While women play a confident and active role in everyday financial decisions, they are noticeably less involved in planning, acquiring and managing long-term investments than men, according to recent research commissioned by the Commonwealth Bank.
The whitepaper, titled Enabling change: A fresh perspective on women’s financial security, found that even though women generally feel just as confident and in control of their finances as men do, this self-assuredness is less evident in their longer-term decisions affecting super and investments.
Managing super and investments
This gender divide mirrors the divergence in super and investment holdings between men and women. When men and women were asked what kinds of investments they held, the research found that one in two women have no investments of any kind, compared to 40 per cent of men.
Women were also less likely to hold every kind of asset type, with the largest gaps in financial market investments (shares, exchange traded funds (ETFs) and derivatives) and alternative investments (such as gold, coins, stamps and art).
And, while the majority of women now have super accounts, they are still somewhat less likely to have super and to engage regularly with it than their male counterparts.
In the research sample, 78 per cent of men had super accounts, compared to 70 per cent of women, while 29 per cent of men said they engaged with their super regularly, compared to 17 per cent of women.
Barriers to investing
Why is there such a marked gender divide in investment behaviour? The research points to four interrelated causes.
Comparing different segments of women, and comparing men and women generally, there is a clear correlation between each group’s financial resources and their levels of engagement in investment and super decision-making.
And while women are confident financial managers, they continue to face ongoing economic challenges in Australian society, including the gender pay gap, the workforce participation gap, and the resulting super gap.
That suggests a lack of financial resources is both a cause and a consequence of women’s lower levels of engagement in investment and super decisions.
As a result, younger women (who have benefitted most from the super guarantee regime and spent less time out of the workforce) show higher levels of involvement in super decisions, while older women (with higher average assets and incomes) are more engaged in investment decision making.
In other words, the gender investment divide is in part a resources gap, not a capability gap.
The research also shows a strong correlation between an early education in investing and higher levels of investment activity and engagement.
So, while 53 per cent of women say they were taught about managing their finances while young — a slightly higher proportion than for men — only 29 per cent were taught about investing, compared to 41 per cent of their male peers.
The result is that while many young women have high levels of financial literacy, confidently managing their money from day to day, they are much less likely to have high levels of investment literacy, with many only becoming informed and confident investors later in life, when they have less time to see their assets grow.
One possible consequence of this difference in education, together with the women’s traditional gender role as household managers, is an apparent tendency for many women to prioritise the practical and immediate, rather than less concrete, longer-term aspirations.
This tendency is evident in the views many women express when asked to define what financial security means to them, with many focused on paying bills and coping with unexpected expenses, rather than building a comfortable lifestyle.
The whitepaper found that there is also strong evidence to suggest women are more risk-averse in their financial decisions than men, which can lead to lower levels of investment and lower returns.
This is reflected in the large gap between men and women holding market-based investments such as shares, with around nine male investors for every six female investors.
Tailored advice boosts accessibility
As this research indicates, women approach their super and investments differently to men and as such they can benefit from customised solutions which is where financial advice can play an important role.
By continuing to develop a variety of tailored advice options specifically for women, advice providers can support choice and make advice more accessible, thereby ensuring that more women have access to the information they need, with fewer falling through the gaps.
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