Conversations With Key Women In Finance About How They're Solving Gender Imbalances

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Conversations With Key Women In Finance About How They're Solving Gender Imbalances

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All The Fiscal Ladies

From the number of execs running banks and hedge funds to the number of everyday investors, women are underrepresented at every level of the finance industry.

They fill just 3% of senior management roles at hedge funds, and in 2018 received just 2% of all venture capital funding. Wall Street has never even had a female CEO. But the problem gets worse: according to investment manager BlackRock, women keep 71% of their total wealth in cash, compared to 60% for men. Put simply, they just aren’t investing.

Women are already paid less than men, not to mention face higher costs in their daily lives. So if they’re not investing what they do have, that gender wealth gap is just going to keep growing. That’ll leave them with less when they retire, when their longer average lifespans mean they actually need more.

As one pioneer has previously pointed out: isn’t it ironic? More female money managers could, after all, be good for men and women alike. Plenty of studies have shown that women are actually better investors than their male counterparts: Warwick Business School, for example, proved female investors outperformed men by 1.8% every year over a three-year period. Turns out they’re less likely to take on big risks or trade too frequently, which makes losses of more than 30% much, much less common than it is for men.

In short, it’s in everyone’s best interests to fix finance’s gender problem. So in this Pack, we’ll look at what’s causing the problem, and how some exceptional women are going about fixing a broken system.

Confidence Game

When we asked women in the Finimize Community why they don’t invest, one answer kept coming up: a lack of confidence.

One study has found that only 10% of women felt “very confident” about opening an investment account – almost half the proportion of men. Some think the gender wage gap likely plays a part:

If you have less money, you’re probably less likely to want to take any risks with that money, which could go some way in explaining why women are still more cautious than men when it comes to investing.

– Interviewee

But Sallie Krawcheck, the founder of women-focused investing platform Ellevest, told us the industry itself is most responsible.

Women are less confident about investing. For years we have blamed women for that: ‘Oh, they're not as good at investing. Oh, they're so risk-averse. Oh, we need to find the right financial advisor.’ I and we see that fundamentally differently, which is nope: the industry was not built with their needs in mind.

– Sallie Krawcheck, CEO, Ellevest

According to Krawcheck, women might “want to invest in a different way” – a way that shies away from trading, jargon, and a macho culture. In short, she says, a way the industry isn’t currently built to provide. So she founded Ellevest with a view to change that.

Our investing algorithm is gender-aware. Huh, ‘money is gender neutral, why does someone need that?’ Well, if the investing algorithm is targeted towards retirement, knowing that women live longer than men do, knowing that women’s salaries peak sooner than men do, knowing that women take more breaks than men do – it's not just a nice-to-have. It's pretty crucial.

– Sallie Krawcheck, CEO, Ellevest

Krawcheck thinks the industry is responsible for women’s lower risk tolerance too. Studies show 52% of women prefer low-risk investments compared with just 36% of men – even though they’re aware they’ll receive lower returns. Yet Krawcheck doesn’t see that behavior playing out at Ellevest.

We see that women, if they are given the right information, will take on more risk – as is appropriate given their longer lifespan … We believe that women's lower investing risk is not based on any inherent lower risk tolerance ... it's really the industry's fault.

– Sallie Krawcheck, CEO, Ellevest

Krawcheck’s attempting to change the industry with her company, sure, but for there to be wide-scale change, the big banks and investment firms need to change too. And that is easier said than done…

Culture Shock

Do us a favor: conjure up an image of a typical stockbroker in your mind.

We’ll bet you’re thinking of a Christian Bale type in a sharp suit. Or maybe a Leonardo DiCaprio type. Or a Michael Douglas type. Or a Matthew McConaughey type.

Statistically speaking, you weren’t wrong if you pictured a guy. In 2018, only 17% of stockbrokers were women – barely up from 12% in 1999, and down from 19% in 2005. And stockbroking isn’t the only place with a male bias: only 14% of partners at UK financial services firms are women, and there’s still no superstar female investor as well-known as Warren Buffett or Ray Dalio.

The reality is that there is an underrepresentation of women in certain levels of the financial services sector … particularly at the most senior levels.

