Gender parity in financial services an economic imperative

The financial services industry has made modest inroads with gender parity, and closing the wealth and financial literacy gap, but the reality is accelerated action is needed from the government and private sector to tackle entrenched inequalities as an economic imperative.

This year's International Women's Day is urging the financial services sector to accelerate action for gender equality. While progress has been made, there is still urgent work to do when it comes to breaking down barriers to having an equitable and inclusive industry.

One small win is that the gender pay gap in financial services marginally narrowed from 23.6% to 22.2% in the last financial year, newly released figures from the Workplace Gender Equality Agency (WGEA) show.

Across all professions, this comes to a 21.8% pay gap or every $1 on average a man makes, women earn 78c. Over the course of a year, the difference amounts to $28,425.

One major win was the passing of the landmark Three Day Guarantee Bill on February 13, which guarantees three days of subsidised early childhood education and care (ECEC) and effectively removes the activity test for all families. The bill not only aims to make ECEC accessible and affordable, but also encourages mothers' workforce participation.

The Parenthood chief executive Georgie Dent said the passage of the bill is "big" and "game-changing reform".

"This change with the activity test is predominantly going to benefit women and households on the lower end of the income spectrum, but it is a huge milestone for all children and families in Australia, because it actually puts in place as a flag in the sand, where we say the minimum we accept is that every child should have the opportunity to participate in three days a week of high-quality early education and care," she told a recent Financial Standard podcast.

The Parenthood, which aims to make Australia the best country to be a parent or carer with the help of a community of about 82,000, has worked diligently in helping push the reforms across the finish line.

Australia is in a unique situation as it leads when it comes to educating females based on metrics by the World Economic Forum. But their representation falls behind in the workforce.

According to the Global Gender Gap Index, Australia lags it comes to the economic participation of women behind global peers. In 2006, Australia ranked 12th for women's workforce participation, regressed to 70th place in 2021 and improved to 42^nd spot last year.

"Generally speaking, the rule is the better educated the female population is, the greater likelihood there is that they'll be participating in the paid workforce to a greater extent, but in Australia, we have got this unusual predicament where we are world leading at female education, but we are world lagging when it comes to women's workforce participation," Dent said.

What typically happens is women end up reducing their work or even step back altogether to have children.

"And that's why in Australia, we have got a really significant motherhood penalty. On average, a woman in Australia sees her income drop by about 55% when she has a baby, and it doesn't recover for about five years. And by global standards, that is one of the biggest motherhood penalties that exists," Dent said.

Confidence is key

Closing the confidence gap between men and women will be a key driver in tackling women's lack of participation in investing and managing their finances.

A new survey from Fidelity International shows that only 13% of Australian women feel confident about their long-term financial goals compared to 22% of men.

Just 18% of women are very confident in their ability to manage their day-to-day finances as well as their overall finances compared to 28% of men.

"Women recognise how important it is to be financially aware and to manage their financial situation. We are seeing people becoming more vocal about addressing issues such as longevity, and how women can contribute more to their superannuation. This is positive progress," Fidelity International head of wholesale in Australia Lauren Jackson said.

Another survey from Colonial First State (CFS) found that three in five women (62%) feel they will be unable to achieve a comfortable retirement compared to 47% of men. Only half of women (45%) know what assets their superannuation is invested in compared to 60% of men.

Women, however, are taking stronger interest in investing. The 2023 ASX Investor Study showed more women are investing outside of their primary residence and superannuation than ever before, despite male investors continuing to outnumber them overall (58% to 42%).

Of the 1.2 million investors entering the share market after 2020, half were women. Interestingly, the percentage of next-generation female investors rose from 9% in 2020 to 11% in 2023 - a small but positive move in the right direction.

Fresh data from Saxo's global platform shows women trading for the first time between January and February was 155% higher than the prior corresponding period. Of this group, 57% were women aged 40 or under.

Overall, the number of buy and sell trades executed by women was 31.7% higher year on year.

