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8 November 2017 | By Carolyn Saunders Community

Closing the gender gap

Women are underinvesting and underinsuring themselves. Financial services providers are missing a trick

There are a number of factors that constrain women’s ability to plan effectively for their financial futures. As a result, women are underinvesting in pensions and financial products and are underinsuring themselves, relative to men.

Our recent report with the Fawcett Society highlights this gender financial security gap and makes recommendations on how financial services providers can help to end these anomalies.

Closing The Gender Gap: Female Consumer Engagement in Financial Products, reveals that although women face greater financial risks throughout their lives – for example, at age 65 an average woman can expect to pay a total of £132,000 for her care as compared with £82,000 for a man – women are less well protected, have less wealth and fewer assets, are less likely to engage with financial products and are less confident with the financial decisions they make.

The gender pay gap accounts for some of these differences, but research shows that these discrepancies also exist between men and women of similar incomes.

A question of confidence

One of the reasons for these differences is the gender gap in financial literacy in the UK. Only 40 per cent of women, compared with 67 per cent of men, score highly on knowledge of eight key financial concepts. And this links to a confidence gap, with women on average believing that they are less knowledgeable than other people when it comes to investing their money. Many women view the financial services world as inaccessible and full of jargon and are less likely than men to seek advice or guidance.

Also, it is well established that women are more risk averse than men across a range of different areas, which can result in women putting their money into less productive investments. Experimental evidence suggests that even when women do seek independent financial advice, advisers can reinforce, rather than challenge, the gender gap in risk appetite.

But all this is at a time when women are more likely to be in work and earning, with a growing proportion earning above average incomes. So, financial services providers are missing a trick by failing to take advantage of the opportunities that this presents.

A tailored approach

Gender research and behavioural economics suggest that there are a number of things that the financial sector could do to better engage women. For example, changing the perception of finance as an area of male expertise – by highlighting more female role models and by changing some of the language used in advertising and promotional literature – will help women to build more confidence.

Reframing risk by raising awareness of the greater risks of inaction and of underinvesting should help to counter women's aversion to investing in certain forms of protection. The industry should also innovate and develop new products that better reflect women’s life courses, which structure saving around goals and which enable women to co-operate rather than compete.

Businesses can help tackle the 30 per cent gap in pension savings between women and men, positively impact on women’s lower insurance coverage levels, and encourage more women to save in more productive investments, by changing both the products they offer and the way they talk about them.

The challenge to financial services providers is will they seize the opportunity?

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