What’s holding you back?

According to UK investment statistics, just 10% of women have a stocks and shares Isa vs 17% of men.  Furthermore, in 2017, 82% of ISA accounts opened by females were cash accounts, compared to 75% of those opened by men. Other statistics reveal that only 7% of women hold other investments or unit trusts, compared with 14% of men, and the ratio of male to female customers among the top 10 DIY investment platforms is reported to be 68 to 32.

As a firm of advisers specialising in advising women, we have more of an insight into this topic than most. So what are the factors that prevent women from investing and how can we think about things differently?

A different attitude to wealth

There is a feeling that women are somehow more risk averse than men. This is a bit of a myth; it doesn’t necessarily come down to women taking fewer risks or necessarily being more risk-averse, but women do tend to compartmentalise the way they think about their money differently from men. Women will often ring-fence some pots as untouchable – for their children’s education, for example – while other pots are there to be invested wisely.

There is no harm in compartmentalising different pots of money – and in many ways, this is a useful way to approach a portfolio. The allocations of money that are designated for investing to obtain a return will, however, need to carry an appropriate level of risk. This comes down to how comfortable an individual is with taking investment risk, their age, their earning capacity and their desired investment growth.

Desired outcomes

One of the key differences we see between male and female investors at Addidi is the end goal of investing – i.e. what money should be used to achieve. When we talk to clients about the goals, one of the questions I like to ask is: “what would you wish for if you had a magic wand?”  The responses from women tend to lean towards financial security and providing for their families. This seems to come from our instinctive desire to nurture those around us and perhaps influences the level of risk we’re willing to take. Having a suitable ‘emergency fund’ in place can act as the security you need, leaving other available funds to invest and deliver a return. For first time investors, it can be a learning curve, but there needs to be an understanding that there has to be a pay-off somewhere and the smaller the investment pot, the harder this has to work to deliver a return.

Finding an adviser that listens to and understands you

At Addidi, we believe that one of the main barriers to females wanting of take control of their financial affairs and invest their money into the markets is the institutions themselves. It’s no secret that the financial industry has historically been – and continues to be – male orientated, often failing to recognise and cater to a female audience. Yet females represent an area of huge potential client base for advisers – especially as according to a report by Kantar, by 2020, just over half of all investable assets will be held by women.

To compound this, the field is also heavily male dominated with disproportionately few female advisers. In fact, the financial services sector in the UK having some of the worst statistics for gender diversity. Furthermore, the ‘product led’, sales-orientated approach the industry has held for many years acts as a turn-off for women. Unfortunately, this has sometimes been reinforced by a poor experience with an adviser – anecdotally, many women have told me that they have been put off engaging an adviser in the past because they didn’t feel they were being listened to and understood. It’s perhaps no coincidence that 70% of widowed women sack their financial adviser after the death of their husband.

The good news is that there are many advisers and financial planning practices that welcome and embrace female clients, with Addidi being just one of them. Finding one that you feel comfortable working with and whom you trust can be achieved – Unbiased is a good place to start your search or ask around within your network for a recommendation.

There is no doubt that women can be just as capable of handling their family’s financial affairs as men. In fact, study after study finds that when it comes to managing investments, women actually outperform their male counterparts.

Taking the leap of faith on the path of investing can be difficult for anyone who hasn’t done it before. However, once you have taken the plunge and you start to see the returns, you’ll almost certainly wish you’d done it sooner.

There is a driving need for women to invest more; the gender pay gap has also led to a pensions gap with the average female pension pot likely to be 11% smaller than that held by a man by the time retirement age is reached. Yet it is women, with their greater life expectancies, who will need their pensions to last longer. So in order for women to be able to achieve their retirement goals, investing will become more of a necessity than a choice.