When does inequality start? Why do women traditionally invest less than men?

On average, women in the UK face retirement with 39% less in their pension pot than men, according to the Financial Reporter. In this article, we ask Senior Financial Adviser and Fiducia Wealth Management Director Susie Laws why this is and what women can do to pivot the situation.

• How big is the gulf between men and women when it comes to investing?

There is a noticeable gulf in terms of pension provision, which increases as you go up the generations.  For the oldest generations where traditional historical gender roles were the norm (and the women tended to stay at home to raise children), it’s not uncommon for women to rely on their state pension with no private provision.

With changing attitudes and increasing financial independence, women are generating their own wealth and are therefore increasingly investing.

• Key differences?

Studies show that women tend to have lower attitudes to investment risk and are therefore less tolerant of the volatility which investing in stocks and shares involves.  This is to make a generalisation, since everyone will have a different risk tolerance, which is why working with an independent adviser can be so important to achieve the right investment approach for that individual.  An adage in the financial sector goes that women save, and men invest, and this still rings true. It seems that even women who have money to put aside tend to squirrel it away rather than try to grow it. This year, there’s already been a lot of discussion around women’s financial security, with Helena Morrissey recently using her status to make statements on the subject, so we hope that the tide will be turning.

In my experience, women are also more likely to consider an ethical/ ESG investment approach than men.  If you have a couple who chose to have children, it will generally still be the woman who takes the career break, or who moves to part time hours.  This can have a real impact on a woman’s future financial health and independence.  It goes without saying that if you have a part-time salary and you are saving a fixed percentage (i.e. how most pension contributions are calculated), you will be saving a smaller monetary amount than the full time equivalent.

• Causes?

It’s fairly straightforward, even if the solution will take some time. Generally speaking, a lower risk/more cautious approach will ultimately lead to smaller funds. (i.e. cash savings will deplete in relative terms once inflation is considered); whereas higher risk investments can produce greater returns.

• How is the financial sector part of the problem?

Traditionally a male dominated sector, little effort has been made to appeal to and attract female demographics.  This is improving and many influential women are inspiring others and encouraging a change in culture, which is helped by the increased number of women choosing financial planning as a career.  Still, work needs to be done to ensure that women feel understood and represented by the financial sector.

• What can government, the financial sector, and individual women do to become more engaged investors?

There are several areas in which institutions can influence change. Education is paramount. Increased education in schools and workplaces (i.e. Fiducia’s schools programme) will increase understanding and engagement.  Women also need to not be afraid to speak to an adviser, start a finance group with friends, read the financial press etc. Talking about money openly will increase their understanding and expand their horizons. Knowledge is power and once the momentum is gathered then things will change.

• Markets have fallen sharply due to the coronavirus; if women were already less likely to invest, what do we tell them now?

Don’t panic. Investing is a long-term game and there will always be short term movements which can look dramatic. In the words of Warren Buffet, I’d say be brave when others are afraid, and afraid when others are brave.

If you feel that you or a member of your family could benefit from some tailored financial planning advice, then visit the website to book an appointment or give us a call.