March 8th, 2021

Bridging the Gender Investment Gap

Why are only 20% of women investing?

There’s a misconception that investing is only for a certain type of person and this is impacting how many women choose what to do with their hard-earned money.

Research shows women are less likely to invest than men, with only 1 in 5 women investing versus 1 in 3 men and this could be putting them at a financial disadvantage in the long-term.

At the moment, of those that were happy to disclose their gender, around one third of our active investors are women on our platform. And that trend is reflected across the investment industry.

So, with this year’s International Women’s Day, we’re choosing to challenge the gender investment gap.

That’s why we’ve written this blog about the current trend and how it’s affecting women’s long-term wealth and security.

The Gender Gap

We usually hear about ‘Gender Gap’ and think about the difference between salaries paid to men and women. But there is a similar problem when it comes to investing money.

There are several factors underpinning the gender investment gap. Obviously, lower average rates of pay are having a significant impact on women’s financial wellbeing, but there are many other issues that you may not be aware of.

Research suggests women are less likely to question their financial freedom – yet it wasn’t too long ago that they had fewer rights or ownership over their finances and it’s now hard to believe there was a time when women couldn’t legally inherit property or open bank accounts.

But in a world where women have fought for their financial independence, an uncomfortable truth still remains, there’s a gender gap when it comes to money.

This gap is evident in the UK today, as the gender pay gap among all employees was still at 15.5% in 2020, albeit down from 17.4% in 2019 (Source: Office of National Statistics).


Mind the investment gap

In the UK we have a £15 billion gender investment gap, with women holding just £14.3 billion in investments to the £29.3 billion held by men, which can leave women financially disadvantaged.

As mentioned above, just one in five women currently hold an investment, versus over a third of men (Source: YouGov). The same study also showed that 52% of women have never held an investment product and another study found that the value of investments held by women (aged between 21-53-years-old) are around half that of men in the same age group (Source: FT Advisor).

The significant gap is becoming more concerning as, interestingly, it’s not something that’s improving as younger, tech-savvier generations enter the market.

A study found that only 35% of millennials (aged between 25 to 40) invest outside of an employer retirement plan, with 40% fewer millennial women investing compared with men the same age (Source: Wealthsimple).

And just 4.4% of millennial women have an investment product in comparison with 7.3% of millennial men. The gap widens further when looking at Generation X (aged between 41-56), where 16.1% of men are investing versus 9.6% of women.

It has been proven that women are more conservative when it comes to taking financial risks. But women are often actually better investors than men.

Repeated studies have shown that among those that invest, women consistently outperform men. Which could be linked to male investors often picking riskier investments and speculative stocks.


Women’s attraction to cash

The gap could also be linked to the differences in saving styles of men and women.

Studies shows that most women much prefer holding onto their cash and having it instantly available to them, if they need it. Women see saving as an important key to unlocking financial independence.

In 2017/18, the last year for which data is available, just over 1 million women invested in government stocks and shares ISAs, whilst 1.3 million men did.

In contrast, the same period saw more women than men invest in cash ISAs, which, although is safer and less risky, are significantly less lucrative than stocks and shares ISAs.

This is interesting because, women are often targeted with the message of ‘save’ when it comes to marketing financial products – with nearly 1 million more women than men opening savings accounts in the last few years (Source: HMRC).

How does it impact women?

The impact of women’s financial security later in life is heightened when looking at the average pension wealth.

By the age of 60-64, women in the UK have an average pension wealth of £35,700 – one quarter of the amount held by the average man (Source: Chartered Insurance Institute). Another finding by the Department of Work and Pensions revealed a shocking 40% gap between men and women’s pension pots.

So, given that women are more financially independent than ever before, the question is why don’t they invest?

Considering we now live in a world where women are just as likely to be business owners or breadwinners as men and often, financial decision makers for their households, it can be argued that investment culture looking somewhat out of date.

In the past, the investment industry has been marketed almost exclusively to men and hasn’t taking the time to understand the unique needs of women when it comes to investing, which has left many women lacking confidence and knowledge, which isolates a large proportion of the population.

Currently, society in the UK discusses money in a highly gendered manner. Most articles in the press characterise women as excessive spenders and suggest they impose spending controls and encourage them to budget better. Which has led to women believing they should cache money in instant access saving accounts, rather than consider investments as a viable money-making option.

This is having profound impact on women’s financial wellbeing; from the products they consider ‘right’ for them or the financial decisions they make.

It is more important than ever that the investment industry begin to break down the perceived barriers to investing, bridge the gender investing gap and with savings account rates close to zero and being outpaced by inflation means that people’s capital are worth less and less each year in real terms.

Not only are women’s wealth dented by the gender pay gap in the UK meaning that women must save a greater percentage of their income than men to afford the same financial stability in retirement, but there are also other influences that impact their wealth.

These include things such as the ‘Motherhood Penalty,’ spending time away to care for children or elderly relatives means that women will earn on average 30% less than their male colleagues – but on top of that, having longer lifespans mean their money must stretch further.

Bridging the gap

Developing women’s understanding of investing and the power of playing the long game could not be more important when it comes to choosing to challenge the growing gender investment gap. And by acknowledging the power of engaging women when it comes to investment products, rather than allowing women to settle for poor returns on their hard-earned money.

It’s important that women make a start to understand how inflation can nibble away at their savings and reduce purchasing power and learn to play the long game when it comes to deciding what to do with their money.

Longer term investments mean that their money is more likely to weather the bumps of the economy, whilst offering a better rate of return than easy-access saving accounts. Starting to invest earlier can also maximise the time they hold an investment for, directly influencing the chances of a substantial nest egg in the future.

And finally, as women are more averse to risk, it’s important to remember that people can lower the risk level by developing a large diversified financial portfolio. People don’t need a large lump sum, choosing to invest a little and often can gradually build a financial portfolio. Although it’s important to remember that all investments have a certain element of risk.

Choosing to challenge the gender investment gap this year for International Women’s Day and beginning to build the bridge between investing and women would positively influence women’s financial independence and better safeguard their future – further allowing them to gain more confidence when it comes to money, achieving their goals and making financial decisions.

By Amey Bennett