The Pathway to Inclusive Investment
Our global research reveals why women’s investment matters.
Why women’s investment matters
If women invested at the same rate as men, there would be at least an extra:
- Responsible Investment $1.87 trillion
- Great Britain GDP $2.708 trillion
- Potential $3.22 trillion
We found that if women invested at the same rate as men, there would be at least an extra $3.22 trillion 3 of assets under management from private individuals today. Perhaps more important, our research also reveals that women are more likely to make investments that have positive social and environmental impacts, meaning that there would be an influx of $1.87 trillion 4 of additional capital into Responsible Investment if women invested at the same rate as men.
The value of investments can fall. Investors may not get back the amount invested.
Three key barriers to higher levels of female participation in investing:
1.
Confidence crisis
2.
Income
hurdle
3.
High-risk
investment myth
BNY Mellon Investment Management
1. Why women don’t invest
Women are less likely to invest than men. This gender-investment gap is a global issue, which limits women’s financial futures and their capacity to influence a better future for the planet. Over half of women believe that it’s important that more women invest to give them the choice to support companies and causes they agree with (53%) and to give them more influence over business and its environmental and social impact (52%).
In order to understand why women don’t invest at the same rate as men, and to explore what we in the industry can do to raise levels of female participation, we interviewed 8,000 men and women worldwide.
Our research reveals that the investment industry must tackle three key investment barriers to encourage more women to invest:
- Investment savvy
- Might invest
- All women
The investment industry is failing to reach, appeal to, and engage women to the same degree as men. Globally, as few as one in 10 women feel they fully understand investing, and less than a third of women (28%) feel confident about investing some of their money.
Women’s Investment Confidence Map
To solve this crisis, we need to take the conversations to women, and not just expect them to come to us. We need to talk, we need to engage, we need to be relevant and we need to be accessible.
Confidence surges among women in young, emerging markets
Such disparity in confidence levels may be partly due to the demographics of these markets. India and Brazil have relatively young populations, and our data suggests that younger women are more engaged with investing: 60% of women aged 18 to 30, for example, are open to investing or have invested in the past, compared with 45% of women over 50.
In addition, different levels of discussion and education may also play a part. In India—where confidence levels are highest—our data shows that there are more conversations about investment taking place. Half of the Indian women in the study, for example, say that their parents educated them on investing, compared with an average of just 32% of women across all markets and just 12% in Japan, where levels of investment confidence are lowest.
In some countries, investing is embedded in the culture and discussed openly among friends and family, leading to higher levels of investment comfort and confidence. Countries such as India, have comparatively higher levels of investment participation among women, as investment can be seen as a way of securing their family’s future.
On average and globally, women believe they need $4,092 of disposable income each month—almost $50,000 per year—before they would consider investing any of it. In the US, for example, on average women believe that they need over $6,000 of monthly disposable income—just over $72,000 per year—before they can start investing.
Clearly, this is unrealistic, especially given the fact that over a quarter of women (27%) describe their financial health as poor or very poor. For the investment industry, overcoming this misconception and explaining that only a small amount of money is needed to start investing should be a key focus.
In the UK, the annual tax-free contribution limit for Individual Savings Accounts (ISAs)—which can be invested in stocks and shares—is £20,0005 [$27,550]6. But rather than understanding this as a limit, many people seemed to be under the impression that this was a minimum or target amount.
The average amount of monthly disposable income women think they need to start investing
Overcoming the income hurdle
- Women with a high or very high level of risk tolerance
While investment offers potential for significant return—and can protect capital from the eroding effects of inflation—capital is at risk. However, misperceptions of the level of this risk are deterring women from investing. Work needs to be done by the industry to better communicate the risks and rewards of investments—and in the context of missed potential opportunities from not investing to bring women into an investment dialogue that is both fair and accurate. For example, 45% of women say that investing money in the stock market—either directly or through a fund—is too risky for them. Just 9% of women say that they have a high or very high level of risk tolerance when it comes to investing. Almost half of women (49%) have a moderate risk tolerance and 42% have low risk tolerance.
Investing does involve risk, of course, but the perception that investing always has to be incredibly high-stakes is not the case. And leaving your money in a savings account isn’t completely risk-free either. During a time of low-interest rates, money in a savings account is losing purchasing power* over the long term as it is lagging behind inflation.
2. How women investing can change the world
Higher levels of female participation in investment could not only have a huge impact on women’s lives but also on the world at large, as women are more likely to invest in causes that they believe in, such as protecting the environment.
What then could encourage more women to invest? Our study shows that women across the world are motivated by the impact that their investments could have. More than half of women (55%), for example, would invest (or invest more) if the impact of their investment aligned with their personal values, and 53% would invest (or invest more) if the investment fund had a clear goal or purpose for good. Two-thirds of women who currently invest (66%) try to invest in companies they like and that support their personal values.
This drive to align investments with values seems to be stronger among those with children: three-quarters of parents—both men and women—who currently invest say that they prefer to invest in companies that support their personal values, compared with 59% of adults who do not have children.
