Can we Address Gender Equity Without Closing the Wealth Gap?

On March 8, International Women’s Day (IWD) will once again be upon us. With this year’s theme being #BreakTheBias, the onus is on all of us to break down the barriers to equality and rebuild a new system that better promotes the status of women worldwide. ?

Our RRA research shows that while more women are reaching the top of organizations than ever before, the numbers remain depressingly low. ?For instance, in Germany and Switzerland women hold just 19% of management board seats at the countries’ largest listed companies. In Spain and the Netherlands, it is even lower.

Given all the work to be done, what can we, as business leaders and organizations, focus on to create a more gender-diverse, equitable, and inclusive reality??

As I pondered this question, I am reminded of our most recent episode of the Redefiners Podcast, with Sallie Krawcheck, who has been named by Forbes as one of the world’s most powerful women and called the ‘last honest analyst’ by Fortune. Notably, as the CEO and co-founder of Ellevest, she has made it her life’s mission to help women scale new heights and achieve their financial and professional goals.

During the interview, Sallie pinpointed a systemic bias in our system that holds women back: “The problem that we're really focused on is the gender wealth gap—how much she has versus a man is 32 cents. So, she makes 84 cents, but she only keeps 32. And if she's a black woman, it's only a penny. We all know that if you want to improve society and make it fair, you get more money in the hands of women.”

These numbers are striking.?

Sallie’s words remind me how critical it is for us to rethink investment and financial goal setting for women if we are to construct a more equitable system. In particular, apart from continuing to prioritize equal pay and leadership opportunities for women, I believe the following areas can serve as building blocks for bridging the gender wealth and finance gap.

Address the ‘confidence gap’ first

While a recent study from the Global Financial Literacy Excellence Center at George Washington University found women are less financially literate than men, the findings also confirm they are far more knowledgeable than they give themselves credit for. In fact, they found that around one-third of the financial literacy gender gap can be explained by women’s lower confidence levels.

Similarly, a survey by Fidelity picked up on something interesting: even though women gain higher than average investment returns than men, just 9% of women believe they make better investing decisions than men.

If we are to make strides in improving women’s financial wellbeing, we will need to first raise confidence levels. Otherwise, women’s success in investment will continue to lag, perpetuating disparities in long-term wealth and retirement savings. To empower women with higher levels of confidence, companies can focus on financial literacy programs, which I’ll explore in the next section.

Level the playing field in financial literacy

Bank of America’s 2021 Financial Life Benefits Impact Report found men have more functional knowledge than women when it comes to managing debt and expenses, planning for unexpected events, and preparing for retirement. They are also more likely to participate in company 401(k) plans and maintain a health savings account (HSA).

These gaps in financial knowledge and behaviors need to be addressed. Many companies already offer some type of financial literacy program for their employees, but it’s time to take it a step further and evaluate how effective these programs are at promoting gender equality and catering to the needs of women.

Because each person has a unique financial situation and relationship with money, companies may need to start exploring more tailored and personalized. For instance, Sallie points out that financial planning algorithms must take gender into account.

“Why does that matter for women?” Sallie posed in the episode. “Because we earn less, our salaries peak sooner, we take more career breaks, and we die later. If we assume you're average, you risk running out of money.”

Start earlier and invest in young women

As Sallie pointed out, women outlive men around the globe. They are also more likely to serve as caregivers for family members at some point in their lives, which can account for the higher frequency of career breaks she mentioned.

The added economic pressures women face drive home the importance of financial wellbeing and goal setting. According to recent findings from Merrill, (where, by the way, Sallie formerly served as president of the wealth management unit) women need to save more money than men, now and into the future.

By investing in programs that start early, companies can help make a major difference for girls and women in the long term. For example, a 2021 study from Boston University assessed the effectiveness of the Invest in Girls program, which offers financial education and mentorship to young women. Longitudinal data found the program is actively changing participants’ financial habits and decisions. In particular, the program is successfully impacting and empowering underserved populations.

Looking forward: go for the win-win

To maintain a competitive advantage in today’s business landscape, companies must have the right people in leadership roles. If half of the world’s population is at a disadvantage when it comes to financial wellbeing and access, companies will inevitably be at a disadvantage when it comes to recruiting leadership.

At the end of her interview, Sallie pointed out how strategic companies are seeing big benefits in helping to close the gender wealth and finance gap. By rethinking how women invest and set financial goals, it creates a win-win situation. She is clear that the winners are not just companies and their employees, but society at large.

“[It’s] just known in developed economies that if you get women more money, their families are better off. Society moderates, nonprofits are better off. So, this increased wealth disparity is really hurting all of us,” Sallie said. “Now the positive is that some companies are increasingly getting it and seeing that they are winning if they get it.”

On this IWD, let’s recognize the “win-win” power of gender equality. By helping to bridge the gender wealth and finance gap, we can all win big.?