Admittedly there’s some cherry picking going on here, but over the past three years the Vanguard S&P 500 ETF (VOO) – the largest exchange traded fund (ETF) in the world and among the most basic – is up 79%, including paid dividends.
That doesn’t mean all investors enjoyed comparable returns – some did better, others worse – but the point is stocks work over long holding periods. So it’s arguably alarming that according to a recent Civic Science survey, roughly half of the women polled said they rely on savings accounts as their primary savings or investing tools. That’s merely the beginning of why advisors and women need to find ways to connect and do so sooner than later.
“A ‘utilization gap’ persists in wealth-building: women are 39% less likely than men to say they invest in stocks and 22% less likely to utilize a 401(k) or other employer-sponsored retirement account,” according to the study.
Advisors can close that gap while empowering female clients to become capable, successful investors in their own rights. Here’s to hoping that happens.
Understanding Why More Women Aren’t Investing
Today’s women, particularly those in those younger age cohorts, are displaying more enthusiasm than ever for investing. More importantly, many are acting on that interest and the actions run the gamut of everything from cryptocurrency, participating in employer-sponsored plans, to hiring advisors and much more.
That’s encouraging, but there are still headwinds to getting more women into the investing arena, many of which are self-imposed. Advisors can get help female clients breakthrough these barriers.
“The barriers keeping women from investing aren’t just money; the data suggest it’s a confidence gap,” adds Civic Science. “While most women claim some level of financial literacy, they trail men in high levels of confidence. Only 27% of women describe themselves as ‘very’ financially literate, compared to 34% of men. Furthermore, women are nearly twice as likely as men to say they are ‘not at all’ financially literate (19% vs. 11%).”
Advisors shouldn’t feel daunted by those data points because understanding where some women are coming from isn’t difficult. Thirty-five percent of women in the Civic Science survey said they don’t think they have enough to start investing, implying that they don’t know that they can access thousands of ETFs with as little as $1 or $5 at numerous reputable brokerage houses. Another 34% of women said they’re either scared of losing money or simply don’t know where to start. Again, these are issues that can be worked through with an advisor.
Positive Signs
Advisors don’t have to stretch when it comes to helping women initiate their investing journeys. Civic Science data indicate that a broad swath of women in the 18-29 and 30-44 age groups are interested in investing.
More good news: women trust advisors and family members to assist with investing while expressing more pause about artificial intelligence (AI) and social media than do men.
“While financial advisors remain the top source of guidance (26%), women are significantly more likely than men to turn to family members (21% vs. 14%) for financial direction,” concludes Civic Science. “This 50% increase over their male counterparts underscores the importance of trusted, personal connections in closing the financial confidence gap. Conversely, emerging tools like AI and influencer content on social media currently have the least impact on women’s decision-making.”
Related: CAGE Match: The First Autocallable Growth ETF Aiming to Outrun the S&P 500