This International Women’s Day, let’s break the bias against women investors

Every year, on March 8th, as we celebrate the cultural, socioeconomic, and political achievements of women, we also shed light on existing discriminations and “glass ceilings” that warrant attention. This year, the Continental Group, under the theme #BreaktheBias, urges stakeholders in financial markets and women to take stock of prevailing prejudices and work towards redressal. The pandemic, which has disproportionately impacted women, has made this drive all the more urgent. In fact, according to Fidelity research⁽¹⁾, following the pandemic, 70% of women wished they had started investing sooner. Today, we have a collective obligation to ensure that this revelation translates to positive outcomes.

However, breaking deeply entrenched biases takes more than awareness. Women investors face multi-faceted challenges, including self-limiting beliefs and unconscious hesitancies. The long-standing pay gap and patriarchal tropes in household finances do not help. It’s important, therefore, that women have easy access to information, support systems, and personalized advisory, so that they can bridge the gaps that have hindered their financial aspirations. And if the latest studies are anything to go by, increased investing by women could be great to them as well as men and the markets at large — because, turns out, women have an advantage when it comes to money matters.

'According to Fidelity’s 2021 Women and Investing Study, women’s investment returns were found to be 0.4% higher than men’s, on average.'

The women advantage

According to Fidelity’s 2021 Women and Investing Study, women’s investment returns were found to be 0.4% higher than men’s, on average. Considering the analysis data set included over five million customer accounts, the findings are quite telling. Historically, researchers have opined that women’s success in investing stems from their ability to take calculated risks, be impervious to short-term volatilities, and have a long-term outlook. Also, multiple studies have established that women tend to save a greater portion of their earnings compared to men. However, a survey⁽²⁾ shows that women invest 40% less than men. This is to say, the majority of women possess savings that they do not intend to invest.

How to incentivizes investing

In a recent Merrill Study⁽³⁾, 75% of women under 45 were found to be managing their own finances. However, the corresponding statistics for older women is not as promising. Empowering the older generation will require considerable hand-holding, where the role of financial advisors becomes critical. This, in turn, shifts the focus on how women tend to view advisory. Turns out, 8% of women have reported negative experiences with their advisors. In fact, the gender bias has been substantiated by eye-tracking technologies, which have shown that, when advisors (both men and women) meet with couples, they focus more (around 60%) on the male. Such biases, often unconsciously harboured, need to be acknowledged and rectified.

'It is important for advisors to understand that women are not a homogenous group with uniform financial goals. So, cookie-cutter advice will not suffice'

That aside, advisors can make several conscious adjustments that can have a direct bearing on women’s financial empowerment. For starters, it is important for advisors to understand that women are not a homogenous group with uniform financial goals. So, cookie-cutter advice will not suffice. In an aforementioned survey, 29% of women cited lack of personalized advice as a reason to switch advisors, along with poor customer service (27%) and bad performance (33%). In response, many organizations are emphasizing personalization and the addition of female advisors, who can relate better with women customers and closely cater to their unique needs.

Women, risks and old habits

Despite the financial acumen, women are known to get cold feet before investing. Many do not realize that it takes only a percentage or two of their earnings to make strategic allocations. Contrary to widely held belief, this is not a risk-averse behaviour but a risk-aware one rather. While men tend to take more risks, women make-do with asset classes like gold, savings accounts, and fixed deposits. In the developing world, many women give greater financial agency to their husbands, thereby relinquishing the opportunity to test the waters and creating a cycle of dependency. It is crucial to break away from such old habits.

The first order of business is to analyze the financial health, set clear goals, and cover all the bases. This could involve preparing for significant changes like a career transition, pregnancy, divorce, etc. In fact, according to research⁽⁴⁾, a woman’s standard of living goes down by 27% after a divorce. So, it’s advisable to provision for an emergency fund and comprehensive insurance coverage, preparing for eventualities that can vary from person to person. This will bring greater clarity on how much money can be set aside for investing. With the right advisor, it could very well be the start of a great financial journey. This International Women’s Day, let’s #BreaktheBias and start many such journeys.

Continental is a powerhouse of senior women financial experts. For a investment to investing connect with us at clientservice@cfsgroup.com .

References -

1. https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/FidelityInvestmentsWomen&InvestingStudy2021.pdf
2. https://www.newyorklifeinvestments.com/assets/documents/lit/women-and-investing/infographic-women-and-investing-part-1.pdf
3. https://mlaem.fs.ml.com/content/dam/ML/Registration/seeing-the-unseen-whitepaper.pdf
4. https://cdn.bfldr.com/86JM1UOD/as/7353fpjw5phgkkcm6m63/Women_and_Investing_White_Paper