– Interviewee

Many blame the problem on finance’s hyper-masculine culture. Working hours are long, boisterousness is encouraged, and sexual harassment is rife – as recent reports from insurance market Lloyd’s laid bare. “I don't know many people who haven't suffered sexual harassment, which is a really hectic thing to say,” says Vivienne Artz, president of the Women in Banking and Finance (WIBF) initiative. Lots of women don’t feel comfortable raising concerns, either, because it’s an environment that values acting tough – and with few other women around, there aren’t exactly many places to turn anyway.

It's lonely, incredibly lonely, when you operate in an environment which is not designed for you, barely accommodates you, and where there was both overt and covert discrimination against you.

– Vivienne Artz, president, Women in Banking and Finance

That’s one of the reasons Artz joined WIBF: she wanted to connect women, as well as push companies to fix their discriminatory practices. In hiring, for example, Artz says “unconscious bias plays a very significant role in the challenges to women actually proceeding to the higher level”. WIBF is working on challenging that: “I think we need to look carefully about how we recruit and who is on panels enforcing diverse slates.”

Another concern is motherhood, given that women continue to be children’s primary caregivers. While many women do return to work after having children, they often find the lifestyle isn’t compatible with childcare: long working hours and constant travel simply aren’t practical, and can cause them to leave again. But that’s also starting to change.

We've really made tremendous strides in relation to maternity leave and maternity policy. Suddenly, managers are being offered opportunities to learn how to better support women when they come back from maternity leave.

– Vivienne Artz, president, Women in Banking and Finance

Artz says she’s also seeing a move towards parental leave, rather than just maternity leave. By encouraging men to take on more of the caregiving role, these policies give “others a mandate to pick up parental responsibility and move from that default mindset thing, where being a parent is the primary responsibility of a woman and a secondary responsibility for everybody else,” Artz says.

In fact, things are improving across the board. “I would say that sexual harassment is on the decline,” she says, in part thanks to the #MeToo movement. And women are becoming more powerful: Alison Rose is now CEO of RBS, one of Britain’s biggest banks, and at the time of writing, Jane Fraser is in line to take the top job at the US’s Citigroup. Likewise, financiers like Helen Morrissey have campaigned for more female representation on company boards, which seems to be taking hold: investment bank Goldman Sachs says it’ll no longer take companies public unless they have a woman or person of color on their board.

“It’s really excellent when firms decide to take a stand,” Artz says, but she cautions that diversity can’t just be empty words. “It’s not about saying that they have to have a woman, because we all know that tokenism doesn't really work … It's more about saying, ‘you know what, we're not going to support companies that are not embracing diversity and inclusion. So get with the program.’”

And everyone who works in finance can adopt a similar mindset. As Artz says:

“We're all role models. I think we can all call out bad behavior when we see it, as we can all reflect ourselves personally: are we being inclusive? Are we supporting our colleagues? … Are we actually practicing what we preach?”

– Vivienne Artz, president, Women in Banking and Finance

Hidden Femmes

There’s a growing trend of using money to fund change across the whole of finance, and that includes narrowing the gender gap.

Funds like Legal & General’s GIRL fund and State Street’s Gender Diversity ETF, for example, claim to only back companies that have enough gender diversity. Typically, those funds also try to encourage companies to increase their diversity (although State Street has come under fire for voting against diversity resolutions in its fund).

Similar work’s happening in private markets, where women are woefully underrepresented: female founders gained just 2% of all venture capital funding in 2018, while women make up just 9% of decision-makers at US venture capital firms. Fortunately, there are women trying to fix both sides of that problem.

On the one side, there are investors like Trish Costello, Anu Duggal, and Shelly Bell who have started their own firms dedicated to investing in female entrepreneurs. And on the other, there are the “femtech” companies that have boomed in recent years: companies like breast pump-designer Elvie, CBD tampon-maker Daye, and fertility tracker Ava. Women-founded companies can identify problems that affect a huge market, offering huge potential for returns: so much so, in fact, that one consultancy firm reckons femtech could be worth $50 billion by 2025.

Of course, this isn’t just about money: it’s about the kind of world we want to live in. The richest men in the world are the ones who have had massive sway over economies and governments for the past however many years. So if the next big-name billionaires are women… well, the world might look a whole lot different in a few years’ time.

If Lehman Brothers had been ‘Lehman Sisters’, [the] economic crisis clearly would look quite different.

– Christine Lagarde, president, European Central Bank

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