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At my girls’ grammar school in the 90s, our maths teacher introduced us to trigonometry by saying that female brains often found it hard. At least half the class promptly switched off and probably never took an interest in maths again.
I am reminded of this episode when studies from the wealth management industry find that women lack confidence about finance. As a result, we are told, women are less likely to invest.
The gender investment gap is real. Boring Money, a consumer investment website, estimates that it rose to £678bn this year, based on the fact that more men invest more money in higher-returning products. A study from the Investment Association this year found that men were twice as likely to hold a stocks-and-shares Isa as women.
The wealth management industry is well aware it needs to attract more women. They currently control about a third of all retail financial assets in the EU and the US, and this is expected to rise to up to 45 per cent by 2030, according to McKinsey. Female-only investment firms have sprung up to address this. Mainstream wealth management firms are trying to recruit more female advisers, while producing leaflets aimed at women to encourage them to be more confident.
But what if they’ve got this the wrong way round? The theory seems to assume that because women are less confident, they’re more likely to hold cash. But this way of thinking blames women for being cautious, rather than blaming the industry for allowing them to be cautious.
Like having a fragile female brain that can’t handle shape rotations.
This industry approach — don’t be scared of equities, delicate female! — has knock-on effects. First, for those that find finance boring, this gives them an out, like the girls in my maths class. Because men aren’t supposed to find finance boring, the ones that actually do may feel more social pressure to overcome this and do their homework. Women may not feel this to the same extent. Second, I suspect it may lead certain old school advisers to not push their female clients as much as their male ones to take on an appropriate level of risk. Part of the gender investment gap could easily be down to a lack of good advice.
Of course, there are different ways of thinking about investment and risk, and some people will be more risk-averse than others. Wealth managers tell me their female clients are more likely to plan for the long term and think about what the money is for — usually children or grandchildren — than their male counterparts. That’s fine, but I don’t think it’s helpful to assume the women will take that approach or the men don’t want to.
Emma Sterland at Evelyn Partners thinks it’s not that women have lower risk profiles, more that they tend to take more time to understand what they’re investing in and ask more questions. This could be misconstrued by a bad adviser.
A bad adviser could also fail to understand that male clients may feel under pressure to understand finance so may paper over a lack of knowledge with bluster, and end up in products they don’t understand or taking on more risk than they feel comfortable with. That’s not fair on them.
Anyone that doesn’t know what is going on or is bamboozled by the unnecessary jargon in this industry should feel able to ask a question. Asking questions is a sign of strength. A brave journalist is one who puts up their hand in the middle of a jargon-filled presentation full of people nodding along and asks, “But what is a mortgage-backed security?” (If the presenter can’t give a clear answer, that’s a very bad sign).
I don’t enjoy gender stereotypes, even if we are able to generalise at times that women are more likely to do x and men to do y. It still doesn’t mean all women or men will act that way, and it doesn’t mean that they should. It’s better for long-term investing to have your money in equities than cash and that is a gender neutral statement. Equally, it’s better to ask questions and understand what you’re investing in and this should also apply to everyone.
One solution to all this is to get better at psychological profiling for both men and women, and wealth managers say AI tools are already helping here. Another solution is to hire more female advisers — only 18 per cent of financial advisers are women, according to the FCA. That will help, though I think less in the sense that women want female advisers than in the more general sense that it’s not good to have too much of one type of person in any business due to groupthink.
There’s also an age element — Gen Z and millennial women feel more confident than older women about finance, according to a McKinsey study. And Alex Loydon, director of advice at St James Place, says that younger male advisers often have a more thoughtful approach to all this than the older male advisers.
Lastly, there is of course financial education in schools. Women shouldn’t be allowed to think that equities are a daunting prospect any more than girls should be allowed to think that triangles are. Getting the messaging right as early as possible should make these lazy gender categorisations a thing of the past.
