Is our idea of an investor out of date? Why women will shape New Zealand’s investment future

This article was originally published on Newsroom.

Future wealth transfers mean women will more often be the ones making investment decisions, making their investment confidence more important than ever.

By Matthew Scott

As New Zealand’s population ages and one of the largest intergenerational wealth transfers in history gathers pace, women are becoming the key decision-makers for household wealth and investments.

Yet only one in three women say they feel confident making investment decisions.

As more wealth changes hands and women play a growing role in managing it, that confidence gap could become increasingly significant for New Zealand’s future.

The Great Wealth Transfer

One of the biggest wealth transfers in history is underway.

A lop-sided population pyramid will see the baby boomers pass on their wealth to the next generation. But before that, longer female life expectancy means many women will increasingly take responsibility for household wealth.

Statistics NZ data shows men have a life expectancy of around 80 years, while women live, on average, another three and a half years. That gap changes who makes the key financial and investment decisions later in life.

Recent research from Craigs Investment Partners found big differences between men and women in terms of their relationship to investing.

The study found only 32 percent of women felt confident making investment decisions, compared to 56 percent of men.

It’s a gap that suggests women may not have been welcomed with open arms into the world of investing in the past, and the effects are still felt today.

Gretchen Williamson knows that changing relationship well. As an adviser at Craigs, she co-founded the organisation’s Women’s Wealth programme in 2007, which equips Kiwi women to invest with the support of events, workshops, and educational material.

But she said the gap between men and women is less about knowledge and more about advisers learning to meet the different needs women bring to the table.

“The different approach to investing is not really a knowledge thing,” she said. “Women often score higher in terms of knowledge.”

So what is it that’s kept women out of investing?

Beyond the ‘boys’ world’

Research from groups like Hi Money found financial institutions may not be getting the right communications out there to get women investing.

Williamson agreed, but said institutions also needed to meet women where they were in terms of their financial comfort zones.

“It seems women often need a longer period before they take the next step, whereas men have a tendency to jump right into it,” she said. “It may be there’s a feeling that you have to start by going all in, when in reality there are plenty of ways to get into investing very gradually – maybe the language we use implies you have to have lots of money.”

It’s a problem that could be eased by the rising use of fintech platforms, which allow users to dip their toes into investing before going big.

“Anything that democratises investment is great,” Williamson said. “And then as balances have increased, we’ve found people have come back to Craigs, often because they value actually being in the room with someone.”

Stereotypes of investment containing big wins and big losses have seen it aimed more squarely at men who have historically earned more and been willing to take greater risks with money.

But it was a self-fulfilling view of investment – one that Williamson said can be dismantled in this day and age.

“Investing was always historically pointed at men,” she said. “It was kind of a boys’ world.”

But investing doesn’t require diving in at the deep end: “There’s no cost to ask questions, and then you’ve got something to go on from: My philosophy in life is to keep asking questions.”

Established social roles across gender lines may have created fundamental differences in how men and women treat money.

Williamson mentioned an acquaintance laughing at herself and how she and her husband’s relationship with cash differed.

“She said if her husband has $100 in his pocket, that’s his. But if she does, then it’s her family’s first. It’s like we pay ourselves last.”

But if there’s an ingrained sense of communal responsibility to the money habits of women, that could ultimately be a net positive for a society with shifting demographics.

Investors of the future

What does the world of investing look like when it’s populated more by women?

Williamson said the difference in how women want to invest could mean good things for an economy that relies on safe and consistent investment to avoid speed bumps and financial shocks.

The research found 46 percent of women are more likely to prioritise a balanced approach to investment, as opposed to 37 percent of men.

Meanwhile, one in three men prioritise growth above all else – compared to one in five women.

Williamson said a safer, more measured approach to investment becoming more common bodes well for economic stability.

Meanwhile, other gendered tendencies paint an optimistic picture of a world with more female investors.

“We know that women are more likely to share, and with good investment they have the ability to donate more,” Williamson said. “Plus, women tend to want to know they are doing less harm by investing responsibly. They work to different goals. The question is, have we adequately communicated that those goals can be different?”

University of Auckland finance lecturer Claire Matthews echoed some of Williamson’s points around women being raised to have a different relationship to money.

“I don’t think we’ve dealt with why those gender issues exist: perhaps people think girls aren’t good with numbers,” she said. “I know society is working on it, but it takes a long time and fundamentally there has been this message that goes out that there are boys’ subjects and girls’ subjects.”

The challenge left for financial institutions perhaps is not just attracting more investors, but recognising that people approach money with different motivations and levels of confidence.

Williamson said the findings reinforce what she sees day to day in her work.

“People are drawing on a range of information sources, but when it comes to making important financial decisions, they still value trusted relationships,” she said. “Whether that’s a financial adviser, family member or someone who understands their personal circumstances and long-term goals.”

The findings point to a broader shift underway in New Zealand’s investment landscape, and as women increasingly control a larger share of household wealth and inheritance transfers accelerate through an ageing population, the traditional image of the investor appears to quickly be on its way out of date.

Market Insights enewsletter

Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.

Subscribe Now