Naturally, women want to see returns on their investments, but they also want to see the impact of their money. Investing for the future—whether it is their own financial security, or for the future of the planet—goes hand in hand with female empowerment.
- Women who currently invest try to invest in companies they like and that support their personal values.
Looking beyond return
Measuring the impact of investments can be difficult, and there is no single way of doing it, although there are many different approaches to responsible investing and frameworks, ranging from simply excluding investments that are harmful to actively selecting investments for the specific good that they do.
Interest in impact investing has been growing rapidly in recent years. According to the Global Impact Investing Network (GIIN), this particular market is now worth more than $700 billion.
The Investment Impact Map
Younger women strive to combine purpose with profit
- <30
- 30-40
- 50+
Young women are seeing their money as a powerful force for good. There is evidence that young investors are becoming more confident about the stock market, getting to grips with the jargon and understanding how their money can grow while also having a positive impact on the world around them.
Investment values: younger women vs. older men
It is important to me to choose investments that:
3. Building an inclusive investment industry
If it’s possible to raise the participation rate of women investing, it could increase their personal prosperity and could have a beneficial influence on environmental and social issues.
Making investing more accessible to women isn’t just about ensuring they have the right technology, but also inclusively equipping everyone with the knowledge, skills, and fostering the motivation to engage with investing. This requires a significant cultural shift within the industry—not only in the way that products are developed and marketed but also in the diversity of the investment industry itself.
We asked asset managers – representing nearly $60 trillion of assets under management – for their insights on the key challenges for gender-inclusive investment and for their thoughts on how the industry can change to encourage more women to invest. Their answers reveal the extent to which the investment industry is currently oriented toward male customers and help identify ways in which financial products and messaging could be reshaped to attract and engage more women.
If women feel like they can’t be part of the system, then that’s an issue for the system as well as for women themselves.
An industry with men in mind
Currently, nearly nine in 10 asset managers (86%) admit that their default investment customer is a man, and three-quarters of asset managers (73%) state that their organization’s investment products are primarily aimed at men, suggesting that they focus on the benefits and features that generally appeal more to men than women.
As a result, potential female investors are met with language, imagery and messaging targeted mainly at a male customer. This often includes the use of high-risk metaphors, such as those used in extreme sports, and the concept of high performance and achievement as a shorthand for investment success.
- Asset managers admit their default investment customer is a man
The idea of performance and wealth-building have become conflated in a way that isn’t necessarily healthy. Investing has become much more about performance, gamification, success or achievements, and less about building wealth over the long term.
The language is quite technical and jargony—it’s that risk concept—the very word ‘risk’ is wrong—it isn’t risk, it’s uncertainty. Risk is doing something silly. That will put women off whatever age they are.
The answer to engaging women in investment isn’t found in outdated gimmicks and doesn’t require, for example, the increased use of the color pink—rather, it’s about forming a connection by understanding what motivates women to invest and how they like to be communicated with.
If the industry can re-think the language around investing, there’s a significant opportunity to affect how much women invest: 37% of women said that if investment language were easier to understand, it would influence them to invest, or to invest more than they currently do. However, the key takeaway is that the language which describes financial products should not only be simpler, and avoid jargon, but also be more clearly aligned to women’s long-term goals and values.
As increasing health standards mean that today’s women need to plan for what might be a 100-year lifespan, women are motivated to invest by thinking of their long-term financial prosperity, independence, and the impact their investments can have. Products packaged to meet these needs and address these interests, clearly communicated in straightforward language, should go a long way to increasing women’s investment.
- Women said that if investment language were easier to understand, it would influence them to invest, or to invest more than they currently do
We need to be promoting the message that ‘The system has not served you, but you need to take ownership and make it work for you, your situation, and your aspirations.’
- Asset managers believe the investment industry would be able to attract more women to invest if the industry had more female fund managers
Building an inclusive investment industry
A key step in fostering inclusive investment is creating a more diverse and inclusive investment industry. While some progress has been made, asset management continues to be a male-dominated industry, with significantly fewer female fund managers and investment analysts. Half of the asset managers participating in our study told us that just 10% or less of their organization’s fund managers and investment analysts are women. This may be contributing to the industry’s challenges in understanding and engaging female customers and, in turn, affecting women’s confidence in trusting an industry with their money when the women are apparently missing.
The benefits of attracting more female talent into the industry range from greater product innovation to encouraging more women to invest. Nearly three-quarters (73%) of asset managers believe the investment industry would be able to attract more women to invest if the industry had more female fund managers.
The biggest impact may be on younger age groups in the early stages of their investment journey. Three in 10 (29%) women under the age of 30 who already invest said that having a female financial advisor would influence them to invest more than they currently do, compared with 16% of those over 50 who already invest—perhaps because those over 50 have had time to resign themselves to the male-oriented nature of the industry.
In addition, fostering a more diverse talent pipeline for the industry will need to start early, making diverse role models visible to children and students, in their formative years. It could be that a concerted focus on inclusive investment could close the gender-investment gap and attract more women into the investment profession.
