WHY IS THE INVESTMENT INDUSTRY LOSING $700 BILLION ANNUALLY IN THEIR FAILURE TO ATTRACT WOMEN?

The finance industry is not known for blithely ignoring the loss of money. Yet over $700 billion is lost annually due to a failure to attract female investors, despite many women reaching mid-life with significant savings languishing in bank accounts and cash ISAs.

Facing pitiful savings account interest rates and the growing awareness that high inflation may erode their savings, this passive perspective may start to be questioned. Consumer-facing investment platforms have realised there is potential to capture this lucrative female pound and reasonable attempts are being made to appeal to female (potential) investors, including TV ads that attempt to put investment in the context of female lives.

Unfortunately the odd nod to women in TV campaigns will not be enough to rectify the situation. Many claim that developments in fintech will help, in that novice investors can begin with micro-sums: this is seen as more democratic and so more enticing to female investors. But this assumes that lack of capital was ever the problem in the first place – certainly it isn’t when it comes to the very women that investment platforms might be wanting to entice.

Of course not all women are averse to investment and many may even bristle at some of the issues I discuss below - but these aren’t the women platforms are failing. It is also somewhat arguable whether the investment discrepancy between the genders is quite as bad as it seems.

Although the ultimate figure of $700 billion probably doesn’t lie, we have to look at the deeper meanings behind certain facts. For example according to Fidelity’s 2021 Global Women & Money study, ‘only a third (33%) of women see themselves as investors,

much lower than their male counterparts (41%). This sentiment of investment being a man’s world is true in every market we looked at, bar China.' Firstly, that’s either a 'massive 8% difference' or 'only an 8%' difference – it is subjective whether 8% is dire straits or a reason for optimism. More importantly, to ‘consider yourself an investor’ is a highly ambiguous state of mind which is not necessarily reflective of actual invested sums and can potentially include huge amounts of reporting bias. Literally every person with a pension could 'see themselves as an investor'. In those terms you would almost have to go out of your way to not see yourself as an investor. By which I mean that how you see yourself is not necessarily relevant to the bottom line – although it’s an extremely important thing to know from a marketing perspective.

So what might be some of the underlying reasons for the discrepancy?

It Starts at School

To begin at the very beginning, women who are mid-life today (and so most likely to have significant uninvested savings) may never have been encouraged, at school, to be particularly interested in maths (which is why there has been so much recent emphasis on encouraging girls into STEM subjects). Since investment is presented as highly mathematical, the entire subject may be off-putting to many, although in actuality I would argue that investment – at the most basic consumer level - doesn’t have all that much connection to math. And this might seem an entirely ridiculous claim.

What I mean, simply, is that most people who claim they don’t understand math are perfectly capable of balancing a household budget (i.e. doing basic arithmetic and using a calculator). Clearly, Fund Managers and other investment professionals have to understand math at a very high level, but does it really take Advanced Math to understand a basic Index Fund, for example, at the level at which a consumer investor would ever need to understand it? Not really. And in a sense this is just a numerical version of the problem of jargon I address in my next point.

Financial Jargon, a Load of Bull (Markets)?

I believe (almost vehemently!) that one of the primary reasons that many non-specialist women are put off the investment world is that they find the jargon extremely inaccessible. This is my own personal view but far from unsupported: the same was put forward in Wealthbriefing’s 2017 report Winning Women: Key insights for wealth firms targeting today’s dynamic female clients: ‘Jargonistic language which alienates women rather than convincing them to invest is a particular issue.’

But why is this a gendered issue? Am I suggesting that ‘women don’t understand jargon but men do’? Of course not! What I am suggesting is that (on the whole, although it is always unwise to make sweeping gendered statements) – novice male investors seem to actively enjoy using jargon that they may not yet fully understand (a brief scan of Reddit is instructive in how anyone so inclined can make a jargon-mountain out of investment molehill). Who knows why? It may make them feel ‘part of the club’. But women for the most part just want to understand the underlying facts.

