How women are changing the investing landscape

When I received questions from attendees of the Globe and Mail’s women initiative, I was struck by a common theme: women have felt neglected by the financial services industry for many years. I have felt that way too at times and the reason I started writing was to help address this by sharing some of my own experiences, but its equally important to look at the bigger picture. While there is much more to be done in terms of creating more economic opportunity and equality for women across the board, it can be easy to overlook the positive changes that are happening.

Equality in education, the workplace and society has helped bring women to the forefront. Statistics Canada data shows that the majority of post-secondary education graduates are women, making up 56.8% in 2020, a trend that has continued since the 1990s[i]. It’s also estimated the number of high-net-worth women is growing twice as fast as the number of affluent men[ii]. According to another survey Canadian women will control $4 trillion in assets by 2028, almost doubling the $2.2 trillion they control today[iii].

Between the generational wealth transfer taking place and the rising earning power of women, it is no surprise that--after many decades of being neglected—women are quickly becoming a coveted demographic for financial advisors and the financial services industry at large. While I think this change is really encouraging, there are still many unique factors and challenges women will face in life that underscores why women need to invest.

Why women need to invest

At one point in their lives approximately 90% of women will become the sole financial decision maker in their families. While the life expectance gap between men and women has been shrinking for decades, the latest available data from Statistics Canada shows that women on average can expect to live 84 years, compared to men at 79.9 years[iv]. Living longer isn’t the only contributor to this phenomenon, grey divorces (divorces over the age of 65) have also increased by nearly 80 per cent from 2010 to 2020 according to Statistics Canada[v].

The risk of being the sole financial decision later in life adds an additional layer of complexity to the primary risk that most investors face regardless of gender—the risk of outliving their retirement nest egg. A World Bank report estimated that women in Canada will outlive their savings by 12.6 years on average compared to 9.9% for men[vi] . These striking datapoints underscore the importance of investing, but women also need to overcome an additional hurdle.

The most recent Investor Knowledge Study from the Ontario Securities Commission found that women were only slightly less financially literate than men, as on average women correctly answered 50% of the questions, compared to 56% for the average man. Despite being fairly close to men in terms of financial literacy, women were much more likely to underestimate their investment knowledge as 17% performed better than expected, compared to only 12% of men[vii]. The lack of confidence likely plays a role in why women in why women are more likely to consider themselves savers than investors. The same study found 60% of women are savers vs 40% of men. 

The rise of female investors

The rise of female investors is providing some interesting datapoints about how women and men invest differently. The good news is that women are increasingly becoming active with their investments beyond their work-related retirement savings programs. The percentage of women who invest outside of retirement grew from 44% in 2018 to 67% in 2021, according to Fidelity. Historically, only 40% of women have invested, according to the CFA Institute, so this latest data shows quite a bit of progress[viii].

In Qtrade Direct Investing’s data we also see that more women have started self-directed investing over the last 5 years, as 33% of new clients self-identified as female in 2022, up from 28% in 2018. However that is still relatively low compared to the actual breakdown of males vs female in the overall population of Canada and shows there is much work to be done.

The bad news is that women still have lower account balances on average compared to men, partially due to the wage gap. The latest data from Statistics Canada shows that, on average, women make 89 cents for every dollar that men make, or about a wage gap of 11%. The wage gap has continued to narrow from 18.8% in 1998, but it is encouraging to see this trending in the right direction as we push towards wage parity.  

Women may see better investment outcomes

Though the data is scant, there have been studies that show women may get better investment outcomes than men.  Analysis done by Fidelity in 2021 that looked at 5 million customers investment performance over a ten-year period found that women outperformed men by 0.4%. A similar study conducted by University of California Berkeley the 1990s found an even larger performance difference of nearly 1%[ix]. When it comes to risk-adjusted returns women may also do better according to a Wells Fargo study from January 2016 through December 2020.

Two studies from Sweden have also come to similar conclusions about women’s ability to outperform. A study by Avanza Bank in Sweden found that women made more than twice as much as men on their investments in Avanza bank during the one-year period to February 2022, according to a report from Avanza. The data is from 1.7 million customers of Avanza, the largest stockbroker and brokerage firm in Sweden. Another survey by SEB (one of the “big four” banks of Sweden) showed that in 10 of the past 12 years, women’s net capital gains have been higher than men’s[x].

Of course we need more data to clearly conclude that women see better investment outcomes than men, but at the very least studies like these should give women the confidence that they aren’t at any sort of disadvantage.

How women invest differently

The difference in performance could be attributed to men and women holding different types of investments investor behaviour. A study by Vanguard found that compared with men, women hold 23% more of their assets in balanced funds and 12% more assets in target-date funds. They are also up to 50% less digitally active and trade up to 50% less than men. Women at the margin appear more aligned with long-term investing principles, such as diversification and discipline[xi].

At Qtrade we also see that our female clients trade less often than males. Our female clients also show a little more risk-averse behaviour as they are more likely to hold a higher percentage of their assets in cash, fixed income investments and mutual funds compared to men, while also holding less equites than men. Females’ reputation as savers also rings true, as our data shows that female clients have higher rates of regular monthly contributions.

This is a lot to digest, but my key message to women everywhere is that it’s more important than ever to start investing for your retirement and there is more opportunity for us to do that today than any point in history. Take advantage of the changes happening in the world of investing while still continuing to push for change. When it comes to the industry putting increased focus on helping women get ahead, I think we’re only getting started.

Christine Zalzal
Senior Vice President & Head of Online Brokerage and Digital Wealth
Aviso Wealth