Countless studies show that many women hold back when it comes to talking about finances, eight in ten women confess they have refrained from discussing their finances with those they are close to.
A recent conversation with my friend, Emilie Bellet, CEO at Vestpod and best-selling author of “You’re Not Broke You’re Pre-Rich” made me realise that although there’s a media frenzy on balancing the gender gap in financial investment, there’s really a lot of work to do on the how.
To address the gap in financial investment, we must first address the gap in financial advice.
Financial instruments and investment advice were traditionally created by men, for men. In many cases, this translates into off-putting language, inaccessible information and an intimidating male-dominated environment.
Granted, you can move past all of it, if you are determined to find out about your investment options. But the undeniable fact is that we are not making it easy for our next generation of women investors to want anything to do with investment, money or finances. Let’s face it, it can seem complicated and intimidating.
On the other hand, for our male counterparts the topic of money is always framed as “exciting”, investment is about “taking risks” and finance is an industry for the “elite”. Put simply, for men finance looks fun, rewarding and powerful.
But just as history taught us for other topics previously inaccessible to women (business, tech, sports, gaming), things change. Talking about it helps but finding real solutions to the problems women have to overcome will bring tomorrow’s generations of women closer to financial independence.
My own experience was fortunate, and I do not take that lightly. I was able to have a financial education and I started my career in Banking then moved on to FinTech. I am lucky to work in a team where knowledge primes over gender, but I have a natural interest in making this knowledge accessible to everyone. This is how I came to understand that exchange traded funds (ETFs) can be the solution to making investment more appealing to women.
Why are ETFs more accessible to women than any other funds?
ETFs are more accessible for first time or individual investors, because they allow you to invest small amounts, starting from as low as £5 in some cases, as opposed to mutual funds or other similar structures that often require commitments that run in the hundreds of thousands of pounds.
The ETF gives access to assets that are not readily available for investment or cannot be traded as typical stocks. For example, you can now buy into Chinese tech companies via ETF. Similarly, the technical complexity surrounding cryptocurrency trading puts off even the most experienced of investors. The ETF provides an elegant solution to problems like custody, security and ease of access.
ETFs are a better choice for risk-aware investors
Studies have also shed light on women’s tolerance to risk. It should be a well-known fact by now that women seek a better understanding of risk and prefer being fully informed (risk-aware), rather than being opposed to risk (risk-averse).
As such, for the risk-aware, ETFs are synonym for transparency. Generally, the list of constituents is displayed on the provider’s website or platform, and there is easily accessible data on performance. As with any investment though, there are still risks to consider, such as volatility or liquidity of a particular ETF.
ETFs bring diversification and freedom of choice
Because of how ETFs are built, having ownership in lots of different investments means your portfolio is naturally diverse. With other types of investments, you can have all your eggs in one big basket which is subject to external factors, then you have to work on diversifying. When you own shares of an ETF with exposure to various assets, the diversification is ready-made for you. Owning a fraction of a company’s stock amongst many other companies means the overall impact on your investment portfolio is minimal.
ETFs allow you to take a social stand
The drive for Environmental, Social and Corporate Governance (ESG) is stronger than ever. A survey by BCG last year showed that women are more likely to invest in funds that create a positive impact as well as perform well. 64% of respondents said they factor ESG concerns into their decisions. Our generation is more aware of the choices they make and want to feel their contribution makes a social impact. And, the same BCG survey found that with younger generations, both men and women share similar views regarding their preference for mission-driven investing. There is an ever-increasing range of ESG ETFs to choose from, to suit your values and system of beliefs. You may want your investment to support sustainable energy, space travel or the Paris Agreement on Climate Change. With ETFs, you can take a social stand.
ETFs are the most democratic choice in investment.
I truly believe ETFs can be the investment vehicle that makes a real difference to our next generation of financially astute women. It offers choice, minimises risk, is accessible to first-time investors as much as to experienced fund managers. With a wide range of underlying asset classes, it suits the moral compass of anyone.
Roxane Sanguinetti is head of fixed income and investor relations at GHCO.
