Why are There So Few Women Investors?

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​​Last month we provided a short article describing the characteristics of a good financial advisor and how to get the most out of this important relationship.  This month we examine a different paradigm.  Why are there so few women in the investment industry even though studies show that they make better investors?

Background Data

It’s no surprise that most investment managers are men.  According to Forbes, women make up
• 35.5% of RIAs (registered investment advisors like Mosaic Fi)
• 23% of CFPs 
• 18% of CFAs
• 20% of Chief Investment Officers
• 11.7% are Senior Private Equity Professionals.

Yet women investors on average outperform their peer male investors from
.4-1%.  What is different about the way women invest compared to men?

• women trade less
• women discount market noise
• women maintain their convictions and avoid the “herd” mentality
• women own what they know

So why are there so few women in the investment business? 

Change doesn’t happen overnight.  Wall Street has long been a bastion of the white male. As in many other industries, achieving parity in diversity is slow, as it requires not just hiring more diverse candidates, but creating structural changes within firms.  Let’s look at contributing factors that make entry for women in the investment industry more challenging:

1. Built-in bias

Some of us remember avoiding talking about our family at the office, particularly if we had small children.  The assumption by management during those days was that we would always put our family ahead of our career thereby making us less dedicated and valuable employees.

Other assumptions included believing that women could not perform as well as men nor could they handle responsibilities.  These biases don’t go away overnight, but what is encouraging is that in 2021, 52% of entry-level positions were filled by women.  Don’t get too excited yet! Keep reading.

2. Lack of female role models

According to the Deloitte Center for Financial Services, in 2019 only 6 of the 107 largest financial institutions in the United States were run by female CEOs.  Yikes!  
At the beginning of 2021 women accounted for about 52% of the industry, according to research by McKinsey, but their representation fell at every step up the corporate ladder.  Such, that in the C-suite, white women accounted for only 23% of executives, and women of color another 4%.
  
3. Smaller pipeline of candidates

Lack of girls opting into STEM programs/classes.  Studies show that girls start opting out at age 11 and at age 15 this trend accelerates.  Again, there are fewer role models and fewer female math and science teachers. While there are a number of investing programs for college-age girls, like Girls Who Invest, more programming for high school girls is needed.  Rock the Street Wall Street is such a program.

4. Lack of support for the dual responsibilities that women carry
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Senior-level women are 57% more likely than senior-level men to have a spouse who works full time. Of those who live with a spouse, senior-level women in financial services are seven and a half times more likely than their male peers to say they are responsible for all or most of household responsibilities. 
Women are eight times more likely than men to look after sick children or manage their children's schedules, which will take time out of their work day or other daily responsibilities.

Research shows diversity of all types provides overall better business results for companies.  Our goal is to keep this important topic on the table and advocate for smart and talented individuals.