Why aren't women investing?

In this latest interview, Dipika Khaitan, chief operating officer and co-founder of social investment app Gather, tells FTAdviser why women today are less financially resilient than previous generations, and what the financial services industry can do to help more women start investing.

FTAdviser: It has been said that women today are more financially independent than any previous generation. But how financially resilient are women? 

Dipika Khaitan: Undoubtedly, we’ve come a long way in advancing women’s economic empowerment. Beyond just achieving basic financial independence, more women than ever are taking an active role in their finances, investing earlier in life and becoming successful entrepreneurs.

Thankfully, women today can also look up to strong female role models succeeding on their own terms.

Yet despite the strides made to break down barriers, it’s an uncomfortable truth that inequality persists. On average, women have less than half the levels of savings and investments held by men.

This is creating a huge wealth gap that cannot be ignored. With inflation climbing to a 30-year high, and the value of savings declining in real terms, this wealth gap is only going to get bigger unless these issues are addressed, and soon. 

A shortfall of confidence accounts for a third of women’s lower levels.Khaitan

Income inequality is a huge contributing factor to this issue, and in general women may conclude that they do not have enough disposable income to invest, or that it is simply ‘not the right time’.

But putting off investing until later in life means they are missing out on harnessing the power of compound interest. Ultimately, this makes achieving financial resilience a much tougher task for women, who are already dealing with an uneven playing field. 

Other, more subtle differences also exist in the way that men and women manage their finances. For example, women’s investment priorities often differ from men’s, but they go beyond conventional assumptions.

Investing with purpose tends to be an important consideration for female investors, as is building their wealth over time, and yet companies generally tend to market their products towards women encouraging them to ‘save’, rather than offering solutions that are tailored to their investment preferences.

Separately, advisers often run with the assumption that we are more risk averse, when in reality we are risk aware.

FTA: What sort of barriers remain in the investment world that might put women off investing - or even working in the investment sector?

DK: There are a number of factors at play here. Chief among them is the fact that many women simply do not have the financial confidence to invest.

For starters, a shortfall of confidence accounts for a third of women’s lower levels of financial literacy relative to men, while genuine gaps in knowledge account for the rest. 

Other women might not be ‘put off’ per se, but might instead believe that the minimum buy-in required will be prohibitively expensive.

The ‘save, don’t invest’ frame of mind plays a huge role here – so too do the historic preconceptions that exist about women investing, or the idea that an ‘old boys club’ mentality still reigns supreme in the investment world. 

At least in part, these views are grounded in reality. There is a staggering £1.65trn gender investment gap in the UK alone – such figures are unthinkable.

Adding to this is the fact that even in this day and age, there is a real dearth of women working in financial services and particularly in higher management roles.

The 2021 Women in Finance Charter Annual Review reported that in 2020 there was, on average, just 32 per cent female representation in senior management roles.

Ultimately these figures don’t inspire much confidence and it is little wonder that many women feel ostracised, or that a lack of empowerment is holding them back. 

FTA: Is there still too much investment jargon, and a lack of financial education?

DK: Certainly. Financial confidence is a huge problem and jargon can baffle even the most experienced investors. Put simply, not enough is currently done to ensure all people understand the fundamentals of investing.

For example, many novice investors have hopped on the online trading bandwagon in recent years, with some even failing to realise that there are very substantial differences between trading and long-term investing.

More clarity is required so that people aren’t taking unexpected risks with their money to profit in the short-term, when they might be better off building their wealth over time.

FTA: How has the pandemic and geopolitical tension affected the investment/savings decisions of women and those on lower incomes? 

DK: There are two lines of thought to consider here. Many women have taken the opportunity to save more money throughout the pandemic, with some dipping their toes into investing for the first time.

This is a step in the right direction, and something I hope will be the start of a new generation of female investors.

On the other hand, women have also been affected to a much greater extent than men by Covid-19.

Government data has shown that overall, more women than men were furloughed across the UK, with women also making up the majority of employees in the industries hardest-hit by job losses, including retail, accommodation and food services – add into this recipe the current issue of spiralling inflation and we have a real problem.

Technology has made it possible for consumers to become more financially savvy.Khaitan

The end result is that women are less likely to invest and more likely to prioritise the more pressing financial demands in their lives, such as paying bills and making ends meet. 

Geopolitical tensions only add insult to injury.

For those already tentative about entering into the investment world, doing so at a time when volatility is high due to a whole catalogue of different reasons (including inflation, the fall-out from Covid-19, and the Russia-Ukraine conflict) can be daunting. 

FTA: What can be done to help democratise investment? What is the role of technology?

DK: To instil real change, we need to normalise talking about money and this must be as wide-ranging as families having conversations at the dinner table through to mandatory money management classes at schools.

The education system is failing to teach students about the fundamentals of personal finance and investing. It’s no wonder that investing is an alien concept to so many young adults.

To truly democratise the investment world, we need to change its culture. Financial literacy should be a priority, as should improving the visibility of strong female role models in the financial services sector. 

Equally, established banks and investment firms must do more to target women and provide them with sound advice to set them on the right path, while keeping investment fees low to reduce the barriers to entry.

This includes getting people comfortable with the prospect of risk, which is no mean feat when we have been societally programmed to avoid it. 

FTA: How can we bridge the literacy gap?

DK: I believe the digital environment can be a great leveller. Already, advancements in technology are paving the path to greater diversity and inclusion in the investment world. 

If properly regulated, emerging platforms can make investing more affordable, simpler and accessible to a larger portion of the population, by lowering the typically high barriers of entry.

Greater access to technology and information can also help bridge the financial literacy gap.

From digital publications to webinars and podcasts, technology has made it possible for consumers to become more financially savvy by tapping into free educational resources.

Further, new technologies have the potential to make investing more transparent – we hope that Gather, when launched, will give people more confidence that their money is being spent effectively, as well as the ability to see what other people are doing with their funds.

FTA: How can financial advisers reach a wider, potentially younger, audience to help them in their financial wellbeing?

DK: Meeting this audience where they are – that is, on the likes of TikTok and Reddit, for example – would make for a good start.

Making education and support fun, easily accessible and bringing it to a wider audience will make women and younger people more likely to engage with their finances.

Shifting the stereotypes that investing is dry or boring is essential – lucid and unpretentious advice will be the key to widening access to investment and advice.

simoney.kyriakou@ft.com