RACHEL RICKARD STRAUS: Is the gender pay gap the real reason women invest less than men?
Why do women invest less than men? It’s a question that engenders endless hand-wringing from those who run the online investment platforms through which we manage our wealth. Big names such as AJ Bell, Fidelity, Hargreaves Lansdown and Interactive Investor.
They philosophise over what characteristics women possess that hold us back from investing – they claim we’re ‘risk averse’, ‘timid’, ‘selfless and nurturing’, to name a few. They bemoan the gargantuan chasm between women’s pension pots and men’s.
They pour out countless surveys, indexes, guides and events to help us women catch up with our male counterparts.
And rightly so. Women tend to be paid less, have smaller savings and are less likely to invest than men. All this needs addressing.
On the level: Women tend to be paid less, have smaller savings and are less likely to invest than men. All this needs addressing
But this is the bit that sticks in my throat. In some cases, these kind of firms perpetuate these imbalances. Every major investment platform pays its female employees at least 12.9 per cent less than male employees. In the worst case, for every £100 paid to a male employee, his female counterpart will get £73. And in one case, the gender pay gap is growing.
For three years now, every company with more than 250 employees has been obliged to release data on their gender pay gap. This year, most investment platforms quietly uploaded these reports on to their websites, no doubt hoping they would go unnoticed. But they didn’t.
Interactive Investor’s latest report reveals its average gender pay gap has grown for three consecutive years. It now sits at 22.9 per cent – close to twice that of its rival Hargreaves Lansdown. It is up from 16.6 per cent in 2017. Now, it’s one thing not to reduce a gender pay gap; it’s quite another to increase it by 38 per cent in just three years.
Despite widening, Interactive Investor’s gender pay gap is still lower than AJ Bell’s 26.7 per cent. AJ Bell has been working to close its gap with initiatives such as rolling out ‘unconscious bias training to all people managers’.
Yet the fact remains it still has just one woman on its board of directors and none on its eight-strong executive management board.
Interestingly, Hargreaves Lansdown, which has made the most progress, has four women on its nine-strong board. Meanwhile, Interactive Investor has one woman on its board of ten, alongside four Johns and Jonathans.
Hargreaves Lansdown has slashed its pay gap to 12.9 per cent from 28.8 per cent three years ago. But the difference between bonuses awarded to male and female employees has crept up to 73 per cent – from 70.6 per cent a year ago. That means for every £27 received by women, £100 is received by men.
This is no doubt because, shamefully, just 9 per cent of directors are women and it tends to be directors who earn the big bonuses. Fidelity has thankfully shrunk its gender pay gap to just below Interactive Investor’s, at 22.8 per cent, after widening the gap the year before.
Of course these imbalances are unfair and need addressing. But what is especially clawing is that some of these firms are perpetuating the investing and pension gender gaps they claim to be fighting.
You can argue all you like about why women invest less than men. But I suggest that the biggest determinant of whether someone invests is not whether or not they’re time poor. It’s whether or not they’re money poor. Check the Isa statistics released every year and you’ll see, unsurprisingly, that the higher someone’s income, the greater the chance they’ll invest.
The investment industry claims that investing is open to everyone. But the truth is, there is no point in investing while you have unsecured debts. Then once you’ve cleared those, you need a good chunk of cash set aside for a rainy day. Only then is it time to invest. And if women are on lower incomes it takes longer for them to get to that stage.
Some women may be prompted to start investing after reading a guide for women from an investment platform. But I would guess that a far greater number are prompted by seeing cash starting to build in their current account and wondering whether it might be put to better use elsewhere.
The gender pay gap also has a direct impact on the pension gender gap. Given workplace pension contributions are paid as a percentage of salary, if women are paid less they will also receive less into their pension.
Within financial services, investment platforms are by no means the worst. The track record in the investment management sector is equally abysmal – BMO Asset Management has a gap of 32 per cent, Schroder Investment Management 27 per cent, Vanguard 22.8 per cent and Baillie Gifford 18.8 per cent. HSBC beats the lot with a 51.1 per cent gap.
The investment industry argues that there are systemic issues working against them. Financial services has traditionally been a male-dominated sector. Those in senior positions tend to be men while lower-paid women in customer services skew the numbers.
Historical trends can explain away the first year of dreadful data. Possibly the second year’s. But if little progress has been made by the third year, it makes you wonder whether anything is being done at all to improve it.
Historic imbalances also don’t explain the pay gap disparity between companies with relatively similar business models. If Hargreaves Lansdown has managed to reduce its gender pay gap, why has Interactive Investor’s risen?
Nor does it explain the pay gap between employees in the same roles. Interactive Investor’s pay gap within roles was 3.3 per cent in 2017.
That means it paid women 3.3 per cent less than men for doing equivalent jobs. By 2018, the gap was 6.1 per cent. In 2019, it hit 7.3 per cent. It claims that pay is ‘broadly consistent within roles’.
But if you found out that a colleague was doing the same job as you, and you were being paid 7.3 per cent less, would you be happy with the explanation that your salaries were ‘broadly consistent’?
I worked at Interactive Investor and I certainly did not feel treated any differently because of my gender. So it pains me to highlight its record. But I am drawing attention to these figures because that is precisely why all firms are legally required to report them.
Hargreaves Lansdown should be congratulated for moving from the worst to the best. It has been taking action to level up its recruitment process. AJ Bell is starting to make inroads although since it started out as one of the worst it has further to go. Fidelity’s figures are thankfully moving in the right direction.
Tomorrow, Interactive Investor publishes its Great British Retirement Survey in which it suggests bold ideas for improving financial outcomes for women. Perhaps it should consider doing the same closer to home too.