CIRO survey reveals that the gulf between female and male investing comfort is more due to confidence than knowledge
One question in the recently published CIRO research on women and investing tells the wider story of the survey’s takeaways. Dorothy Sanford, Chair of CIRO’s Investor Advisory Panel (IAP), explains that women and men were asked in the survey how much money they would have if they invested $100 and got a five per cent rate of return that year. Their options were $95, $100, $105, or ‘I don’t know.’ Women selected ‘I don’t know’ at a far higher rate than men and therefore scored lower than male respondents on overall financial literacy in the survey. When the same question was put to a different cohort of respondents without the option of saying ‘I don’t know’ the gender gap in financial literacy disappeared entirely.
“Women are not actually less financially literate than men. They could answer all the same questions accurately. They just didn't think that they could,” Sanford says. “When faced with the question and freezing feeling you get in a multiple-choice question in a test, they grabbed the ‘I don't know’ option, because that's a safer choice. That speaks to lack of confidence, not a lack of knowledge.”
Sanford explained why a lack of confidence can be so debilitating for any investor, especially a younger or more novice investor. She outlined the role of advice in building that confidence and how certain dynamics, especially for couples served by advisors, can actually serve to reinforce women’s lack of confidence. She highlighted results from the survey which showed how advisors can better reach and connect with their women clients, while also emphasizing why its in advisors’ interests to make those efforts now.
A host of factors have contributed to the current lack of confidence among women investors. Sanford believes that while some degree of financial literacy education has been introduced in schools, not enough has been done to break the social taboo that many Canadians have about money. The idea that money would not be an acceptable topic of conversation, in Sanford’s view, has contributed to this lack of confidence. Men, conversely, have found enough spaces to talk about money and investing such that 56 per cent of men surveyed identified as investors and 52 per cent said they invest more than $5,000 per year. Those numbers fell to 43 per cent and 41 per cent respectively for women.
The survey found that one of the most common reasons why women don’t invest is because they “don’t know where to start.” Male respondents, conversely, did not have the same issues with taking the first step. Sanford believes that if advisors want to empower their female clients, they should begin with the straightforward whys and hows of investing, explaining the details of what opening an investment account looks like and involves, what investing actually is, and what different vehicles and investments can achieve.
Throughout those conversations, Sanford notes, the tone must always be one of respect. The survey found, too, that jargon is particularly off-putting for female investors, so explanations in plain language are very necessary. If advisors can work with women to help them understand the value of investing and to find the money to invest, even amid an affordability crisis, then Sanford believes those women will learn how much easier investing is than they had once thought.
Advisors also need to stay cognizant of couples’ dynamics when they work with clients. Since they often serve families and meet with a couple rather than individuals, a more confident male client may overrun his partner, demonstrating greater confidence and leaving the woman behind. Thee survey found that men, for example, are much more comfortable with financial jargon and talking in that language may feel easier for the advisor. Sanford wants advisors to remember that when they serve couples they are serving two people with different approaches. A conversational style that strives to include women more fully can foster confidence and strengthen the overall relationship, which can be an important in the long-term as women tend to outlive their husbands.
“These are not huge discrepancies that require a completely different playbook. These are nuanced differences to dealing with female clients,” Sanford says. “I think it would serve advisors well, particularly ones looking to grow their book of business, looking to attract more female clients, to pay attention to this and to tweak their approach.”