Saxo chief investment strategist Charu Chanana said many women still lag or are sitting on the sidelines when it comes to investing.

"The reality is that women need to invest differently, not just because of societal norms but due to structural factors that impact their financial future," she said.

This is because women live five to seven years longer than men on average, which means higher healthcare costs, and take more career breaks for caregiving duties, leading to less retirement savings.

"Investing isn't just for Wall Street bros. It's for [women also]. And it's the key to financial freedom, security, and the life you actually want," Chanana said.

Jackson sees women becoming increasingly aware of the importance of managing their financial wellbeing and taking steps to take control their finances.

"While this confidence may not necessarily translate into investment success, it is indicative of the bigger issue around women's confidence in their financial abilities, and therefore the steps that they take to manage their finances," she said.

"However, what we should tackle next is the gap in the confidence and faith that women have about their own ability to manage their financial situation when compared to men, as this will have a knock-on effect on the decisions that women make about investments and managing money."

An often-overlooked sub-segment of the female population is migrant women.

Research from the Association of Superannuation Funds of Australia (ASFA) found that those from non-English speaking backgrounds (NESB) face a retirement savings gap compared to the overall population.

NESB women are likely to be worse off as those aged 55 and over retire with a median balance of $120,000 as opposed to NESB men with $200,000. Compared to the overall population, women retire with $170,000 while men retire with $250,000.

Ultimum financial adviser Manisha Bhudia said migrants who come to Australia have hard-wired DNA around their cultural norms and expectations, whereby traditionally, it is women who work part-time and are the main carer while men are the ones who find a job.

"But nobody is factoring in the equation that if something happens to the man, for whatever reason, how is she going to pick herself up and the kids? For me, that's the equation I would like to solve - how do we help them think about these things in a [financial sense]?" she said.

"What are we doing to help uplift the financial literacy levels in women from a different cultural background who move to a Western country?  Yes, they may know how to access programs offered by the government. But are they actually empowered?"

One reform The Parenthood is pushing for is that every family has access to one year of paid parental leave that is shared between parents where there are two parents. This would then be paid at a replacement wage rate.

"That would be a world-leading paid parental leave policy. It would also be an incredibly effective lever to accelerate progress for gender equality, because having inadequate paid parent leave or having a situation where it's predominantly mothers who take extended parental leave and dads only take a small amount, that perpetuates this arrangement where mothers are primary caregivers and dads are primary breadwinners," Dent said.
"That doesn't actually reflect the economic reality for households in 2025 when a lot of households need two incomes to get by. So, improving our paid parental leave policy settings will absolutely accelerate progress towards gender equality."

Bhudia, who provides financial literacy presentations at schools, wants to eventually reach out to ethnic migrant communities and start delivering financial literacy education to women on topics like property investing, what the superannuation system means and so forth.

"It is important because it's going to empower them. It will not only amplify the family's finances, but it will also provide better opportunities for the women and children. It is also a protective mechanism for women," Bhudia said.

"If something happens to the partner or she finds herself in a toxic relationship, she then has an opportunity to be able to move away from that and create something for herself."

The government has a key role to play in strengthening the framework needed for businesses and families to thrive and work together to make gender parity an economic imperative.

Last December, early childhood educators received a pay rise of at least $103 per week. This was part of two pay rises that entitles workers to a total 15% bump in their pay.

The Parenthood advocates for ECEC that's delivered by a professional, paid, and supported workforce, and is free for low-income families and lower cost for other families.

"We know that outcomes for children improve dramatically when they have access to early education and care that's high quality, but it also happens to be one of those rare silver bullets when it comes to accelerating progress for gender equality," Dent said.

Without the infrastructure or having access to affordable, suitable, quality ECEC, Dent points out that paid employment opportunities for mothers are greatly reduced.

"We know that the only way to develop financial security over the course of your life is by participating in the paid workforce. When you don't consistently participate in the paid workforce, instead of accumulating financial security over the course of your life, you are too often accumulating financial insecurity. And when you have no financial security, you have no security," Dent said.