#IWD2022: AJ Bell’s Laura Suter argues that tackling the gender investment gap should start with financial advice changing its image

by | Mar 8, 2022

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Laura Suter, head of personal finance at AJ Bell

In celebrating International Women’s Day today, IFA Magazine is shining the spotlight on the role of women working in financial services by bringing you personal stories from just some of the many influential women working in financial services in the UK today.

In this article, Laura Suter (pictured), head of personal finance at AJ Bell, reflects on some of the findings of their recent research and why she believes we need to look closer to home if we are to effect the changes needed to properly support women in making better investment decisions

The gender investment gap is one of the biggest challenges facing our society today. Based on our recent AJ Bell Money Matters research, women have less than half the levels of savings and investments than men.

We delved into the average savings of men and women, and found that when we look at someone’s total savings and investments, so their cash savings, pensions, investment accounts and any other assets (but not their house) the average woman has £134,232. But in comparison the average man has £306,699. That’s a whopping £172,000 difference, which when you scale it up to the UK population means the gender savings gap in the UK is a £4.3 trillion problem.

When we look at all areas of women’s lives, they are poorer than men. They have less saved, are paid less, have less stashed away in their pension pots and have smaller amounts in their investment accounts.

But rather than just revealing the problem, we wanted to look at why that wealth gap exists. Clearly it’s a multi-faceted problem, and the gender pay gap plus the financial impact of career breaks have a big part to play. But the first thing we found is that it’s not through disorganisation or disengagement with savings on women’s part. Women are as likely to have a savings account as men, with 65% of women having a cash account compared to 66% of men. But they are saving less, and are much less likely to have an investment account, or to be saving money into their pensions.

Pensions are a big part of it, through higher pay and higher prioritisation of pensions men have far more in their pots than woman. The average man has almost £100,000 in their pension, compared to £39,000 for women – a £56,800 gap, based on our findings.

Unsurprisingly, considering what we’ve seen so far, 44% of woman say their partner has a bigger pension than them. What’s more, only around a third of women are confident that their long-term investments will meet their goals, compared to over half of men.

While lack of available spare cash is clearly a big problem, it’s also true that women are standing in their own way. They are reluctant to take risk with their money, which means they are reluctant to invest, instead choosing to stick to cash. In the current higher inflation, low interest rate world that’s a more financially damaging choice than it was before.

To highlight this issue, we asked both women and men what they’d do if they received a sudden windfall of cash. Most women said they wouldn’t invest it, instead they said they would use it to pay off debt or pay down their mortgage, or would chose to save it in cash.

Men are simply willing to take more risk. Our data shows 28% of men would rather take bigger risks for bigger potential rewards, compared to just one in 10 women. When we pegged this to investment losses explicitly, almost half of women said they wouldn’t be comfortable with any losses – showing that investing really isn’t for them. This means that they will pick ‘safer’ assets that will lead to lower returns.

But it’s not just women’s risk avoidance to blame. We work in an industry that has been run by men, largely for men, with a majority of the intermediaries also being men. For example, 35% of Personal Finance Society members are women. This will be an improvement on previous years, but we still have a long way to go to reach parity.

But this gender divide matters when it comes to engaging women in finance and investing – although not as dramatically as some might think. When asked if they had a preference of what gender their financial adviser was, 80% of women said they didn’t care, but 16% said they’d prefer a woman (the remainder had a preference for a men).

So why aren’t more women joining the industry? Just 5% of the women we questioned said they would definitely consider a career in financial services. In comparison, 40% responded “no, definitely not” and another 20% said “no, probably not”.

When quizzed about the reasons, the most popular answer was that they don’t understand the industry, followed by “it sounds boring”. The industry being majority men wasn’t actually a deterrent for that many – just 3% put it as their reason.

Clearly anyone in the industry will put forward an impassioned argument for why it’s not a boring career. But the onus really rests on the industry to change its image, and make it more appealing to women. Because with more women in the industry we’ll see more engagement from the industry with women, and then we might stand a chance of closing that £4.3 trillion gap.

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