Financial Insights

Empowering Women Through Investment: Overcoming Challenges and Driving Financial Independence

8th Mar 2024

6 minute read

Mariel Diez

Mariel Diez

Head of content

Compare Wealth Managers

Poppy Fox

Poppy Fox

Investment Director

Quilter Cheviot

Olivia Newmann

Olivia Newmann

Private Client Manager

Brooks Macdonald

Megan Jenkins

Megan Jenkins

Partner and Regional Director

Saltus

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Women now control 32% of global wealth. This is set to grow at a compound annual growth rate of 5.7% to $97 trillion by 2024.

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International Women's Day serves as a poignant reminder of the progress women have made in various fields, including finance and investment. Despite the progress, challenges persist, and financial empowerment remains a key focus for women around the world.

Gender penalties, such as motherhood, childcare and menopause, amongst others, have made it challenging and overwhelming for many women to have positive financial experiences, particularly in the investment field. Megan Jenkins, Partner and Chartered Financial Planner at Saltus reminds us that whilst there have been advancements in closing the gender pay gap, it still remains. «The earnings difference means that men and women ultimately start their wealth journey on uneven ground. This may mean women need to save more to achieve the same outcomes in retirement and so planning ahead and starting on their journey early is key.»

In this empowering day, let’s explore the unique challenges women face in the realm of finance, particularly in the context of investing. Despite them, there’s an increasing number of women entering the investment world, therefore we share some initiatives which are actively working to bridge the gender gap.

Challenges Women Face in Finances

Historically, women have encountered unique challenges related to finances, including wage gaps, career interruptions due to caregiving responsibilities, and longer life expectancy leading to increased financial planning needs. Poppy Fox, Investment Director at Quilter Cheviot, recaps some of these hurdles: The Motherhood penalty, for instance, translates into mothers earning 20% less than fathers ten years after the birth of their first child and very few new parents opt to take shared parental leave. Another one is the childcare penalty, since 65% of mothers work compared with 93% of fathers, according to ONS statistics. In addition, many of the informal care responsibilities performed in families are assumed by women, such as taking care of elderly family members, and when women hit menopause, statistics show that one in 10 women have left work due to menopause symptoms, 14% reduced their hours at work and 8% decided against applying for promotion.

These challenges often translate into distinct barriers to entering the world of investments. “Women typically spend 10 years away from full-time employment to start families and care for children. When you combine lower income with career breaks or reduced working hours to accommodate for childcare this all adds up to a widening pensions gap in the UK» adds Megan Jenkins. “On average, women save an eyewatering 33.5% less than men by the time they reach age 65. That said, the position is improving, and regularly reviewing your pension savings can help close the gap even if you choose to take a career break.»

Risk Aversion and Investment Decision-Making

Quilter Cheviot emphasizes how women may have differing approaches to risk compared to their male counterparts. Women tend to be more risk-aware, preferring a more cautious investment strategy. While this can be seen as a prudent approach, it may limit the potential for higher returns and long-term wealth accumulation. “It is often reported that women are “more reluctant to take financial risks than men”. This may be in part because women arguably have less room for error with their finances than men, due to everything discussed above», Megan Jenkins notes. «If you take two ends of the spectrum, women make up around 50% of landlords in the UK, with property being seen as a somewhat safe investment, yet they only make up 8.5% of cryptocurrency investors.»

Although this tide may be changing, understanding how and when to take the appropriate level of risk for each individual is crucial. «Taking less risk with your investments could mean that you have a greater risk of falling short of your goals. Prioritising each of your financial objectives can help paint the picture of the appropriate level of risk to take across your portfolio. This is not to suggest taking levels of risk that you are uncomfortable with, instead, making informed choices on how much risk to take based on how this will meet your objectives» Jenkins adds.

Olivia Newmann, Private Client Manager at Brooks Macdonald, understands that Investing can be complex and disconcerting, especially during volatile periods, so guiding each client through their own financial challenge is key. “We will explore how much risk you’re comfortable taking with your money, and factor in other important considerations like the current economic climate and tax implications.» As for how to react in volatile times, Olivia adds: “We would encourage investors to stay invested through uncertain times. Investments can be volatile in the short term but can have the potential for growth in the long term. We can help with rational decision-making, keep you focused on your long-term plan and spread your risk by investing in a broad portfolio of different asset classes.»