As such a relentless and / or unnecessary use of investment terminology in materials aimed at non-professional potential investors simply comes off as unnecessarily obfuscating. And it bothers me that this may be barring people out for no good reason. (Again I’m not of course talking about highly complex financial instruments way beyond most individual investors need-to-know levels but fairly straightforward investment concepts and products.)

I choose optimistically to think that this is not being done on purpose in order to sell unnecessary financial advice, and I also appreciate that people within an industry must ‘talk shop’. More cynically, ‘jargonising’ is certainly a proven way to bar people out, which would be quite convenient if you were wanting people to feel they had to employ an advisor. For example: is it really necessary to talk about ‘bull markets’, ‘bear markets’ and ‘headwinds’ in magazines or marketing aimed at non-specialist readers? They are not hugely complex things to explain. Equally, I was able to explain the term ‘accumulation’ to a woman with a fear of maths in about 2 minutes max.

It might be argued that if people want to invest then they ought to ‘learn the language’. I disagree. If it is a hobby then by all means learn the language, just as you need to learn football or tennis terms to enjoy the games. But you aren’t expected to learn Python to use an App. More importantly, it is the investment platforms that are the ones wanting to sell product. As such it is their responsibility to explain their product to the customer, not the other way round. Indeed in very few other areas do retailers continue to insist on using ‘expert language’ when trying to sell to non-expert consumers (with the possible exception of IT). As such even the most basic DIY investment platforms – which may seem straightforward to someone with a basic understanding – can appear completely inscrutable to those with no financial knowledge.

Microfinance – Addressing the Wrong Problem?

There seems to be a prevailing assumption that Fintech will enable microinvesting which in turn is going to be a major contributor to redressing the investment gender balance problem. For example Schroder’s states that ‘microfinance investment can empower female entrepreneurs and contribute to closing the credit gap’. But why? Minimum investment figures on well-respected and accessible platforms are already low - as little as £25 per month (so about one glass of wine a week in a bar, not that I am suggesting women drink too much wine - I could have come up with innumerable arbitrary metrics to show how little is required!), with a minimum initial £100 investment.

But as I’ve said, lack of money is not the problem in the first place: conversations with women have taught me this. Forget democratising the amount of capital invested: again, how can you even invest £100 into an Index Fund if you don’t know what an Index Fund is, or how to choose one? How can you ensure it is cumulatively reinvested if you have no idea what that means? In my experience talking to women, it is not the amount of capital they have that is the problem, it is that they simply do not understand the terminology. Interestingly, Coutts suggests that many women feel patronised when they do seek advice (including women of High Net Worth). And while there are many ways to patronise people, using unnecessarily debarring language is certainly one of them.

In reality, I have known women with very significant sums who are resistant to investment. I have equally also known women on extremely modest budgets but keen to invest, yet who simply do not understand what they are looking at when they try to use the platforms. Again the impenetrability of the jargon – and a lack of instructional material - is a primary cause.

Attitudes to Risk

There are of course many other factors which prevent many women from approaching the area of investment. Of those who are financially literate, there may still be a resistance to investing due to the obvious fact, warned by law on every financial platform and product, that ‘your money can go down as well as up’, i.e. risk. Traditionally it has been thought that women take fewer risks because they are more concerned with security (possibly to the point where the only acceptable amount of risk is no-risk, aka leaving the money in a savings account, although this attitude does not recognise the risk of erosion of sums sat stagnant in bank accounts due to inflation).

Actually, commentary is mixed on this point. Some sources do still report that women are more conservative investors with lower risk tolerance. However, Coutts finds this more nuanced. While women do seem to prefer long-term and medium-risk investments, they are prepared to take risks: they just require more facts in advance. And whether you consider wanting to understand the facts more deeply as lower-risk behaviour is a matter of perspective. Many would say that risk is only useful when it is calculated - so we might equally argue that women are big fans of calculated risk. Indeed many stats point to women overall being strong investors when they do invest because they may tend to take a measured, informed and level-headed approach.

‘Life Pictures’ and ‘Financial Journeys’

Another factor is that investment is not historically presented in a way that’s connected to life goals, except perhaps when it comes to pensions and despite the fact that this is now beginning to change in certain specific TV ad campaigns.

