Benedetta Lucini, CEO and co-founder of Oval Money thinks that the conversation on the gender gap in industry is too simplistic. She says it's not even about pay, rather wealth is at the heart of the problem.
There have been so many discussions about the gender pay gap in most developing countries. If you take the UK this is about 83% meaning that a woman earns about 83c for every 1£ of male salary when in the same role. This means that clearly women are working for free from the 27th of October every year.
I believe this is unfair and needs fixing but what I am even more concerned about is the gap in wealth that further widens over the years.
The widening gap
As women become increasingly independent, or even the breadwinners of families, there is a surprising amount of them that still do not make financial decisions that can protect their futures.
This is because on average women do not invest their money like men and if they do they tend to hold it in low risk investments like deposits. HMRC data shows that for the year 2017/2018 females opened nearly 3,600 Cash ISAs but only 1,200 Stocks & Shares ISAs.
Without a strong push to financially educate women to invest independently, the wealth gap can create huge financial inequality for future generations. This is because much of the management of money is actually passed on in the family and if young girls are not seeing their mothers as role models, it will be very hard to bridge the gap.
TransAmerica Center for Retirement studies found that less than 70% of U.S. women are investing money for retirement, compared to 81% of men. Of those who are investing, the median household retirement savings for women is just $23,000, compared to $76,000 among men.
What's the situation in the UK?
The situation in the UK is even worse; women don’t tend to invest - just one in five women currently hold an investment, against 1 in 3 men. This investment gap has a huge impact on the financial stability of women in the later stages of their life and surprisingly in younger generations we do not see this improving.
At Oval, we focus on financial education and saving and investing for the younger tech savvy professionals. We see about 40% of our users that save being women but only about 10% of investors.
But this does not impact only the public markets, but also private equity investments. According to Statista, business angel investors in the UK are 12% female. In the US, Angel Capital Association and Wharton Entrepreneurship survey over 1600 angels to find that 22% are female, but that this number is improving as for newer angel investors — those who started in 2014 or later — 30 percent are women.
The average returns from angel investing are hard to predict, as investing in startups is very risky but usually if you diversify your portfolio data suggests that on average angel investors make 2.5x their initial capital so if they invest $100,000, they are likely to earn 250,000$. It also shows that on a single investment the odds of making a return are less than 50%. It is a very skewed industry with 10% of exits account for 90% of returns. ( Kauffman Foundation Angel Returns Study and NESTA Angel Investing Study)
The future of financial education
Without a strong push to financially educate women to invest independently, the wealth gap can create huge financial inequality for future generations. This is because much of the management of money is actually passed on in the family and if young girls are not seeing their mothers as role models, it will be very hard to bridge the gap.
Benedetta is one of our thought leaders speaking at the IM|Power conference later this year. Discover more about the world's premier investment management experience.