Founder and CEO of Franc – a mobile app which makes investing simple, affordable and social – Dr Thomas Brennan, said his company is working harder to equalise the playing field for women in finance.
According to Dr Brennan, women control just 27% of global wealth and a meagre 11% of the wealth in Africa despite climbing the ladder for decades.
One of the main reasons for this, he said, is that investing has historically been seen as a man’s domain, and given that over 70% of financial advisors are men, it’s unsurprising that women have not been well catered for.
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“Investment managers and financial advisors assume that women have a lower risk appetite and, therefore, presume that there is a narrower range of products they can offer or recommend.
“They also stereotype women as preferring investment options geared towards social and environmental issues instead of profitability,” he explained.
Gender investment gap
The gender investment gap is a result of women tending to invest less than men. It is an issue experienced not only in South Africa, but worldwide.
But, finally bucking this trend, Brennan reported that 51% of Franc investors are now women.
“This is remarkable because in 2020 Franc’s gender investment split was 70% male and just 30% female. The team managed to turn this around in just two years.
“Almost 60% of these female investors are younger than 35 with 26% aged between 31 and 35, and 24% aged between 26 and 30. This is in stark contrast to the industry average where only 30% of retail investors are women,” said Dr Brennan.
Top investors are female
“The top investors on our platform are also female, in terms of the total balance, despite earning significantly less than their male colleagues, with the gender pay gap in South Africa estimated to be between 23% to 35%.
“In addition, the impact of “pink tax” on women’s disposable income (paying more for ‘female’ items than men do) has been well documented,” Dr Brennan said.
Although Franc’s investors are mostly women, they still see a distinction between the average ages of men and women investors, with men starting to invest earlier. Most of Franc’s male investors are aged between 22 to 25, whereas most of the women investors are between the ages of 31 to 35.
“I’d like to see more women start to invest in their 20s, this ensures that women give their investment as much time to grow.”
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How women are investing
Most of Franc’s female investors create an emergency fund.
“The past two years have highlighted how critical it is to have an easily accessible emergency fund. Many investments do not offer investors quick access to their money and so they keep their emergency savings in a bank savings account that often has very low interest if you need access to it.
“Fixed deposits offer higher returns, but then you’re likely to incur penalties when you need to access your savings in an emergency,” Dr Brennan says.
“We have seen that the main barriers to retail investing in South Africa centres around product complexity and minimum investment requirements. We were so frustrated to learn that so many South Africans have no savings or investments that we decided to create a simple-to-use app that would allow all South Africans to start investing in less than 20 minutes,” he said.
The app makes investing easy by simplifying the investment choice to just two low-cost funds, the Allan Gray Money Market and the Satrix 40 ETF, which invests in the largest 40 companies listed on the JSE. Franc agrees with Warren Buffett in that high fees tend to benefit the fund managers and not retail investors, who are better off investing in low-cost funds.
Most investment options require an up-front payment of at least R50 000 or a monthly commitment of R1 000, which is a major deterrent for many first-time investors.