The gender investment gap

Why do women invest less than men, even though they have more success and how does this affect their lifetime income? A conference last week heard of new research to understand what might convince women to invest more.

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How can we reduce the lifetime income gap faced by women? One part of the problem which financial experts have focused on is to educate women better about their finances and to encourage saving and investment. Yet research shows women are less likely not to invest their money.

Faith Reynolds, adviser to the board of The Investing and Saving Alliance [TISA], spoke at the CHASM [Centre on Household Assets and Savings Management] annual conference on Thursday, about some recent TISA research conducted in collaboration with industry into how technology can help promote financial inclusion.

Reynolds said research shows women use ISAs to save as much as men, but are significantly less likely to save into a stocks and shares ISA than a cash one. Women, particularly women in lower socioeconomic groups and outside London, tend to be more loss averse than men, she said, and are likely to anticipate greater potential losses.

Better, more targeted marketing

The research focused on whether financial services could convince them to invest more by making the language around finances more accessible and simple [around a third of women find language an issue and many drop out in the process]. To do this they could layer the information and show more women in messaging.

That also means showing them research that shows women are good investors of money, and often have better outcomes than men because they are more likely to do their research and stick with shares that are performing well rather than to speculate. However, women tend to think investing is not for them due to negative stereotypes, said Reynolds. She said more research is needed into focusing on what women are good at rather than the risk aversion narrative.

Part of the issue, said Reynolds, is that women don’t tend to think of money as their own. They think of it as shared with their children. That responsibility can make them more anxious about losing it. They are also time poor. The research looked at whether financial education could be made more accessible and whether financial services could learn from platforms that target women specifically with advice. Reynolds said different communications might be needed for men and women to counter stereotypes for both. She said financial services could also use contextualised risk warnings and graphics to show returns and think more about hidden gendered language in messaging, given women tend to be more sensitive to risk. Reynolds also called for greater diversity and inclusion in regulatory initiatives and for financial inclusion and wellbeing to come under the aegis of the Financial Services Authority.

In a Q & A she added that the FSA should require firms to report on their investment in so-called credit deserts, said access to emergency credit needs to be simplified and waiting lists for debt advice halved. She also said that digital finance needs to work for everyone and said more needs to be done to address unclaimed benefits.


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