a totally accurate reflection (some reports, for example, show growing numbers of female investors taking an interest in cryptocurrency – not exactly a risk-averse option). 

What’s particularly interesting is that there’s a lot of evidence to suggest women are seeking out sustainable and values-based investing. Decision-making isn’t just influenced by the potential size of the pot, it’s based on the needs of their communities, society and the world around them. 

According to one US survey, only 19% of women said they’d invest in a company that wasn’t considered socially responsible – compared with 51% of men. This makes women an incredibly influential group of investors for the future.

Lessons on diversity and inclusion 

And increasing influence from this socially conscious set of investors could benefit us all.

Diversity and inclusion is a key area of socially responsible investing, particularly areas such as representation on corporate boards. Having a board that has a fair gender balance gives companies broader perspectives and access to a wider talent pool. Companies based in Germany, France and California for example, have minimum quotas for female representation. 

And the evidence points to increased diversity aiding financial performance as well. According to MSCI, “the presence of at least three women directors may be seen as a doubly positive indicator: of a better-performing company and of a more functional organisation overall”, its research showed better female representation boosted return on equity and earnings per share.

Lack of diversity and inclusion will make a good company poor and ineffective. 

That’s certainly true for the finance industry, where it’s imperative that the advice we give and the products we market reflect all our clients – not just the male half. 

I’m cautious of ‘mansplaining’ these important issues, but from my perspective, taking diversity seriously isn’t just a question of something that’s ‘nice to have.’ It’s more like something that all of us just ‘can’t do without.’

[1] Finder.com survey of female investors in the UK, 2021

[2] Why has the gender investment gap grown? Boring Money

[3] Kantar – Winning Over Women