Again, without wishing to over-generalise, many women do see aspects of life in a more interconnected and social fashion; that is, they are not interested in money as a pure numerical measuring post but rather in what it can do for their life and the lives and wellbeing of their loved ones. Interestingly, narrative plays a strong role when it comes to ‘telling stories about companies’ and errors are made when people invest on the basis of a good story (for example cryptocurrency, or certain fashionable start-ups). Yet the same financial industry that gets blindsided by heroic narrative here often seems to struggle to sell investment itself via a non-heroic but more socially-minded narrative.

Different Life Trajectories

It is often pointed out that not only are women's salaries (on average) lower, they often peak sooner that men’s (although I would point out that while this is true for salaried women, female entrepreneurs’ wealth contribution in fact peaks at the same time as men, circa 46-55). Perhaps more critically - women live longer. These are fundamental facts that ‘gender-lens’ investment needs to take into account.

This is not even to mention many other gender-specific factors that may be deemed subtle, psychological, behavioural or anecdotal, such as observable facts regarding post-divorce and/or post-retirement behaviour. For example, since men (not always, but often) tend to prioritise their career up to midlife, while women are often taking the lion’s share of childcare and are also often burdened by caring for older relatives, at retirement or post-retirement age priorities might be wildly different.

For example, the last thing many men want to do at 'retirement' is continue working – especially given they are likely not to live as long. As such they tend to fit neatly into classical retirement trajectories. However women frequently find a new lease of life at midlife and a new level of confidence which means many don’t retire at all but start businesses. That is, just as many men are ready to settle down, many women are only just getting started. And so in actual fact they may end up with a higher income post supposed retirement than they had before – which completely goes against standard models of retirement planning.

On that note it is intriguing that Accenture finds many women change financial advisors roughly 3 years after the death of a spouse. Put simply, women often make radical changes in later life when they find themselves (chosen or otherwise) fully in charge of their own financial future.

Psychological Blocks and Poor Reputation

Finally, other reasons for a resistance to investment may be more nebulous and rather harder to account for in concrete terms. In fact they may even seem peculiar to those who don’t feel this way. But the startling fact is that I have met women with very large sums stashed in ordinary current accounts who have expressed (in so many words) that they found the notion of investment almost distasteful. The impression I received was of a sense that the entire concept of investment represents somehow a ‘greedy’ or obnoxious desire to ‘unnecessarily’ increase the acquired capital / savings that they already had. The fact that inflation would erode these savings is sometimes missed.

These are not merely delusions of sainthood in the women I am speaking of. More women than men are perhaps likely to be left-leaning (certainly more women voted Labour in 2019 than men), and a prominent current narrative is that investment is ‘unearned wealth’ (despite that for most ordinary consumer investors, investment products are bought with hard-earned post-taxed income, and also despite the fact that all pensions, including those in the public sector, are investment gains). We must add, from a pop-cultural perspective, that the connection between investing and ‘obnoxious greed’ is hardly helped by films such as The Wolf of Wall Street!

This may seem on the one hand difficult to address because it’s not driven by logic in the first place but by ideology and emotion. You may even wonder how it is your problem and may simply write off the many women who feel that way as not your target market.

I would say by contrast that this is an enormous opportunity to show investment in a different light. Couldn’t you make it your job to explain how investment need not be that way and what it really is? That it is a way of nurturing your carefully acquired money for your own wellbeing and that of your family? That far from investment being somehow unethical it can be and should be about sustainable growth, that there is increasingly a whole world of actively ethical and sustainable investment opportunities available? In other words why, as an investment company platform, would you not want to make this passionate demographic your problem?

References / Sources:

Accenture Consulting, 2017 - Reinventing Wealth Management for Women

Fidelity, 2021 - Global Women & Money Study

Wealthbriefing, 2017 - Winning Women: Key insights for wealth firms targeting today’s dynamic female clients (in association with Boston Multi Family Office, Clearview Family Wealth and Wealthmonitor).