By Christopher Maule, CEO, UK Bond Network
This month has brought gender equality to the public’s attention with the 104th International Women’s Day. While this event offers an opportunity to celebrate the achievements of women, it also shines a spotlight on how gender equality can be improved –and this is as relevant for the financial services sector as it is many others.
It is no secret that the Financial Services sector has been slow to embrace women. Historically, the industry has typically provided products and services that cater specifically for men. The lasting legacy of this was exposed in January, when research, conducted by the International Longevity Centre (ILC), revealed that women were consistently less financially aware than men when it came to achieving income security in retirement. While this research focused on those approaching retirement and their understanding around pensions, it provides a reminder of the sector’s past poor service to women.
Besides this wider apathy, the sector has cultivated a macho image that, if not deliberately, has certainly helped alienate women as potential customers and investors. While the financial awareness of older women may have suffered as a result of legacy issues, the good news is that the tide is turning. As the number of female professionals, senior executives and entrepreneurs grow, women’s potential to earn money – and large quantities of it – is causing the FS community to sit up and take notice. Research from International Women’s Day suggests that the number of UK female millionaires is increasing by 11 per cent a year, and by 2020, 53 per cent of the country’s millionaires could be women. More than a social nicety, it is now within the sector’s best interests to provide products and services that appeal specifically to the female market.
To take advantage of this opportunity, institutions will have to understand how these women differ from men in their approach to finance, and what they really want from the FS community and its products. There have been a number of studies into this, including one recent survey which asked male and female participants how they would invest £100,000. The research found that, whilst the majority of women would place funds in an ISA or pay off their mortgage, only 12% would invest in share-based options and 6% in commodities. Men on the other hand were far more likely to consider these forms of finance, with 21% of male respondents saying they’d invest in shares and 13% in commodities. Comparing these responses, an interesting, if not altogether surprising, trend emerges. Women appear less willing to risk their money than men.
It would, however, be an error to interpret this caution as a lack of financial understanding. Rather, it’s an approach supported by one of the most financially astute women in finance, Helena Morrissey. Helena is CEO of Newton Investment – one of the few women in the notoriously male dominated hedge fund industry – who has explained how “long-sighted behaviour creates prosperity at both an individual and societal level.”
Indeed, our own analysis suggests women’s reticence to risk their money is linked to their ambitions for it. We’ve seen that women typically prefer to invest or save for a specific long-term purpose – to achieve a life goal such as getting on the property ladder, for example. This is in contrast to men, who are more likely to focus on immediate returns. To appeal to the female market therefore, members of the FS community need to consider women’s priorities and address these in their offerings – be they savings accounts, bonds or other investment vehicles.
Since its launch, UK Bond Network has received an increasing level of interest from High Net Worth women looking to take control of their own investments. This echoes the broader trends we’re seeing across the industry, where female investors are becoming more active. It is also likely to be, at least in part, due to the nature of the investments, which offer a fixed return over a defined period of time, as well as security on every issue. Another attraction might be the level of information available on a company to potential investors, as women are typically more methodical when it comes to researching financial decisions. Therefore, platforms or investments that provide detailed information, clearly highlight risks and enable participants to conduct their own thorough research, are more likely to appeal to women.
While the ILC’s research paints a grim picture of institutional bias, the situation for women is changing. This may be because the FS sector has realised the error of its ways and decided women deserve better service. I am optimistic that, as we approach the 105th International Women’s Day,the need to get women investing is being recognised across the industry. What is certain is that, with the number of UK female millionaires increasing at 11 per cent per annum, engaging with this affluent and receptive market segment makes good business sense.