Why more women don’t invest…but should.

Executive summary:

  • Women have gained better control over their finances over the last 150 years but are still more hesitant to invest than men
  • On International Women’s Day we consider the theme of #InspireIncluson which encourages us to collectively support opportunities for women
  • As financial advisors, you can help women invest for their futures by appealing to their specific needs

Every year on March 8th, we commemorate International Women's Day — a day dedicated to celebrating, acknowledging, and reflecting upon the remarkable achievements of women across social, economic, cultural, and political spheres. This year’s theme of #InspireInclusion encourages us to move beyond stereotypes, recognizing the strength that emerges when we collectively support the opportunities of all women, everywhere.

When it comes to investing, women have been gaining better control of their finances gradually over the last century and a half. Policies, workplace advancements, improved educational opportunities, and initiatives promoting financial inclusion have collectively contributed to empowering more women to manage their finances. And while the future seems bright, the truth is, there are a variety of reasons that more women aren’t set up to be as successful or as confident heading into retirement as much as their male counterparts. The good news is that as financial advisors, there is a lot you can do to not only #InspireInclusion by helping women invest for their futures, but also to take the opportunity to position yourself for the future as more and more women manage their own finances.

Let’s dive in!

Minding the Gap

It is important to recognize the persistent income disparities between men and women, despite the continued advocacy for pay equity. In Canada, women earn approximately 89 cents for every dollar earned by their male counterparts. Beyond the wage disparity, women are disproportionately more prone to encountering frequent career interruptions, not only to maternity or parental leave but extending into later stages of life when they often assume caregiving responsibilities for aging parents. Not surprisingly, the months following the global pandemic saw the sharpest ever decline in women’s workforce participation. For these reasons, women are more likely to take on part-time jobs, foregoing access to employer retirement plan benefits. Women also generally live longer – which comes with a higher probability that they will outlive their wealth.

Over a woman’s investment horizon, this reduced income translates into fewer funds available for retirement savings. In fact, research shows that women have saved 30% less than men do when they retire.

Risky Business

The influential study "Boys Will Be Boys" by Barber and Odean1, completed in 2001, delved into the investment outcomes of men and women, revealing many instances where women outperformed men as investors. This research challenged the myth that women are more risk-averse than men, instead suggesting that women's approach to risk is not about fear but about heightened awareness. Contrary to men who often focus on chasing returns, women tend to take a more holistic approach, incorporating a variety of factors into their decision-making process. Interestingly, the study found that men's frequent trading, marked by overconfidence, lowered their net investment returns by 2.65%, compared to just 1.72% for women.

This distinction in investment strategy and outcomes between genders extends into broader financial behaviors, particularly in planning for retirement. Despite having similar retirement goals, women express less confidence in their ability to achieve their goals, with about 36% doubting their ability to retire comfortably, as opposed to 21% of men. This disparity in confidence isn't solely the result of financial discrepancies, such as the gender pay gap or less savings, but also stems from a combination of limited financial literacy, societal norms regarding gender roles, and self-doubt in their investing capabilities.

The insights from "Boys Will Be Boys" not only illuminate differences in how men and women engage with investments but also underscore a broader pattern of how attitudes and perceptions significantly influence the retirement savings landscape, highlighting the intricate link between investment behavior and retirement security.

Click image to enlarge International womens day_01

How can you best help women become more engaged investors and help them get to a more comfortable financial future?

  1. Engage in more meaningful discovery. When is the last time you refined the way you gather information on your clients? Doing proper discovery (or rediscovery, for existing clients) is an excellent way to help investors identify their priorities, their concerns, or their challenges in planning for retirement. It is also a great way to include more disengaged spouses -often the female member of a traditional couple - who may show less interest in the investment strategies but do value planning for their futures.

  2. Tailor your approach. While few clients might want the fancy charts and convoluted investment graphs, most just want reassurance that they are going to be okay when they retire. Think about demonstrating how they are invested for outcomes vs. invested for performance. In a survey, women said that the second most important criteria when choosing to work with an investment advisor, is to be treated with respect, as an equal. This factor was ahead of choosing an advisor that takes the time to understand her specific financial needs.

  3. Offer more and better resources. Offering workshops, resources, and tools that demystify investing and financial planning can empower women to make informed decisions. Be sure to emphasize the importance of long-term financial wellness, retirement planning, and the role of investments in achieving better financial outcomes. At Russell Investments, we see the value that you bring to your clients’ financial wellbeing. We are happy to be a partner that can help you with any of these strategies. Reach out to your regional team for our Women & Investing materials.

3 ways your Russell Investments team can help

Women Wired to Invest Tools: Collaborate with your Russell Investments regional director to gain additional insights on how to support your female clients effectively. Host special events with Russell Investments experts to demonstrate how you can empower women to unlock their financial power and take control of their future.

Deep discovery: Engage your female clients and prospects through a deep discovery process designed to identify their true priorities.

Get organized checklist: Provide your female clients with a checklist to get them organized on issues that will shape their financial future.

The Bottom Line

You might be surprised to hear that it’s only been 59 years since women in Canada have been able to open up their own bank accounts without permission from their husbands. Less surprising is that today more women are in control of their households’ finances…and they are starting earlier in life. While fewer than half of baby boomer women reported being the primary financial decision-makers in their households, this figure has jumped to 72% among Millennial women.

As we stand on the brink of the largest generational wealth transfer in Canadian history, it's projected that by 2028, women will control nearly half (42%) of all financial wealth in the country, amounting to more than $4 trillion of personal wealth2. This monumental shift not only underscores the growing financial empowerment of women, but also signals a transformative change in the landscape of wealth management.

1 https://faculty.haas.berkeley.edu/odean/papers/gender/boyswillbeboys.pdf

2 By 2028, women in Canada will control 42% of the country's wealth, but there are still challenges to achieving financial empowerment, Desjardins, March 2021