Why women and investing aren't a match in Germany

Women in Germany have a harder time building a career, they earn less than men on average and they have a greater risk of falling into poverty. In short, German women are still disadvantaged in many walks of life.

The curious thing, however, is that in areas where they could act independently, they still often do not. For example, when it comes to investing their own money.

One reason seems to be that many women think they have too little financial knowledge. However, a study by the Manheim, Germany-based Center for European Economic Research found that this is probably due more to a lack of self-confidence than to actual gaps in knowledge. Although data shows that the financial literacy of women is lagging that of men, one-third of the women surveyed by the center thought their financial knowledge was lower than it actually is.

Wealth accumulation remains a male domain

Women — not just in Germany but around the world — also tend to voluntarily hand control over their assets to their male partners. The majority of women worldwide — nearly two-thirds — leave long-term financial decisions to their husbands, according to a 2019 study on wealth management by Swiss bank UBS.

As a result, women invest significantly less than men overall, with 27% of men owning stocks, equity funds or other securities, compared to just 18% of women, according to a similar study done by the AXA insurance company. And financial industry group Deutsches Aktieninstitut found that of the 12 million Germans who invested in passive ETF funds in 2021, only about 4 million were women.

This trend has recently intensified. The share of male shareholders has risen by five percentage points since 2011, while the female share has only increased by three percentage points in the same period.

It doesn't help, said Alexandra Niessen-Ruenzi, that about 80% of financial advisers in Germany are male. "Women are given worse advice on average, our studies have shown," said Niessen-Ruenzi, who researches women and finance at the University of Mannheim.

Moreover, women's financial behavior is related to socialization, she told DW. "We did a survey among students a few years ago and found out that financial topics are more often discussed between fathers and sons," she said. Women are less likely to be exposed to the topic from an early age, which is why it's not surprising that women are uncertain and perhaps have some inner resistance to dealing with wealth accumulation.

Women are a promising target group

Yet, women represent a huge potential market, Germany's Savings and Loan Banks said in a recent report, with the so-called female economy being "a bigger growth market than China and India combined." That is because 31% of the total wealth in Western Europe is held by women.

"The financial industry is still in the very early stages of unlocking this potential, both in terms of the number of female clients in general and the services offered to female clients," the report added.

In recent years, things have started to change in the realm of women investing. Banks have become more sensitive to the issue, and an army of female financial advisers, so-called finfluencers, has emerged online promising to help women invest their money and impart financial knowledge "from woman to woman."

The advice, however, comes at a price. Natascha Wegelin, for example, runs a website called Madame Moneypenny, welcoming visitors with a video claiming to "know exactly how you feel." She claims that she lost €18,000 (around $19,000) a few years ago because of "very bad financial advice." Now, she's offering "financial mentoring" for a fee of several thousand euros. Female clients would have to "apply" for her services as "not everyone is suitable," her website says.

The Finmarie website also offers paid and free information for women regarding their finances, and so does Financery, a fintech startup promising just a little personal effort to get rich. Their female customers only have to download an app and answer a few questions regarding their investment preferences. And then: "We set up an ETF portfolio for you, monitor it and — if necessary — adjust it for you." You don't need to do anything else, Financery promises, except, of course, paying a service fee of 1% annually on the invested assets.

Beware of the bank advisor

But consumer advocacy groups warn of the confidence-boosting online advisers and their dubious get-rich-quick messages.

"The coaching sessions are often expensive; prices and services are not transparent," the Hamburg branch of the German Consumer Protection Agency warns. Women usually spend more money on online courses without personalized advice than on a fee-based consultation, the organization says on its website, adding that women should make their own effort to learn the financial basics themselves.

Annabel Oelmann from the consumer protection agency in Bremen urges caution specifically "when it comes to concrete buying recommendations" of financial products. "If someone promises fast and uncomplicated money, I would always be on alert," she told DW. She recommended that anyone who seeks advice should first check the consultant's professional qualifications. "Who is the person, how much has he had to do with finances so far, and what does he do for a living?"

Meanwhile, banks are also jumping on the women-investing bandwagon and wooing customers with advice tailored specifically to the "circumstances of a woman's life."

Comdirect, the online brokerage of Germany's Commerzbank, for example, offers information and services for women on all aspects of money under the catchy title Finanz-Heldinnen, or Financial Heroines.

However, women must be aware that banks primarily want to earn money and tend to recommend the bank's own financial products, said Niessen-Ruenzi. Do women really need extra advice, she wondered, after pointing to a study by Dutch ING bank that showed women are slightly better investors. ING found that women achieved an average return on investment of 24% in 2019, while men made only about 23% that year.

This article was originally published in German.