Why are women losing out?

It is no secret women are penalised when it comes to their finances, the combination of the glass ceiling, taking maternity leave, supporting a partner’s career or requiring flexible working can make it difficult for women to climb up the career ladder. 

Unsurprisingly these difficulties are having a financial impact on women with the full-time gender pay gap for women being 14.1 per cent, according to the Workplace and Gender Equality Agency (WGEA), meaning women earn $239 less per week than men. The average full-time weekly wage for a man is $1,695 while the average for females is $1,455. 

This lower wage then leads to a lower superannuation balance with the average super balance for a women aged 60-64 being $157,049 compared to $270,710 for a man, according to the Association of Superannuation Funds of Australia.

As well as having lower salaries and lower super, women are subsequently less likely to supplement this income with any additional investment. Fidelity found over half of 815 women surveyed for its ‘The Financial Power of Women: A state-of-the-nation report on the barriers to women investing’ did not hold any other savings products other than their super. Less than half had invested in shares and less than a quarter had invested in a managed fund.

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Survey respondents said this was because they either didn’t have spare money to invest, didn’t know where to start, felt it was too complicated or felt investing was too risky. This indicates there is a clear knowledge gap among women who lack the confidence to invest compared to their male counterparts.

Fidelity International managing director, Alva Devoy, said: “If women’s ability to earn and therefore save during their working lives is less than men’s, then it is even more important that they have access to the tools to help them to make their money work harder for them. A lack of time and confidence, and fears about the risks, are all obstacles that are stopping women from believing that investing is for them.”

The fact women are less likely to invest is interesting given research by UK investment platform Hargreaves Lansdown which found, over three years, female clients saw the value of their investments grow by 0.81 per cent more than men. If this was replicated over 30 years, women would end up with 25 per cent more than their male counterparts. 

This was, HL said, because women were more naturally likely to have diverse portfolios, tended to hold safer investments and were more likely to utilise a ‘buy and hold’ strategy instead of frequently turning over their portfolios.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Women are far better investors than they think. Women who invest overwhelmingly have the knowledge they need in order to make sound investment decisions. And rather than working against them, their determination not to take excessive risk with their investments is one of the things that makes them such good investors.”

So what would help women and encourage them to invest? Women said they wanted the finance industry to be more transparent on costs and help them understand how to invest. They also wanted to see less risky products on the market as the majority of women surveyed said minimising loss was a key priority for them. In contrast, just seven per cent said they were ambitious with their investments and keen to make gains, indicating they remain fearful of the markets.

“Investment industry communications are seen as complicated by over half [of women], a quarter see communications as intimidating and about one in five see them as being tailored to men. Women are less likely to feel they have the right level of information or knowledge they need about investing,” the report said.

“It’s clear how the investment industry needs to respond to cater better to the needs of female investors. Almost half want greater transparency on the industry costs, more than a third want greater education to help improve our understanding of investments and just under a third want communication from the industry to be more relevant and useful. Meeting these needs would encourage more women to either start investing or to invest more.” 

Female financial advisers

When it came to seeking financial advice, women were less likely than men to see an adviser and said cost was an issue as well as not understanding the role of an adviser. 

According to a study entitled ‘Attitudes to Women in Financial Advice’ conducted by the Financial Services Council and BT’s Stella Network in 2017 this presented an opportunity for education by the industry.

“Perceived needs and fees are key barriers but poor information on the value of consulting an adviser suggests an opportunity to educate the benefits and increase the reach of the profession. Females are more likely than males to blame cost, lack of a perceived need and lack of understanding. Males are slightly more likely to question the profession itself, expressing doubt regarding the value of the service and level of trust in financial advisers.”

Would having a female adviser help? The report found female advisers felt their gender was advantageous as clients were more likely to open up and engage with them about their circumstances. 

Some 85 per cent of female advisers felt being a good listener was important and 77 per cent said building a strong relationship with clients with key. They also felt being caring, supportive and empathetic were positive characteristics for an adviser. 

Pene Lovett, chief operating officer at the Financial Planning Association (FPA), said: “The research report showed that knowledge and empathetic skills are more important to consumers than age and gender when looking for financial advice. However, some female financial planners noted that once they began to establish a relationship with a client, many believed that their gender was an advantage because clients were more likely to open up about their circumstances.”

