By 2024, three generations of women in Canada are destined to control an estimated $3 trillion or 46% of personal wealth. Are they ready?
According to a recent study for the Ontario Securities Commission, only 27% of women reported they have good or excellent investment knowledge compared to 51% of men. No wonder, then, that women respondents age 55 – 64 reported higher levels of stress regarding their retirement planning than similar age men.
Why are women less comfortable with investing? Many women haven’t accumulated enough assets to make learning about investing a priority. This situation of having fewer assets is exacerbated by gender-based gaps in lifetime career earnings and periodic absences from the workforce during prime earning years.
This is an unfortunate outcome, as learning about investing—much like investing itself—is easiest when you start early, take it in bite-sized pieces, and allow your knowledge to grow and compound over time alongside your investment portfolio. The key to success is consistency and discipline, attributes that women amply demonstrate in many other facets of their lives. We meet many women, for example, who oversee the family household budget and finances, but when it comes to investing, confess that their husband “handles all that”. This traditional division of duties can be disastrous for a woman who later finds herself suddenly single or widowed without the basic knowledge needed to handle her own portfolio or know what to look for in a financial advisor.
Reaching women earlier in their educational development is key to empowering a new generation of female investors. Our school system has long ignored the importance of teaching financial life skills to young people. Fortunately, Ontario schools will be introducing a financial literacy program to the curriculum for grades 4 through 12 for the first time in September 2018. Awareness and outreach are key, and leaders such as Jane Rooney, Canada’s Financial Literacy Leader, are to be commended for spearheading the development and implementation of the National Strategy for Financial Literacy—Count me in, Canada. Key to this strategy was the launch of the Canadian Financial Literacy Database, a one-stop shop of resources supporting the National Strategy.
From a career standpoint, awareness, outreach and education are required to attract and prepare a growing pipeline of women investment professionals to the financial services industry. By the time your daughter gets to university it may be too late. She was likely not made aware in high school of the diverse and rewarding career opportunities in the field of finance. It is also likely she hasn’t been told what high school courses she should be taking to get her there. Last spring, I addressed an undergraduate finance class at the Ivey Business school where approximately 25% of the students were female. It was evident these women were on their way to exciting careers. But how did they get here and where are the others?
A 2016 CFA Institute study reports that, while women comprise close to 50% of graduates in business, professional accounting, medicine and law, only 18% of CFA charter holders are currently women. (The CFA charter is the pre-eminent professional designation attained by portfolio managers, research analysts and other investment professionals). The numbers are growing, but more slowly than in other professions.
Evidence shows that mentoring has a huge role to play in the entry of women into the field of finance. This is particularly true for women professionals acting as role models for other women. A study in the December 2017 Financial Analysts Journal noted that women whose mother is in a STEM field (Science, Technology, Engineering or Mathematics) were 48% more likely to become CFA Institute members than a son. Daughters with a father in a STEM profession are 28% more likely to become CFA charterholders than a son.
Not every woman wants to be a portfolio manager, but an introduction to investing is something we owe all the women in our life. To start, we must share what we know, reach out to others, cut out the jargon and keep the conversation going.