Access to Funding for Female Entrepreneurs

The British Business Bank is one of many institutions that have set up specific funding for female entrepreneurs since they recognize the challenges faced by female entrepreneurs in accessing funding. «Limited access to capital has been a longstanding barrier for women looking to start and grow their businesses. Addressing this issue is crucial not only for individual success but for fostering economic growth and diversity.»

Women-Backed Initiatives

The UK Business Angels Association's "Women Backing Women" program is a commendable effort to connect female investors with female entrepreneurs. By fostering a supportive community and providing networking opportunities, this initiative aims to break down barriers and encourage more women to become active participants in the investment ecosystem. Oli by fostering a supportive community and providing networking opportunities via Newmann, along with other female investment directors at Brooks Macdonalds, have created “Female Folio”, an initiative aimed at “empowering women on their financial journey”.

Empowering Women in Investments

Despite the challenges, there is a positive shift in the financial landscape, with more women actively participating in investments. Several initiatives and platforms are contributing to this transformation, ensuring that women have the knowledge, resources, and support needed to navigate the investment world. In addition to the mentioned above, Quilter Cheviot, with Poppy Fox in the lead, have also created the “Women and Investing Hub”, a specific site where women can access information, webinars and many other resources that can help them navigate their investment journey.

Investing has many benefits in general, which is why more women should take the lead in their financial journey and start capitalizing on their money. «Investments also help to counter the effects of inflation which could reduce the buying power of your money over time. The earlier you can start saving and investing, the more potential you will have for your wealth to grow. You'll have more time to take advantage of the power of compounding.», Olivia reminds us.

Educational Platforms and Resources

It is of utmost importance to allow women to access educational pieces that will empower women financially. Quilter’s and Brooks Macdonalds’ initiatives provide valuable insights, tips, and success stories to inspire and educate women about the world of investments.

However, for those who are taking their first steps in the investment world, professional advice is key to having a successful start. “A financial adviser can help agree your goals, budget, structure your investments and ensure you use available allowances. It’s important to get the basics right and have a financial plan in place» remarks Olivia Newmann.

Megan Jenkins also adds that financial planning is individualised and, «whilst every individual will have different needs and wants, and face different challenges along the way, there are certain factors that feature more in women’s lives.» She explains that women on average live longer than men, by an average of 3.5 years in the UK, so they will need to ensure that they can sustain their retirement income for a longer period of time. «Whilst it is hard to predict how long you will need your funds to last, we can help to project forward to begin to map out your financial journey using cashflow modelling. We can also carry out financial scenario planning based on different outcomes. For example, what if you outlive your partner, or alternatively what if they outlive you? Or what if you are the sole earner? By creating various scenarios, you can have confidence that the plans you put in place will lead you on your way to achieving your financial goals, regardless of which road life takes you on.»

Promoting Female Leadership in Finance

In several markets, women already hold significant wealth, with the potential to drive economic dynamism and resilience. Globally, women's wealth has grown unprecedentedly in the past decade. According to the Boston Consulting Group (BCG), women now control 32% of global wealth. This is set to grow at a compound annual growth rate of 5.7% to $97 trillion by 2024.

Empowering women to take leading roles is a must across all industries, and educating women early on is key to helping them achieve leading positions. Some progress has been made in breaking gender barriers within the financial industry thanks to initiatives that promote diversity and inclusion. These are essential in creating a more balanced and representative environment, ultimately empowering women to pursue leadership roles in finance.

UN Women and the UN's Department of Economic and Social Affairs publish an annual update on progress towards SDG5, which aims to achieve gender equality and empower women and girls. This year's International Women's Day theme is 'Invest in Women: Accelerate Progress'.

As we celebrate International Women's Day, it is crucial to acknowledge the progress made in empowering women in the financial and investment sectors. The challenges persist, but initiatives and resources are actively working to bridge the gap. By fostering a culture of financial literacy, breaking down barriers to funding, and promoting diversity in leadership, we can create a more inclusive and equitable financial landscape for women worldwide.

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