How advisors can help close the investing gender gap

Women are often seen as risk-averse investors compared to men, or less interested in investing. Indeed, less than half of American women said they invested in stocks, versus nearly two-thirds of American men, according to a Nerdwallet study from 2021.

It's a costly problem, as their lower rates of participation in the stock markets have contributed to the average woman in recent years reporting only 32 cents in total wealth for every dollar a man owns. 

A new study says that apparent lack of interest may be caused by outdated gender norms about girls and women as investors. Advisors can help change this imbalance, though. 

Read more: Women fund managers outperform their male peers, yet comprise fewer than 1 in 8 in the industry. Why?

An Aug. 13 academic paper found, based on an analysis of multi-year data from an online stock trading app, that women are less likely to be gifted stock than men — receiving just 38.8% of all stock gift cards for the app. When women or girls were gifted stock, the amount on average was 21.9% less than what men received, the study said, reflecting a bias that women are less interested in financial matters. "Gift givers usually tailor gifts to the recipient's interests or at least their perceptions of the recipient's interests," the researchers wrote.  

However, "following equal encouragement to enter the stock market, roughly the same proportion of men and women continue to participate" in the app, the paper said. This suggests that when given a chance to invest free money, women are just as eager to invest as men are. 

How advisors can help

Seton Hall University

Jennifer Itzkowitz, the lead researcher on the paper, said in an interview that the study has big implications for advisors — who all too often fail to engage women as clients or engage the female partner of their male clients seriously, as industry research has shown. 

As women's wealth has been steadily increasing in recent years, and is set to significantly expand in the coming decades through the great wealth transfer and more women achieving higher pay at work, advisors who fail to engage women will miss out on a big opportunity to serve the wealth client of the future. 

"Financial advisors can do things as simple as always making sure that (both) a husband and a wife are copied on emails," said Itzkowitz, who is an associate professor of finance at Seton Hall University and adjunct associate professor of finance at NYU. "Always make sure that they're speaking to both parties." Advisors should also look at portfolios and question why a son's portfolio, for example in a 529 college savings plan, may have more saved in it than a daughter's, and encourage all their clients' children — not just sons — to learn about financial literacy and investing from a young age, Itzkowitz said. 

Read more: How advisors can help underserved wealthy professional women 

Itzkowitz got the idea for her study when a female friend who was highly educated asked her for advice on investing in new brokerage accounts for the friend's two sons — but didn't consider accounts for her two daughters. Asked why, the friend simply said the daughters wouldn't be interested. 

Wealth management firm leaders seeking to bring more women into the fold can also take a page out of the book of STEM employers, Itzkowitz said. "It was not too long ago that women were not welcome in STEM fields, and there's been a tremendous amount of progress getting women into STEM programs and getting them into STEM careers. … Finance is still very behind in learning from that." 

One idea to steal from the STEM world is female cohorts, she said. "Create a financial literacy class just for women, where you have a woman role model, or try and create female role models." For example, a woman client could be asked to speak to other female clients about her experience. "Women just relate to each other in a different and very positive way." 

Read more: Women are less prepared for retirement than men — Goldman Sachs sees an opportunity

Wiss

Paul Peterson, the partner in charge at New York-based accounting and wealth management firm Wiss, said in an interview that wealth-building is easier for investors when they're young. 

"The best time to fail is when you're young, you don't have a lot. But you learn a lot through failing," he said, adding that a client could simply start by teaching a daughter about the companies and brands they see in their life — such as Apple or Disney — and talking about them as businesses they could potentially own a piece of. "You can open up like a $100 investing account, and let them try to learn that way," he said. 

For women of color, as well as people of color from either gender, there can be an added barrier, said Chloé Moore, a CFP financial planner who is the founder of RIA Financial Staples. 

Martine Beher Photography

Moore, whose clients are mostly women of color and often the primary breadwinner of their household, said she's had clients who came to her after being turned away from other advisors because they didn't have investable assets beyond a 401(k) or other workplace savings account — often because they didn't have education about investing or come from a background of wealth growing up. 

Read more: 7 tips to help Black clients find multigenerational success

For women from historically disenfranchised communities, teaching investing is especially important, Moore said. "They never saw it modeled in their household with their family members, and they didn't really have anyone to look up to for advice on how to properly manage their money."