More female advisors are needed, but there should be more access for women altogether. Male advisors need more experience in talking on a level with women too. They often stick to the older methods that appeal to men. There needs to be a more female-friendly culture from these advice firms.
- Asset managers believe the investment industry would be able to attract more women to invest if the industry had more female fund managers
If we have women in key positions across these organizations, then the culture and the language that forms the industry will be different, and much more aligned to a female demographic. That would solve many of the issues that discourage women from investing.
If we have women in key positions across these organizations, then the culture and the language that forms the industry will be different, and much more aligned to a female demographic. That would solve many of the issues that discourage women from investing.
What Women Want:
Investing in Independence
4. Changing investment, changing the world
The amount of wealth controlled by women globally is disproportionately small, but ever-growing and our research reveals that more women are looking to invest. This could bring benefits not only for those who invest but also for women everywhere, and for the world as a whole. However, women are being held back by lack of confidence, concerns about risk, and an industry oriented toward men.
Responsible investing allows women to champion causes they believe in effectively by using their money to directly help reach social and environmental goals. A greater focus on this type of messaging and on the wider benefits of investing should help to attract more women.
Greater diversity within the industry should also help to achieve higher levels of female participation and ultimately investment; but in order for a meaningful industry shift to take place, both women and men will need to help drive change.
If we all work together, we can achieve the goal of making investment more inclusive, for the benefit of all.
As part of a company that touches every part of the investment cycle – we believe we are in a strong position to make a difference. We can effect change at the grassroots through early engagement about money via our partnership with international group, Inspiring Girls. We can examine how to inspire the c20,000 women in our own organization to participate and invest more. We will review our approach and how we can engage with women better and work with intermediaries and the wider industry to make a difference and set clear targets for progress.
The time to act is now. The investment industry needs to be more inclusive, find a better way to engage with women, make investing more accessible and close the gender-investment gap. Because more women investing will benefit everyone: society, the investment industry and the planet.
#AllStreet
5. Our expert advisory panel
Download the report
The Pathway to Inclusive Investment
Credits
Man Bites Dog
Man Bites Dog is an award-winning global thought leadership consultancy based in the UK, specializing in compelling content, campaigns and communications to tell their clients’ stories.
Coleman Parkes
Is a global B2B research specialist with first-rate experience across all verticals and markets. Coleman Parkes Research complies with the rules and regulations set by the MRS Code of Conduct (2010) which is based upon the ESOMAR principles.
Cerulli Associates
For nearly 30 years, Cerulli has been at the forefront of the financial services industry, delivering ground-breaking global market research through the use of data.
Glossary – key terms
Saving: Saving involves putting your money into cash products, such as a savings account in a bank or building society. Compared to investing, saving typically results in a lower return (i.e., your money does not really grow), but it involves virtually no risk (i.e., the chance that you will lose your money is very small).
Investing: Investing involves selecting particular assets with the expectation that there should be a higher return. It is also about putting money away for the future, but it usually involves the expectation of a higher return (i.e., your money increasing in value) in exchange for taking on more risk (i.e., the chance of losing your money is higher). Money is usually invested in stocks, funds, or bonds, where you could get more or less than you originally put in.
Impact Investing: Impact investing is an investment strategy that aims to generate specific beneficial social or environmental effects in addition to financial gains. Impact investments may take the form of numerous asset classes and may result in many specific outcomes. The point of impact investing is to use money and investment capital for positive social results.
Active Ownership: is the use of the rights and position of ownership to influence the activities or behaviour of investee companies.
Inflation: Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
ESG (Environmental, Social and Governance) Criteria: A set of standards for a company’s operations that socially conscious investors use to screen potential investments.
References
- The 16 markets included in the study were: Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Nordics (Denmark, Finland, Norway, and Sweden), Singapore, Spain, Switzerland, the UK, and the USA.
- As at Q2 2021. All dollar currencies in report are US$.
- This calculation was made using the data from the research on the average volumes of investments held by men and women to find the difference. We then used data from Cerulli to calculate the size of the retail investment market in each of the geographies within the study and applied the difference between male and female investment volumes to that number to show how much more investment would be available if female investment volumes matched male. This assumes the numbers of male and female investors are the same. As there are typically more male investors than female, the amount to be gained could be assumed to be even higher than the one shown, i.e., “at least” $3.22 trillion.
- Our research also provided data on the share of investments made by men and women that are responsible – i.e. investments that are qualified according to either their positive impact on society and the planet or at least their absence of a negative impact. The average share of female investments that are responsible was then applied to the overall uptick in investment volumes to reveal the percentage of those investments that can be expected to be responsible.
- Accurate as of the financial year 2021-2022.
- Pound to dollar conversion accurate as of October 25, 2021.
- DQYDJ S&P 500 Periodic Reinvestment Calculator https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends
- As at 11 June 2020
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The value of investments can fall. Investors may not get back the amount invested.
Important Information:
Any views and opinions are those of the author, unless otherwise noted and is not investment advice.
This is not investment research or a research recommendation for regulatory purposes.