Why do women invest less than men?

Women have been disproportionately affected by the pandemic but as the world starts to reopen, could financial institutions use this as a chance to persuade more women to invest their money?

The pandemic has amplified issues affecting women including the difference in average income, the reliance on women to take on the majority of childcare and homeschooling duties, and the gap in savings and pension pots between the sexes.

Women already earn less on average than men, with average salaries of £22,200 and £27,400 respectively.

Men are more likely to invest than women so even when women have money to put away, they’re more likely to keep it in a cash ISA instead, lowering their potential returns.

But why? Is it because of the issues around income, caring responsibilities, and having less to invest or are there other issues at play?

One argument is that companies, which have traditionally been largely used to targeting men, aren’t yet effectively communicating with women.

This is argued by SCM, the wealth management company run by Gina and Alan Miller. It believes women don’t need separate investment products, but they need to be given different information and spoken to differently.

It has now launched ‘MoneyShe’ described as a ‘female-focused information and resource centre aimed at increasing women’s confidence about investing’.

Gina says in a statement: “There is much said about the gender pay gap, but not enough about the enormity of the investing and pension gender gap. The sector has been aware of the gap for years, yet little has changed.

“We believe this is because there has been too much focus on designing female-focused products, but our experience is that men and women do not necessarily want different products. What women want is to be communicated with and treated in a straightforward, uncomplicated manner.”

The fact that women earn, and save less, is also an important factor.

Men hold an average of £30,089 in ISA savings, compared to £27,098 for women, and this gap exists at all ages.

The behaviour of saving between the sexes is also different. Women are more likely to have an ISA, making up 52 per cent of holders. They are more likely to have a cash ISA compared to men but less likely to invest in an ISA, according to government data.

When it comes to retirement planning, 30 per cent of women are confident they’ll be able to retire, compared to 40 per cent of men, and 28 per cent of people who’ve left financial planning to a partner said they had lost track of it, according to research from Hargreaves Lansdown.

However, Gina Miller believes the main issue is confidence which stops women from investing. Research from investment companies shows that women need to know more than men before making a financial decision and this extends to other aspects of life too.

Sarah Coles, spokesperson for Hargreaves Lansdown, said: “Women tend to have a higher confidence threshold – they need to know more before they consider themselves to know enough.

“This is true for everything from whether they’re likely to apply for a job to whether they are prepared to invest. Meanwhile, society tends to mould women into generalists and men into specialists.”

So, if women need to have the confidence to part with their money, what are companies doing about it?

Gillian Hepburn, head of UK intermediary solutions at Schroders, says less than 10 per cent of financial advisers had a proposition for retaining, attracting, and advising women, according to the company’s research.

“A proposition doesn’t necessarily mean having different investment products or services but starts with an understanding of why women may approach investing differently,” she says.

“Women typically have a greater focus on health, longevity, awareness of risk but often a misplaced lack of confidence around finances. As a result, they actively seek education, information and when selecting an adviser are keen that there is a ‘personal fit’.”

While there is clearly a myriad of reasons women aren’t investing their money, one area where things do seem to be slowly changing is the way investment companies are communicating with them, such as with the latest launch from SCM.

Coles adds: “Investment companies are well aware of all these risks, and have been working to make their communications more inclusive. If you open any of the myriad of guides produced for beginners by investment companies you’re likely to find clarity and inclusivity at their heart.

“On top of this, the growth of communications aimed specifically at women helps overcome concerns women may have that the investment world isn’t for them. This is not a new idea, but the more companies that embrace this approach, the more women will feel investment is just a normal part of everyday life.”