To start, the industry could curb its use of jargon, which tops the investment wish list for 42% of women, writes Faith Glasgow.
At the risk of being labelled a one-issue bore, I am returning to the question I raised last month – that of how to encourage women to become long-term investors. What are the factors that deter them, and what could be done to change things?
I’ve been thinking about the subject and heard a number of viewpoints, and one conclusion is clear. Reasons for the disparity between men’s and women’s investment habits are complex, multifaceted, and certainly not a simple reflection of the gender pay gap – the fact that women on average earn less than men (almost 18% less, according to findings by the Office for National Statistics in 2018). In other words, it’s not just lack of spare cash that’s holding them back.
That conclusion is highlighted by a recent UBS global survey of wealthy women, which finds that while they are very involved in day-to-day financial management, 62% of respondents in the UK leave investing and other long-term financial planning to their partner. They give several reasons, including “focusing on other responsibilities” and lack of interest in the subject, but the primary reason (cited by 85% of UK respondents) is the fact that “men know more about investing and planning”. In other words there is a powerful sense that somehow they are not up to the job, that they would be out of their depth, that investment decisions are a man’s domain.
Joint control is a good thing
Yet among the 15% of UK women who share the long-term financial decisions with their partner, more than 90% of respondents see it as a good thing: they describe themselves as feeling more confident and less stressed about their finances, and better placed if something should happen to their partner.
So what can be done to change perceptions among women across the board that investing is not for them? A recent Boring Money discussion – pointedly entitled ‘Women are not a niche market’ – drew on research among ‘ordinary’ women to highlight several starting points, all inter-related.
For a start, investment needs to be presented to women as something relevant to them. Surveys find that women are much less responsive to the notion of wealth for wealth’s sake than to stories around greater security.
Thus, being told you’ll lose your tax-free Isa allowance for this year if you don’t use it in the next two weeks is only going to resonate if you care about your Isa in the first place. In contrast, investment as a means to a lifetime goal that matters – “if you start investing regularly, you have a much better chance of being able to help your child through university” – sends a much more meaningful message that investment is something that can improve prospects for you and your family.
Jargon is another huge stumbling block. The world of investment is full of acronyms, technicalities and specialist ‘insider’ terminology – and providers have historically been quite happy to use it to address ‘outsiders’ too. Boring Money found in a survey that getting rid of jargon was top of the investment wish list for 42% of women, way ahead of any other. In comparison, just 23% said they wanted guaranteed returns of 15% a year.
The industry knows this is a problem. The Financial Conduct Authority recently told fund managers to get their house in order by cutting out jargon and using consumer-friendly language in their literature – though unhelpfully it stopped short of providing any type of guidance as to what this might look like.
‘Outsiderdom’ issues extend beyond jargon, though, to broader questions of communication. Fund managers, platforms and advisers are faced with a very tricky balancing act between clarity, condescension and complexity when communicating with consumers. Basically, people are much more likely to listen if they can understand and engage with what is being said, and don’t feel they are being either talked down to or blinded by science.
Tied up with all these considerations is empowerment – somehow selling the idea that investing is something everyone can do successfully, even if they have never done it before, have little spare cash and don’t know where to start.
Morrissey is leading the way
Many investment houses do little more than pay lip service to the idea of reaching out specifically to women, but Legal & General is one that has put its money where its mouth is, with Dame Helena Morrissey spearheading its mission to encourage women into investing. Initiatives so far include partnerships with online forums Mumsnet and Gransnet, and the launch of a new Savers badge for the Girl Guides. “We are trying to tap into as many age ranges as we can to empower them to make their first investment steps; we’re in it for the long term,” comments Morrissey.
But she believes an industry-wide or governmental push is ideally what’s needed. The ‘This Girl Can’ campaign was launched in 2015 to give more women the confidence to take up physical activities, and had got 1.6 million women exercising by May 2016. Could a financial equivalent be run to show women that investment is for them and could enhance their lives and well-being, just as a more active lifestyle can?