In 1987, Congress followed the lead of several U.S. states and passed a joint resolution declaring the entire month of March to be Women’s History Month.1 As we reflect on equality and the role women have played in our country’s history, it is also a good time to reflect on the gap that exists between some advisors and female investors. Bridging the gap requires more than just acknowledging the presence of women, but also a nuanced understanding of their unique preferences, goals, and challenges.
Opportunity in half the population
Let there be no question that women present a massive opportunity to the financial services industry. If women invested at the same rate as men, there would be at least an additional $3.22 trillion in assets under management from private individuals, a report from BNY Mellon Investment Management found. In fact, because women tend to outlive men, by 2030 women are expected to control much of the $30 trillion in financial assets that baby boomers possess, according to McKinsey & Company. The firm’s 2020 report said it is “a potential wealth transfer of such magnitude that it approaches the annual GDP of the United States.”
Interestingly, investing is most popular among younger women—71% of Generation Z women and 63% of millennials invest.2
Lots of similarities, some differences
Last year, Envestnet and The Center for Generational Kinetics conducted research into generational opportunities for financial advisors, looking at the mindset of affluent American investors (read the report here). This month, we went back to the raw data from that survey and compared the responses of men and women.
Overall, men and women were within a few percentage points of each other on most of the questions in our survey. Other than a few key areas that we’ll highlight below, investors are investors, regardless of gender.
The data did show that women may feel differently from men in their financial confidence, market skepticism, and technology use.
Confidence
One of the biggest key differences noted in research is that women aren't as confident as men in their investing abilities and demonstrate lower levels of investing knowledge.3 Our own survey identified that women are less likely than men to feel confident in their ability to achieve financial wellness (63% women vs. 73% men). Our survey also found that women are slightly less likely to have prepared for an upcoming inheritance or prepared to transfer wealth to upcoming generations.
It is important to note that this lack of confidence is not founded in reality. Women investors actually achieve better investing returns than men, with studies finding differences of 0.4% to nearly 1%.4 So while women tend to have concerns or hesitations about investing, it is not because we ultimately make poor investment decisions.
One possible explanation for the difference in investing outcomes might be because women tend to trade less. This often surprises women I speak with who believe that their husbands know more about stock markets and therefore might be better at investing. But the reality is that once you have identified a solid strategy for accessing capital market returns, resisting the temptation to tinker and trade on your impulses is generally the best strategy for long term wealth creation.5
Skepticism
Women may have less trust in financial services overall. Our survey found that:
- 61% of women surveyed are skeptical of investing due to recent market fluctuations (vs. 48% of men)
- 63% of women have heard of crypto, but haven’t considered investing (vs. 40% of men)
- 81% of women are skeptical of crypto (vs. 65% of men)
Women are also less likely to have a “successful investment portfolio” as a financial goal (69% of women listed this as a priority vs. 81% of men). Our survey doesn’t delve into why this might be the case, but it could be that women are more focused on what they gain from the portfolio (e.g., financial security, financial freedom, opportunities) vs. the portfolio performance itself.
There is also research that suggests women have a bigger interest in sustainable investing than men.6 It may be the case that if you can incorporate social preferences into a portfolio allocation without sacrificing potential return, you may be able to better engage investors and keep them disciplined, which can make for a better investment experience and also longer run returns if they stay invested through the ups and downs. About 74% of sustainable funds ranked in the top half of their respective investment categories in the five years leading up to 2022, according to Morningstar.7
Technology
Technology is an interesting category where women investors seem to feel differently than men in a few areas. Our data showed that:
- 40% of women have heard of budgeting tools, but they haven’t considered using them, e.g., Mint, RocketMoney, CoPilot Money (vs. 35% of men)
- 40% of women surveyed hadn’t even heard of robo advisors and have not considered using them (vs. 18% of men)
But women are more likely to be comfortable with transactional/day-to-day task-oriented technology (vs. planning or investing apps):
- 90% use credit cards (vs. 81% of men)
- 78% use apps to send money, including Venmo, Zelle, etc.
- 70% use credit score tools (very similar to men)
- Approximately 60% use tax tools and insurance tools (very similar to men)
These numbers could suggest that women may be more focused on tools that increase their efficiency and productivity, rather than planning for the future or investing specifically. As our educational system embraces personal finance curriculum, I’m hopeful that more women will become more interested in exploring budgeting, planning, and investing tools.
How to better support female investors
If I’ve sold you on the opportunity women present to the financial services industry, you may be wondering how to apply these research findings to your own practice. Here are a few takeaways to keep in mind:
Women may be more skeptical of less traditional investment vehicles. For example, you may not want to lead with crypto unless they bring it up. Gain a clear understanding of their goals, expectations, and preferences before you make even casual recommendations.
Women have used technology as it directly applies to their daily lives, but are slightly less likely to have used it for budgeting, planning, and investing. Ask what tools they use and how they feel about them. Listen to their answers and then proceed accordingly.
Women may be less likely to give you a gold star for portfolio performance. Their goal is less likely “to be a great investor” and more likely related to their personal lives and values. Deliver value with behavior coaching and support. Being a steady guide, particularly during times of market uncertainty, may help female investors feel more confident that they can meet their long-term wealth objectives.
Finally, I don’t think it is possible to discuss female investors without also touching on female advisors. Most U.S. financial advisors are male — just 35% were women in 2022, according to the Bureau of Labor Statistics. One can imagine that there are a lot of women who might prefer to invest with a woman advisor. I am hopeful that we will see our share of the advisor community continue to grow to capture this opportunity.
And to all advisors, I hope that by this time next year we’re talking about how your business has grown, at least in part because you’ve addressed the needs of female investors. Their success is our industry’s success as well.
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