We focus in this issue on research we recently did on women in wealth management. The topic of female advisors, and female investors, is ubiquitous at industry conferences and in the marketing offices of asset managers and brokerage firms. The consistent theme: How do we attract more women to the industry, and in doing so can we attract more female investors?
I’m skeptical of treating any group of people as a monolithic class with similar attitudes, ideals and outlooks. It’s condescending at best; at worst, it excuses all kinds of injustice.
And yet some realities can’t be denied. There is plenty of research that shows women, in general, are more risk-averse investors, and less prepared for retirement. That’s bad because women live longer. (Women should be investing more aggressively than men, arguably.)
Many want to bridge this gender disconnect. Consider the increasingly crowded subgenre of robo advisors run by women, for women, all launched within a span of months. Sallie Krawcheck’s Ellevest, an automated investment and advice platform, promises to “redefine” investing for women. Beacon Wealth Management’s Tina Powell founded SheCapital to “empower” women to make financial decisions. Amanda Steinberg, the founder of a financial advice newsletter for women, joined Source Financial Advisor Michelle Smith in launching WorthFM to make investing “clear” to women.
These are smart people with good intentions, but a “different” kind of investment process won’t bridge the financial gender gap. As Krawcheck points out, it’s unequal workplace compensation, nonexistent maternity leave and heavier childcare responsibilities that lower a woman’s lifetime earning potential. There are solutions to those problems, but tweaking the allocation of an ETF portfolio isn’t among them.
But the efforts have value. A recent paper from Florida State University published in the International Journal of Consumer Studies claims women are more risk-averse financially not because they lack knowledge, need their hands held or have no affinity for math. It’s confidence. The researchers found women, in general, scored lower than males when taking self-assessments that measured their financial “self-efficacy,” or an individual’s belief that he or she can independently organize and execute a course of action to achieve a goal. According to the researchers, self-efficacy comes from “personality, family history, social and cultural norms and frames of reference.” In finance, those norms still favor men.
“When they are equally as confident in their financial decision-making ability, the women chose similar investment options,” as men, according to the researchers.
Female-focused financial advice won’t solve the finance gap. But maybe more women will recognize they can make investment decisions as well as (and likely better than) men, even on a tilted playing field.