Women: The New Face of Investing

Women are the new face of wealth. A recent McKinsey study found that females now control about one-third of all retail financial assets in the European Union and United States, with that share expected to rise to between 40% to 45% by 2030. In 2023, the study found that women controlled about $60 trillion in assets under management (AUM) – or 34% of global AUM.

And the growth of female-controlled assets is also outpacing the market. Between 2018 and 2023, McKinsey found the amount of wealth controlled by women rose by 51% while global financial wealth increased by 43%.

Investec, meanwhile, has noted a considerable wealth transfer from men to their surviving spouses – a trend that is presenting unexpected challenges. “Women are still often disconnected from their husband’s businesses,” Investec reported. “Once the capital is deployed, they face several difficulties in understanding the structures, the investment solutions and regulation implications.”

That’s not the only challenge. “Affluent women […] are less likely than men to work with financial advisors,” McKinsey reported. “An estimated 53% of assets controlled by women are currently unmanaged, versus just 45% of assets controlled by men.”

Gender Gaps

“Women now control a large – and growing – share of wealth,” says Mesh MD Connie Bloem. “We’re seeing this first-hand in the demographic profiles of our Mesh.trade users. Yet, speaking as a woman, our investment reality can be very different from that of our male counterparts.”

She’s right: women, on average, live longer than men. If you’re a female in South Africa, you have a life expectancy of 64, according to the World Health Organization. If you’re a male, your number will (statistically speaking) reach just 58.9 years.

Women also earn less than men do on average. A 2021 UNU Wider study indicated that women earned 78 cents for every rand earned by men (down from 89 cents in 2008). This translates to an unadjusted or raw gender pay gap of 20.1% at the hourly level and 32.5% at the monthly level.

Financial literacy levels are also, generally speaking, lower among women than among men; and there’s still the perception that certain corners of the financial world are either off-limits to women, or dominated by a gatekeeping “boys club”.

These factors have significant impacts on women’s investment outcomes – especially over the long term.

Investment Strategies

One of the spaces where this is most apparent is in retirement. Speaking about the gender longevity gap, Samantha Jagdessi, Head of Consulting Strategy and Best Practice at Old Mutual Corporate Consultants, says: “This results in females needing more savings to support their extended period of life in the retirement stage. On average, a female requires at least one to two times her annual salary more in savings at the time of retirement than a male – yet our research finds that women are paid significantly less, which means that they will need a higher multiple of savings.”

Women also tend to put their careers (and their retirement and other investment contributions) on pause when they take maternity leave. This also negatively impacts investment outcomes.

Gender also plays a pivotal role in short-term investment strategies. When looking at cryptocurrency in particular, BDC Consulting found that women prefer to “invest” (49%) in cryptocurrency for the longer term, rather than trade in and out of it (19.7%). “This fact is consistent with the data from Fidelity Investments research, which found that men are 35% more likely to trade than women,” BDC pointed out. “It is noteworthy that a little more than a quarter of our respondents (26.5%) just store cryptocurrency.”

“This trend suggests that women may approach investing with a long-term investment perspective, seeking to enhance financial independence and wealth generation,” says Bloem.

Investing in a Woman’s World

In a perfectly equal world, the exact same investment rules would apply to men and women. In this world, however, there are a few things to consider. One of these is behavioural finance. This interdisciplinary field combines psychological insights with financial decision-making and examines how emotional and cognitive biases influence investors’ behaviour and investment choices.

The insights may (or may not) surprise you. One behavioural finance study, conducted by Oxford Risk, found that men, on average, are likely to be more confident investors, but also more prone to placing too much faith in their own expertise.

Meanwhile, a small 2019 study by South Africa’s North West University found that while male investors were prone to “loss aversion”, female investors tended more to “regret aversion”. Put simply: while men have a fear of losing, women have a fear of missing out.

They suggest that female #FOMO might be a function of women’s generally lower financial literacy rates, and also potentially a lack of awareness of the opportunities available in the market.

Financial Education in a Finance 3.0 World

“What does this all mean for you?” asks Luisa Mazinter, Chief Growth Officer of Mesh. “As one reads the reports and studies, one significant theme emerges in all the literature,” says Mazinter. “And that’s the impact of financial literacy on women’s investment decisions. Research indicates that while women tend to earn higher average investment returns than their male counterparts, a notable gap exists in their confidence regarding investment decision-making. This discrepancy underscores the need for educational initiatives that empower women with the knowledge required to navigate their financial futures confidently.”

In that spirit, Mesh is proud to announce the upcoming launch of The XX Index Wealth Work-Out. Every month, we’ll create a space for smart, savvy women to come together to talk about investing, building wealth, with a practical view of what that really entails.

“The XX Index will invite leading female voices in finance to connect with each other on a range of topics related to investing, the capital markets and smart money moves, we’ll ask them to share their personal stories, ideas and insights that will keep all of us informed, inspired and in charge of our own financial story.”

The pilot episode of The XX Index Wealth Work-Out will be available soon. Fill in the form below or follow Mesh on LinkedIn for updates.