A new insight for 2017: Women need finance and finance needs women.
I’ve been doing quantitative and qualitative research on women and finance for seven years and thought I had mastered the topic. Not much was going to surprise me — but this idea did.
Finance Is the New Black
Historically, few women knew much about finance — they didn’t need to. Few women had jobs, or didn’t make much money if they did. They rarely had their own accounts, and if they inherited money, fathers, brothers, husbands, sons, or other men managed it for them. Most women weren’t interested or motivated to learn about finances, and that was okay — at the time.
Today, women are earners, executives, and the ones who make the majority of the household spending and financial decisions. All women, young and old, need to know about finance.
Why Do Women Need Finance?
1. To make more informed financial decisions.
In celebration of International Women’s Day, I am releasing my white paper “How Smart Women are Managing their Money in 2017.” It confirms that women are very aware of: a) the financial opportunities available to them, and b) the consequences of their financial behaviors and decisions.
“Managing” means different things to different women. Some women are more structured and disciplined in their approach to their finances. Some are highly knowledgeable and strategic. Still others prefer to focus on their personal interests and passions, and will find trusted advisers to manage their money.
But regardless of their age, profession, geographic area, or cultural background, smart women deal with money one way or another everyday. And no matter which managing style they lean toward, smart women take care of their finances.
At times, they may lack specific information about money and investing — called a “financial knowledge gap.” When such a gap exists, women now have access to a wide array of educational options served up in approachable and interesting formats on their favorite platform and device.
Sandra Lindqvist, a management consultant in Stockholm, is an example of someone who decided to close her financial knowledge gap:
“I felt motivated to start investing after I listened to the Rich Thinking research at a Nordnet presentation in 2015. I realized that . . . all of my money was sitting in a bank account earning only 1% interest, so I decided to start investing in stuff that matters to me. I wanted to invest in a “gender equality” fund, but none existed at the time. So I decided to pick my own stocks.
“I use a trading platform, and my track record investing in my own gender equality basket of stocks has been very strong since I started. I share my record, and a lot of fund companies now know my brand. In fact, I have received a few calls from CEOs wanting to invest in my product. I am about two years ahead of everyone else with gender investing.”
Of course not every woman might be as motivated as Lindqvist, but it is just a matter of beginning. Start with $20 each week — take small steps. You don’t need to invest a lot of money to begin.
Helping people increase their financial skills in order to make more informed investment decisions will be the biggest growth opportunity for financial institutions in both market share and profits.
2. To get ahead in business.
It used to be that a finance degree was only relevant for securing a job in the finance sector. Now, having financial knowledge will help you no matter which industry you work in.
Smart women are rapidly upgrading their financial skills in order to gain a competitive edge in the business world.
Kate Amato, beginning her career as an attorney in New York City, has this to say:
“My mom always emphasized the importance of education and, in particular, financial literacy, which is probably why I ended up doing a joint MBA/Law degree. Knowledge is empowering, and understanding key financial concepts has made me more confident.”
Irene Fialka, CEO of INITS, an academic incubator in Vienna, strongly encourages women to acquire financial knowledge to enhance their careers:
“Just looking at my business incubator’s small ecosystem of start-ups, I see that they definitely need people with financial acumen on their team. Whether they are working on an app to help society better manage diabetes, or a 3D printer company to disrupt the supply chain, every business needs a financial person. It is a series of critical roles — to be able to read financial statements, understand what it takes to make a profit, know how to judge the quality of a business, and how to put together a business plan. It is never just about finance. You can combine your knowledge with whatever you feel as a person is a good thing to work on. If you want to move the world in a new direction, finance will help you.”
One emerging growth area for women is data science. According to Daphne Kis, CEO of WorldQuant University,
“We can now access, manage, and manipulate massive amounts of data with such ease that the real work has shifted to analysis and practical applications across all industries.
“The world of finance, of course, has benefited greatly from data and data science, but most of the action in big data has been reserved for computer scientists. Right now, there are fewer women graduating with computer science degrees than in the 1980s. Nevertheless, as we move from big data to data science, doors will open for more and more women. Data science will not be exclusive to the male-dominated computer science profession, and a tidal wave of opportunity will arise for women.”