Female advisers were found to have better emotional intelligence than men, which was an important driver of both trust and satisfaction for a client. Clients who had a female adviser also felt more connected to their adviser on an individual basis rather than to the wider company. 

Asked why they liked their job, female advisers said they gained satisfaction from meeting new people and building a relationship in order to help the client reach their goals whereas men cited a preference for the numerical and data factors of the job. In contrast to men, just 38 per cent of female advisers said they joined the industry because they wanted to ‘work with numbers’. 

Women in the industry

A further factor to consider is the lack of female representation in the overall industry, leading to the perceived view that finance remains a ‘male’ industry. Even today, many women choose to leave the household finances to their partner, leaving them in the dark and at risk of losses in the event of divorce.

Returning to the gender pay figures from the WGEA, financial services and insurance had the highest gender pay gap of all sectors at 26.9 per cent, nearly double the national average. For the highest decile of earners in that sector, it rose further to more than 30 per cent. 

Looking at the sector’s workforce breakdown, 48.1 per cent were women and 37.7 per cent of managers were female. The share of female executives was 25.3 per cent, only a minor increase in the last five years from 24.6 per cent. Finance was also noted as one of the top five sectors with the highest glass ceiling for management ranks. 

According to the Australian Institute of Company Directors, the percentage of women on ASX 200 boards was 29.5 per cent. So far, in the first quarter of 2019 there have been nine women appointed to board positions. There were 27 financials companies on the ASX 200 and only four were chaired by women; AMP, Commonwealth Bank, Insurance Australia and Medibank Private. Across the sector, the average percentage of female directors was 29 per cent, as of 31 January 2018, with the best being Medibank Private at 56 per cent and the worst being Blue Sky Limited at just 11 per cent.

Kathryn McDonald, head of sustainability at AXA IM Rosenberg Equities, said: “It is very common to have women in their 40s who have years of experience making financial decisions for themselves and their families and these are the women who are our end client. So we need women like that around the table in financial services.”

Women cited barriers to entry as being their own self-confidence, having to wait for a suitable role to become available, needing to work flexibly around their families and being less aggressive at promoting their abilities than men.

“We are not seeing women in financial services rise to the very top, they are being stopped just beneath the top level. Some women require things like flexible working and maternity leave but there are others who are willing to do whatever it takes and yet they still are not seeing that rewarded,” McDonald added.

She commented there were additional economic benefits, as well as marketing ones, to companies running a gender-diverse business with firms reporting a greater ability to stabilise profits and revenues when they employed a gender-diverse workforce.

“People need to connect the dots for those who are sceptical about diversity and share this type of research with their employees.”

Despite the aforementioned benefits of the financial adviser role, only 20 per cent of the Australian financial planning community is female.

The report suggested more emphasis on the ‘soft’ factors of the job might encourage this to change and more women into the industry. To become a financial adviser, a candidate must complete an approved bachelor degree, gain a year of supervised professional experience with an AFS licensee and including 100 hours of structured training, and lastly complete an exam set by the Financial Adviser Standards and Ethics Authority (FASEA). 

“There is a perception that financial advice is more of a quantitative role strongly associated with ‘numbers’ when in fact, these advisers feel advising is not only about financial knowledge but about building relationships.

“By highlighting the qualitative nature of the role which includes listening and getting to know people, many female financial advisers believe this could attract more women into the industry.”

When it came to staying in the industry long term, Lovett said factors that encouraged and helped women to remain in their role included flexible working arrangements, access to good mentors and quick career progression.

“Mentoring is particularly important, being someone that a younger person in the industry can come to and ask questions and play an active role in their career development,” added McDonald.

What is being done?

Following the report, the FPA has launched its own Women in Wealth program in association with Financial Executive Women (FEW) which is designed to advance the progression of women in financial planning by offering mentoring and professional development opportunities.

In funds management, firms such as Fidelity, Challenger and Macquarie have signed up to the Future IM/Pact, an industry initiative founded by Yolanda Beattie which is encouraging women to pursue careers in investment management. The Asset Management Council also runs a special interest group called Women in Asset Management group which runs a mentoring program.

Lastly, Money Management runs its very own Women in Financial Services awards which will take place later this year and recognises women in financial services.