The P2P lending sector in the UK has a problem: it is not catering enough for women. This article examines the terrain and what should be done about it.
This publication has examined a number of themes concerning women and wealth management. One specific topic is a perceived lack of female investors in the peer-to-peer lending space, part of the alternative finance segment which has arisen in recent years.
Roxana Mohammadian-Molina, who is chief strategy officer of BLEND Network, a property-backed P2P lender, talks about the subject. This publication is pleased to share these thoughts and invites readers to respond. As usual, the editors do not necessarily endorse all views of guest writers. Email the editor firstname.lastname@example.org or email@example.com
With the gender pay gap being a regular topic of debate, people rarely talk about another key financial gap between and women: the gender investment gap. Just 23 per cent of female adults in the UK hold an investment product, compared with 35 per cent of men, while women gravitate towards more risk averse options. Women opened 5.2 million cash ISA accounts last year compared with 4.4 million opened by men (1). Women’s investing needs aren’t understood by a male-oriented financial services sector, which needs to change in order to facilitate and encourage female investing. But women cannot and should not wait for this change to happen but should drive it themselves.
So, why do women shy away from investment, preferring the safe haven of cash? Recent research by Fidelity has shown that the fundamental driving factor behind this is confidence – women do not feel confident making financial decisions as they don’t believe that they understand financial products well enough (2). There is a financial literacy gap between genders, with women focusing on being thrifty and frugal while men concentrate on investing and growing their wealth.
Part of the problem lies within a financial service sector that doesn’t adequately serve women’s needs. Recent research by EY has revealed that 75 per cent of women feel misunderstood by wealth managers (3). The vast majority of wealth managers do not appreciate the differences between male and female investment priorities, which means that they are unable to advise women on how to achieve their investment aims properly. This is not simply down to risk but down to overall goals; men hunt for high returns while women often link investing much more to longer-term financial goals.
This is not simply a societal issue; it has economic ramifications. A recent study by Warwick Business School has shown that women make better investors than men, outperforming them by an average of 1.8 per cent over a three-year period (4). Natural character traits give women an advantage when it comes to investing, with a woman’s instinct being not to tinker - 12 per cent of women only check their investments once a year, compared with 14 per cent of men who check once a month and 10 per cent who check once a week (5). This means that women benefit from buy and hold investing, meaning that they don’t build up trading costs, don’t get distracted by short-term market movements and, as a result, aren’t tempted to sell at the bottom of the market and buy at the top.
Within this difficult climate, women need to take the initiative and do more to challenge the status quo and drive change. There are a number of different measures that can and should be put in place in order to unlock the power of women investors.
Support networks are vital. Women should not attempt to drive change on their own but should network to create supportive communities in which they feel free to share information, experience and advice. These networks, whether they be online or in person, provide safe spaces where women can discuss money, from unpicking jargon to making recommendations for wealth advisors that understands women’s investment needs.
With money management and investing still not part of the national curriculum, women should educate themselves and spend time to understand the basics of financial management. Greater knowledge will allow women to build their own confidence, which allows them to become less dependent on wealth managers. Learning sooner rather than later is important as money management skills last a lifetime.
It is also important that difference be embraced. Women should not consider taking more risks in order to emulate men but should embrace their more risk-averse nature. Investing does not have to be full of risk to be successful and if women understand that their individuality is an asset, it will encourage them to invest. Women can start to invest with the smallest amounts and then slowly build up the amount they are willing to invest.
It is important for women to see and celebrate successful women in finance. To do this and tackle an “old boys club” perception, it is important to change the composition of the financial services industry as currently only 10 per cent of wealth advisors are women. Their positive stories will encourage other women to work in the industry.
This is an issue that needs to be at the forefront of debate within the financial services sector. Unlocking the potential of female investors is not only a societal necessity but a wise financial move. Change needs to be multi-faceted, coming from inside the financial service sector and from women themselves, who shouldn’t wait for change but should act.