For the past few months, we have been running a series of interviews on the theme of ‘Women in finance’. One of the views that emerged consistently was that there are still too few women in the financial services world. Although recent years have seen progress, and there are now a number of women among key decision-makers, overall the financial services sector remains male-dominated – particularly at management levels. But what about women as investors? What do women do with their money? How active are they on capital markets? And are there differences in the way women invest when compared to men?

Untapped potential

Women’s share of wealth in Europe is estimated at around 40% to 45%. However, although women have almost half of the wealth, they are far less likely than men to invest. According to “Winning with Women”, a report by data analytics and brand consulting company Kantar Group, only 26% of women describe themselves as ‘investors’, compared to 37% of men. Furthermore, more than twice as many women save compared to those who invest. This represents a real loss, because the economy needs the investment that women could bring.

So why are women less inclined to invest? One reason is general stereotyping surrounding investing, which is still seen as more of a male domain. This bias is even more marked when it comes to cryptocurrencies, where investors are overwhelmingly men and the more traditionally male ‘get rich quick’ mentality prevails. Added to this is an issue highlighted by Commissioner Mairead McGuinness, in her interview in the ‘Women in Finance’ series – that is the problem of jargon. A lack of financial skills and knowledge means that complex and unfamiliar jargon can frequently alienate women and make them less likely to invest their money in financial markets and instruments.   

Self confidence

But skills and knowledge can be acquired and jargon can be learned. And this brings us to one of the other major factors, which is confidence. Because even where women do in fact have the skills and knowledge needed, they do not always have confidence in that knowledge. The Kantar report shows that although women are only a little less confident than men about managing short-term ‘everyday’ finances, when it comes to long-term finances, 46% of women say they are confident compared to 56% of men. Meanwhile, a 2021 study by GFLEC (Global Financial Literacy Excellence Center) entitled “Fearless Woman - Financial Literacy and Stock Market Participation”, found that one third of the financial knowledge gap between men and women actually came from a lack of confidence, rather than a real knowledge gap. For instance, experiments showed that women tend to disproportionately respond ‘do not know’ to questions measuring financial knowledge, but that when this response option in unavailable, they frequently chose the correct answer.

How women invest

Compared to men, women tend to keep a larger proportion of their wealth in cash, real estate or other physical assets. And when they do chose to turn to capital markets, studies show that women invest differently to men, for instance they generally take fewer risks. Consequently, women predominantly opt for more conservative, less-risky assets, and often do not have enough equities in their investment portfolios. This puts them at a clear disadvantage for growing their capital over time.

But there are also differences in the investment behaviour of women that bring advantages when investing to meet long-term financial goals. Women are less likely to engage in frequent trading activity and they tend to invest with a more long-term focus.

Finally, women are also particularly interested in environmental, social and governance (ESG) criteria and ‘impact investing’ – investments made with the intention to generate specific beneficial social or environmental effects in addition to financial gains.

Running the business

Something that could contribute to increasing the numbers of women investing would be having more women-run SMEs and businesses. Eurostat figures from 2018 show that women in Europe are half as likely as men to be self-employed. This disparity is even more pronounced in the FinTech sector: only 12% of global FinTech founders are women, and just 6% have female CEOs. This lack of women in leadership positions means both less investment in businesses led by women and less-appealing investment choices for women. For instance, if there were more women in the product development teams at financial services start-ups, there would likely be more products tailored to women.

Going forward…

As recently as the 1970s, women in some European countries were not allowed to open a bank account without their husband’s or father’s permission. We have clearly come a long way compared to this. However, there is still a lot of work to do to get more women active in the financial services world – as investors, as decision-makers, as clients, and as business owners and entrepreneurs.