Do you invest your money or do you prefer to keep it in savings? Figures show that women are less likely than men to invest. In my view, it’s partly because the investment industry hasn’t really taken the time to find out what women want. But what would persuade you to invest? Here are some of my ideas:
1. No jargon or confusing terms
I don’t think anyone – women or men – likes jargon. But there is evidence it puts women off more than men. And the financial services industry, and pensions and investment companies, in particular, use a lot of jargon. Or they’ll use straightforward terms in a confusing way. Things are improving, but there’s still a long way to go.
To give you one example of confusing language, financial companies and personal finance journalists (including me) often talk about ‘saving for your retirement’ or ‘saving into a pension’. But saving means putting your money into a bank or building society account. You earn interest on your money, which is the ‘return’. Saving is not as risky as investing in that the original amount you save is only at risk if the bank or building society you save with goes bust. Even then, there’s a UK-wide savings safety net that would step in.
With a pension, you typically invest your money in a share-based fund or several funds (I’ve really simplified it as you shouldn’t have your money in one fund or even one type of fund).
When you put money into a pension, it’s not saving at all, but it’s often described as saving. With investing, the original amount you invest – sometimes called the ‘capital’, can increase in value or it can lose value.
If you think that putting money into a pension every month is ‘saving’, you may not be aware of the risk you’re taking on and you may also not think of yourself as an investor – which you are.
2. Better explanation of risk
I think one reason why women have been reluctant to invest is that the investment industry has historically been, frankly, rubbish, at explaining what risk is and where the risks of investing lie.
It is impossible to invest without taking risk. Depending on what you invest in, you may expose your money to some or a lot of risk. What can be difficult is working out where the risk lies and how much risk you’re taking on. But in some circumstances, that may be the right thing to do. Some people (men as well as women) are not comfortable taking on any risk. Many others may be able to take some risk with some of their money. What’s key is that they can afford to leave the money invested for at least ten years (that’s my opinion – some investment experts think five years or more is OK) and that they understand what the risk is and what it means for them.
I think the investment industry has not been clear enough about the risk and in some cases it’s lied about the risk people are taking on. That doesn’t help anyone. All it means is that when stock markets fall (and it’s a when, not an if), women who invested without really understanding the risk sell their shares and vow never to invest again.
3. Talking about what investing can achieve rather than focusing on the product
I don’t think many people get excited about financial products (I don’t and I spend a lot of time thinking and writing about them!). The financial services industry loves talking about products (that’s what they sell, after all).
Companies are getting a bit better at talking about what investing can help you achieve, but individual companies are still too keen to link it to a ‘buy button’. Too often the discussion is about buying more products and not what investing could mean for a woman’s future life. They may not literally have a ‘invest here’ button on a blog that talks about the benefits of investing (although some aren’t far off). However, they don’t always see the bigger picture, which is that if more people get interested in the idea of investing, it will increase the potential market for investment companies.
About five years ago I was at a meeting about the introduction of some big changes to workplace pensions. Most of the pension companies were represented. I said that when I talked to women’s networking groups about setting aside money for retirement, women told me one of the things that struck home was when I said that it helped to think about investing not as depriving yourself of money that you could spend today, but buying yourself options in the future.
I talked to companies about the fact there was no overall message encouraging people to invest in the same way that there’s a ‘five a day’ message about eating fruit and vegetables. I was told that the pensions industry had discussed this but companies couldn’t commit or agree to paying for a joint campaign where one of their rivals might benefit more than they did. I thought at the time that this spoke volumes about the pension companies’ attitudes.
Paying for a joint campaign could well mean that one company got more customers one day and another company benefited more the next, but ultimately, companies that were any good should gain customers. And, importantly, a simple industry-wide message could be far less confusing than all the marketing campaigns run by individual companies.
4. Asking women what they want
Until fairly recently, the investment industry hasn’t really bothered to ask women what they want from investment products. The simple reason for this is that financial companies haven’t thought that women could be a key part of their market. It’s true that fewer women invest at the moment, but that’s not necessarily to say women won’t invest.
In my view, if the industry started talking about investing in a way that made more sense to women, explained the risks better and – crucially – asked women what they want from investments, more women will start to invest. That is beginning to happen, but not fast enough and it’s not yet industry wide.
What do you think? Do you agree or disagree? Let me know!
Different types of investment funds
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