“The catalyst was around mid-2024,” says Stephanie Wilkes-Wiffen of online broker eToro. Then he read the annual boring money report. It revealed that the gender investment gap in the UK has widened, with almost 60% of investors being male.
eToro then began developing its “Loud Investing” campaign, which aims to educate and empower women to invest. This is not the only initiative so far to target women investors.
Wilkes-Wiffen has seen an increase in female-led initiatives across the industry over the past six to twelve months. Online brokers are launching new brand campaigns, producing “women’s finance” podcasts or sponsoring women’s sports teams.
“In my opinion, the more the merrier,” she says. “If for whatever reason our message doesn’t reach someone, maybe someone else in the industry will.”
Women have long been underrepresented in the world of investing. Today, almost two-thirds of the shares issued in the stock market are held by men. Women still face many obstacles in investing. They generally earn less than men, leaving them with less money to invest. They do not receive the same financial education in childhood, leading to lower financial literacy later in life.
Women have also historically been excluded from the finance sector. For example, in the UK, women were banned from the trading floor of the London Stock Exchange and faced widespread discrimination in accessing financial services until the mid-1970s, with banks requiring a father’s or husband’s consent even to open an account.
Changing the story about women investors
“It’s a simple change in rhetoric,” says Wilkes-Wiffen. “We need to use language that celebrates women’s strengths like patience and discipline, and create an environment where women feel comfortable.”
For example, eToro is including more female presenters in its online educational content and addressing the psychological barriers facing first-time investors.
Highlighting the statistics of women being capable investors also increases their appetite for investing. The financial industry often hears reports of how women’s risk-aversion and lack of confidence is holding them back.
“If we treat people with stereotypes, we risk them eventually becoming stereotypes,” says Professor Ylva Beckström, senior lecturer in finance at King’s College London. She says too much emphasis is placed on women’s low self-confidence, when in reality, “it’s overconfidence that kills performance.”
According to him, men are more likely to lose money due to short-term trading and excessive risk taking than women. “When women invest, they often outperform men,” Backstrom says. A study by Warwick Business School found that women outperform men by 1.8 percentage points when it comes to investing.
Women’s investment preferences are also different. They make more sustainable investments than men and are more likely to consider ESG factors. “So, women really think very differently about their money. Yet, we’re not seeing those needs met,” says Christine Yu, co-founder of financial education company Sophia.
Women are more likely than men to seek financial advice, especially when entering a new stage of life, such as planning children, divorce or widowhood.
Financial incentives for this change
Online brokers also have a financial interest in integrating women into their client base.
“Increasing women’s investment participation rates is one of those win-win scenarios,” says Backstrom. According to the World Economic Forum, the financial services industry (for example, which includes banks, brokerages, and credit card companies) could increase its revenues by $700 billion if it better served women.
Women’s wealth is also projected to increase rapidly in the coming years, especially in Asia. One reason is that women are accumulating wealth through ongoing intergenerational wealth transfers, as baby boomers transfer wealth to their children.
“This is an opportunity for the financial services industry,” Bäckström told DW. “They need to improve their services for women, because otherwise women will move away, and they often do that when they inherit property.”
This applies only to a small section of people who are already wealthy enough to invest. While about 60% of the US population claims to invest in stocks, many countries report much lower stock market participation. In Germany, stock investors constitute about 20% of the population, and in India about 5% of households invest in the stock market.
Finfluencers also target prospective female investors
Online brokers and investment platforms are not the only ones taking advantage of this opportunity. The past few years have also seen a rise in financial influencers, or finfluencers, and online investing communities, many of which specifically target women. “What does it tell you? It tells you that there’s a need that’s not being met,” says Yu.
Given the lack of accountability and regulatory oversight, online dissemination of financial advice also carries risks. This leaves people vulnerable to misinformation and fraud.
Steps towards closing the gender investment gap
So how effective are online brokers in reaching female investors? And are women becoming more involved in the stock market?
Leah Zimmerer, a postdoctoral researcher at the University of Mannheim, says the gender investment gap is actually smaller among younger generations. The German Stock Institute has confirmed that this is the case in Germany. In fact, last year more women than men started investing in the stock market in Germany. But, in absolute terms, only 5.4 million women invest in Germany compared to 8.7 million men.
The younger generation is also more receptive to online brokers. Zimmerer says people between the ages of 18 and 30 are more likely to invest. According to the German Stock Institute, most investments in the stock market in Germany are made by people under 40 years of age. And according to JPMorgan, stock market participation among American 25-year-olds is expected to increase from 6% in 2015 to 37% in 2024.
As young people grapple with inflation, the high cost of living and concerns about the security of retirement benefits, they are increasingly taking matters into their own hands. Financial markets have also become more accessible through investment platforms and online information. Especially since the Covid pandemic, e-trading apps like Robinhood, Webull or Fidelity Investments have seen a surge in downloads.
Young women still invest less than young men
However, experts warn not to draw conclusions immediately.
Zimmerer says just because young women invest more doesn’t mean they’ll continue to do so throughout their lives. The gender investment gap increases with age and is largest when women are between 40 and 50 years old. This, she says, is a time when women are tied to family life and are less likely to manage their own finances.
Later, for example, when women experience divorce or widowhood, the gender investment gap becomes smaller again. It is unclear whether Gen Z women will continue to invest at higher rates as they age, or whether they will instead reflect the life-cycle patterns of previous generations.
Backstrom is equally skeptical. “We cannot be comfortable with the possibility of a short-term trend becoming a long-term phenomenon,” she says. “We need major reforms to level the playing field.”
Edited by: Srinivas Majumdaru