Data science is now a critical part of finance, and every industry is now the financial industry.
Why Does Finance Need Women?
1. To understand the financial decision maker: her needs and behaviors.
Financial institutions use data-driven analytics to gain insight into female financial behavior. Valuable information becomes available by analyzing social media patterns and mobile usage.
Data science is also key for abolishing those outdated self-documented surveys. Self-reported information is never as insightful as looking at what women really do.
But as Andrew McAfee and Erik Brynjolfsson point out in “Big Data: The Management Revolution,” “big data’s power does not erase the need for vision or human insight.” I argue that qualitative research is more important than ever if we want to truly understand our female customer.
A few things I have learned from my own qualitative research:
- Smart women have great respect for financial independence.
Solange Strom, a retail executive in Paris explains:
“Earning my own money and feeling independent — this is core to how I manage my finances. When it is your hard work, you know just how much it takes to get that money and you know how long it will take you to earn it back if you spend it.”
- Women and millennials are interested in the social value of their investments.
Susan McLean, a strategy leader at MaRS, a global innovation hub in Toronto, states:
“While we are all investing in hopes of generating good returns, the fact that those returns can also be supporting the changes we want to see in the world is really exciting, and I am looking forward to a world where impact investment is mainstream.”
It isn’t just about charts and numbers or earning 3.5% versus 3.8% — it is about causes, concerns, stories, and conversations.
- With women, it’s more about relationships and connections.
Facebook IQ commissioned a survey on mobile use, and of the 2,000 respondents, nearly two-thirds or 64% reported that they would value financial advice and education through mobile apps. The remaining 36% said they would like to deepen their relationship with a bank.
Women are more likely than men to do their banking on their phones and tablets, but they are not “mobile only.” Women still value the human factor, including in-person banking with real people, not bots.
2. To access her network.
Women love to share. And social media has changed the way that women learn about money, communicate about and share investment ideas, and find investment advisers.
In the article “Customer advocates: Finding customers’ BFFs,” author Adele Sweetwood points out that personal references are one of the most powerful tools in the sales process.
Even though potential customers read newspapers, visit websites, and talk with salespeople, a referral from a friend or a co-worker can make all the difference.
As Sweetwood suggests:
“Think about the way that sites like Google, Yelp, and others have changed the way consumers are choosing restaurants. You can go to the restaurant nearest you or one you’ve visited before. Or, you can try something new by looking at your smartphone to see which dining spot has the highest ratings or the best reviews. Why? People show a preference for the personal experience of those in their networks.”
What Can Financial Institutions Do to Tap into the Networks of Their Women Customers?
For a start, banish all boring seminars that are simply poorly disguised, hour-long sales pitches for the latest investment product.
Instead, think about vendor-neutral sessions, taught by independent experts, on how to start investing. For example, round tables, focus groups, and financial salons, which demonstrate that the bank is interested in talking to and hearing from their women customers.
Further, banks should have their high-level female employees, from branch managers through senior management, attend these events to show women customers that the bank itself “walks the talk.”
“All the critical resources you need to get anywhere are attached to a human being. Strategic networking is paramount.”
So What’s New?
As mentioned, relatively few women in the past knew much about finance nor did they need to.
But today, all women, young and old, have access to capital, make the majority of financial decisions, and need to have financial knowledge.
As Robinett predicts:
“The combination of global education, web 3.0, and crowdfunding is a perfect storm: the democratization of capital. As women get educated on becoming investors, we will see major changes in asset allocation like we’ve never seen before.”
The democratization of capital has indeed been a magical thing for women. Especially because women use their capital in ways that aren’t always constricted by the highest or riskiest short term return. Rather, they use capital to create, to connect, and to transform.
Nerina Visser, board member and VP, CFA Society of South Africa, eloquently communicates the feelings of so many women that I interviewed:
“In recent years I have become much more conscious about money and the power that it has: whether the power to change things in my personal life or the broader power for good. I love to invest in projects where I am facilitating people who need access to capital. In this way, I am combining a financial investment with an investment in a person and this is incredibly satisfying. My return on investment is measured both in monetary terms as well as in human capital.”
The perfect storm? Finance needs women and women need finance.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.