Women have long faced legal and societal barriers to participation in the investing sphere but have often found creative ways to overcome them. For example, in the 18th and 19th centuries, British-American common law prevented married women from owning property in their own names, but many women circumvented this by obtaining credit and running businesses in their husbands’ names. One credit record from the 1870s discusses the case of a Mrs. William Neff running a corset business in Boston, describing her as “a very smart woman with a drawback of a … shift less husband.”
Today, many of the barriers Mrs. Neff faced have been shattered. Still, there is progress to be made, both in women’s financial wellness—which we have researched and blogged about before—and female representation in the financial services industry.
Stereotypes Are Misleading
Contrary to what many would assume, female investors earn slightly better returns on their investments than men do. Fidelity’s 2017 client data showed women outperforming men in this area by about 0.4%, enough to matter over the long term. Sallie Krawcheck, founder of digital investment platform Ellevest, found that women investors outperform because they don’t “overtrade, panic in down markets, or pay too much in fees.”
Despite this prowess, women invest much less than men do; only 44% of women—versus 59% of men—invest outside of their retirement accounts, according to Fidelity. Meanwhile, Corporate Insight found that nearly 86% of male survey respondents eligible for employer-provided retirement plans were enrolled in them, compared to fewer than 81% of eligible female respondents. Moreover, 37% of female respondents—and just under 20% of males—reported having less than $10k saved in retirement accounts.
The gender gap in retirement savings alone is vast compounded over a lifetime, especially since women tend to live longer than men and earn less. But Krawcheck estimates that the overall gender investing gap frequently costs women hundreds of thousands of dollars over the span of a career.
Confidence in Ability to Afford Desired Retirement Lifestyle (CI Survey Data)
What Are Firms to Do?
Before Krawcheck founded Ellevest, she conducted extensive research to determine why existing investment platforms seemingly appealed more to men. She found that women frequently invest to meet specific goals, tending not to share men’s competitive approach to investing—think rhetoric about “beating the market” and “picking winners.” A lesson here for other financial services firms is that their products and messaging should appeal to both goal-oriented investors and those with higher risk appetites and more competitive mentalities.
Notably, this dichotomy has been criticized for implying that investing needs to be dumbed down, so to speak, for women. There is no reason this should be the case—goal-orientedness doesn’t imply simplicity, and all investors benefit from comprehensive knowledge of the platforms they use and detailed educational materials. Moreover, the dichotomy isn’t gender-specific; competitive female investors and goal-focused male investors clearly exist, so explicitly gendered platforms are not the answer to all problems or even a desirable goal. Speaking to both mentalities is simply a good strategy to reach a wider, more diverse crowd of investors.
Social Media Presents an Opportunity…
Social media is a good place for firms to start looking for small but concrete steps to reach women more effectively. To look at some examples, Corporate Insight tracked leading banks’ messaging on social media about Women’s History Month. Many firms posted in celebration of International Women’s Day on March 8, but some posts were more engaging than others. Santander Bank, for example, shared a link on Facebook and Twitter discussing female entrepreneurs in which the firm invested.
Santander Bank’s post stands out for using a compelling story to demonstrate the firm’s commitment to investing in women, rather than just paying lip service to the cause. In contrast, firms that made generic posts on International Women’s Day missed an opportunity to engage their followers amid a sea of similar content.
Social media users know it takes little effort to acknowledge a holiday as Capital One did, so firms should take opportunities like Women’s History Month to tell stories about concrete actions they are taking that their competitors aren’t.
…but Capital One Is Right: Representation Does Matter
In fact, women make up over half of the entry-level financial services workforce in North America as of 2017, but they are fewer than 20% of C-suite executives. This is despite data showing that the industry’s more gender-balanced companies perform better; McKinsey found that firms in the top quartile of gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to demonstrate “superior value creation,” measured by economic profit margin. Moreover, companies in the top quartile for ethnic and cultural diversity on their boards were one-third more likely to have “industry-leading profitability.”
Certainly, firms with diverse management would be better at creating products for, and marketing to, our diverse society. Financial services firms should therefore see leadership diversity—both gender and otherwise—not as an externally imposed constraint but as good for business.
Despite the progress made since the days of Mrs. Neff and her “shift less” husband William dragging down her credit record, the financial services industry is not yet engaging women, or other historically underserved groups. The ideas outlined in this post are by no means exhaustive solutions, but they are a good start.