Women and finance… where we’ve come from and where we’re going

There has been a marked change over the past three generations regarding women’s position in the workplace and their relationship with money. Although progress towards gender equality in business and financial affairs still has a long way to go, it’s important occasionally to look back and consider how far we have come.

I’m of the Baby Boomer generation, and I think it's fair to say that it was my generation that saw the greatest emancipation of women financially.

Then and now (the difference)

In my parents’ generation (people born before World War II), the roles of men and women in middle-class families were generally quite fixed: the man of the household was the breadwinner, while his wife stayed at home looking after the house and raising the children.

These women generally left all money matters to their husbands, sadly to their disadvantage if the husband died prematurely.

Fast-forward 70 years or so. A study last year by US research company RTi Research showed that families with female primary breadwinners now make up nearly a quarter of US households that have investable assets of $250 000 (R4 million) or more. And there has been a corresponding increase in financial awareness: the study notes that when they became primary breadwinners, 25% more of them recognised the need for a financial adviser and 48% more took an interest in retirement planning.

Their top requirements of a financial adviser were:

  •  Helps me with retirement planning (53%).
  • Takes the time to understand my specific needs (50%).
  • Speaks to me in a language I understand (49%).

In a recent article, “Five reasons why the future is female”, Dale Irvine, co-executive director of financial services firm Sentinel International, quotes a study by the Boston Consulting Group that found that women hold 32% of global wealth – roughly $72 trillion – and most of the private wealth that changes hands in the coming decades is likely to go to women.

“More than ever before, it is crucial for the personal financial and fiduciary industries to understand how and where women will choose to invest their wealth. The knowledge gained will change the way that financial advisers, tax practitioners and estate planners do business,” Irvine says.

Women as investors

Irvine quotes another study – by UK consumer investment platform Hargreaves Lansdown – which found that women investors returned an average of 0.8% more than their male counterparts over a three-year period. The study points out that if this were to carry on for 30 years, the average woman would end up with a portfolio worth 25% more than the average man.

“What made the women fare better? Mainly, because they made less risky financial decisions than the men. They were more likely to invest in funds with a consistent record and they didn’t hold on to loss-making investments in the hope that they would come good, as their male counterparts did.

“The study also showed that women tend to trade less frequently. Women traded shares 49% less than men and traded funds a whopping 67% less,” Irvine says.

In a recent article, “More diversity in the fund management industry means better outcomes for investors”, Victoria Reuvers, managing director of Morningstar Investment Management SA, bemoans the fact that there aren’t more women investment fund managers (globally, 14% of fund managers were women at the end of last year, a figure that has not changed in 20 years), but suggests that the Covid-19 crisis may speed up change in the right direction.

“The ways in which we are redefining what it means to be productive should be echoed through a new diversity of thought around females in the global fund industry,” she says.

“We also need to think more broadly about diversity. I like to think more about diversity of thought. We often view diversity through a gender or race lens, but true diversity is an expression of different cultures, thoughts, energy and ideas.”

Morningstar showed in a 2018 study that the gender of fund managers doesn’t affect investment performance in any way. At the same time, Reuvers says, a growing body of research suggests that the presence of women on corporate boards and in executive positions is linked to superior financial performance. That’s why diversity is an issue increasingly in the spotlight in the world of finance, and asset management companies themselves are pushing for diversity at the companies they invest in.

“The more we can bring this new diversity of thought into our industry, the better the outcomes we can achieve for everyone,” Reuvers says.

By Martin Hesse