My sister texted me the other day asking for some pointers on investments. She is in her late twenties and is looking to put aside a regular amount for the future. I thought this sounded like a great idea, and I started making a mental list of what we could cover – equities, funds, active vs. passive, tax wrappers, time horizon, investment objectives. I texted her back to give me a call so we could chat.
Coincidentally, that same week I also stumbled across figures from Boring Money about ISA investment. Their research reports that 21% of men had a stocks and shares ISA while only 13% of woman had one. Furthermore, the average balance among men was £36,000 whereas for women it was only £23,000.
That’s not to say that women don’t engage with ISAs – indeed more women than men took out ISAs in 2015/16 (the most recent tax year for which we have detailed figures). However, they generally tended to favour cash ISAs rather than stocks and shares.
This could be due to several reasons. Women may have different investment objectives, and certainly cash may be more suitable for short-term needs or emergency funds.
There is also some interesting psychology in the background. When it comes to financial decisions, studies show that men tend to have a higher tolerance of risk (and certainly equities are riskier than cash). Men also tend to overestimate their investment abilities much more than women do.
However, while undoubtedly riskier, equities consistently outperform cash in the long run, and the interest on cash may not even keep pace with inflation.
The challenge here is clear. If the trend of women avoiding funds and equities is left unchecked it could exacerbate the general gender wealth gap and could also leave women with smaller funds to see them through what’s likely to be a longer retirement.
This is a complex situation, and one for which there are no easy answers. But certainly simplifying financial products and industry jargon used would be a help for everyone, not just women.
Providers might also look at shifting the focus of their advertising and marketing, which has typically focused on male-dominated pursuits and sporting events.
And from a slightly more cynical perspective, it’s also worth recognising that there is a big opportunity here for providers (and advisers) if they can open up this market.
For example, recent analysis from Age UK reports that single women over 65 are more likely to have accumulated greater wealth than their single male counterparts.
On a more day-to-day level, there are also steps we can take ourselves, like harnessing the power of our own social networks to encourage everyone we know to engage with investments and financial planning. We can also espouse the values of taking good quality independent advice.
On that front, I should mention that my sister still hasn’t phoned me yet. But as Mahatma Gandhi said, if you want to change the world… you first need to change yourself.
I’ll call her tonight.