Taking a risk

10 January 2023

For anyone working in or engaging with investing, the concept of risk is almost second nature, and something the industry should be well versed in.

Yet when it comes to engaging with and including fearless women, it seems that any understanding of risk becomes shaky to say the least. Regardless of the research  we have highlighted - that women face different challenges when it comes to our finances - there is still an overarching belief that women are risk averse when it comes to investing. Furthermore, marketing and advertising still tends to portray women as frivolous spenders, more interested in gathering material things, or saving towards events such as weddings rather than investing cash or building their wealth. 

This failure to look at the whole picture when it comes to women and investing is not just condescending, it’s short-sighted. By not properly understanding the relationship between women and risk, the industry risks losing potential investors and billions of pounds of potential investment. Instead, this money could instead end up being diverted into unregulated financial products or even debt management.

The data

While there is no definitive figure, research has shown that women do not invest at the same rate as men -a 2021 report by The Motley Fool found that in the UK the balance within the investment community was around 80% men to 20% women - and that they tend to be more conservative in their investment approach.. These figures often lead to assertions that women are too risk averse to invest well, yet little is done to explore the reasons behind this, even though we know that the existing gender pay gap, plus expectations around caring responsibilities mean that women tend to earn less. City Hive’s 2021 Gender Pension Gap White Paper found that twice as many women surveyed said they needed to put spare money towards household expenses compared to men, while 15% of women said they had no spare money, compared to none of the male respondents. Our 2022 survey found that 85% of male and female respondents kept careful track of monthly spending, but 34% of women said they usually run out of money before the end of the month, compared to 24% of men. Only 20% of women said they were very confident in managing their finances, compared to 28% of men.

This lower confidence is in part because women are likely to face more significant financial consequences if investments fail, and take longer to recover. The main missed opportunity is if wealth simply sits as cash, particularly in an inflationary environment. But instinctively, the women who are investing are doing well to spread risk; the 2021 Credit Suisse Global Wealth Report noted that women tend to have the least exposure to high risk investments. 

The influencer risk

Are we rewarding this behaviour or ruling it as below investment-grade? One group has noticed that women are ready to invest; the influencer community. Although the recent rise of financial influencers can partially be attributed to the ubiquitous spread of social media, the increase is largely driven by the exclusivity of the traditional investing industry (and therefore its exclusion of many communities). Unlike traditional investing, influencers appear accessible, speak directly to customers, and offer the promise of spaces where all can be welcomed, and financially thrive. It’s not surprising that an underserved group would respond.
When this works, influencers with bona fide finance background can encourage more people to engage with investing. Yet many influencers are unregulated and unqualified, leaving space instead for errors, financial scams, and financial losses. Many ordinary people are risking beyond what they can afford without realising there is no safety net, with their losses the true cost of feeling excluded from the traditional investing space. 

The risk within

Having too few fearless women proportionally represented across the investment industry, especially at senior levels means that progress towards influencing and improving  product structure, outreach and offering is glacial.  Fair enough, industry women have their own battles to fight; In 2020 women working in UK asset management firms were paid 26% less than their male colleagues, and only one in 10 portfolio managers in the UK are women. Changes need to happen with companies and across the industry to deliver on their requirements to service the whole, diverse market.

What female investors want

Just like men, women want to build wealth and a financially secure future. In a survey conducted for City Hive, 56% of women said they were worried about having enough money when they retired, compared to 40% of men. Meanwhile, 72% of women said they often think about how to improve their finances (vs 63% of men), and around 70% of both groups feel like investing would offer a more financially secure future.

By examining the data, and behaviours of potential female investors, the industry has an opportunity to create products, marketing, advertising and communications to attract potential female investors, and additional income to the industry. But it’s not just recognising there is untapped potential investment wealth. It’s understanding that what looks like a lack of interest might really be entrenched social factors, and the higher magnitude of consequences that women face from failure.  

To access this long-term, sustainable wealth creation potential in women, industry must better represent their needs, including by changing the way their business works to embrace progress and the potential to do so much more. By creating a vision of what an inclusive industry with democratised access investment can be.