The reality is that there aren't nearly as many women in finance as there are men in finance because, frankly, it's a largely male-dominated industry — and it always has been. The gender gap in finance is, however, closing in some areas of the industry. And more and more women are making their way up the ladder in the finance world, creating some serious change for the better.
If you're a member (or aspiring member) of the finance industry, don't let the numbers scare you. Be aware of the challenges, but be confident you can be part of the exciting change.
Here's what you should know about how women fare in finance and how the industry has changed — and is changing — for the better.
Men still make up the vast majority of finance positions, especially when it comes to capital management. In fact, in an analysis by Equilar of the highest-paid financial services positions in the Russell 3000 index, only 10 percent were women. That makes finance the third-worst industry of the 11 on the list, only after energy and communication services.
While the gender gap does seem to be closing in some areas of finance, it's actually getting worse in other areas. For example, just 11 percent of U.S. fund managers in 2019 were women. This number sits well below the global average of 14 percent, and it's even worse than the 13.9 percent in 2020, according to a report from Morningstar. While the number of funds has skyrocketed over the last two decades, the number of women working in that sector has not followed suit.
It's no secret that men have an advantage in the finance space before they even enter it. Why? Networking and unconscious bias. Chances are that they know someone close to them already working in finance — or they're able to get close faster due to preconceived notions about their ability.
“It’s no secret that this industry is very male-dominated,” Francesca Federico, co-founder and principal of Twelve Points Wealth Management, told Forbes. “It’s pretty much an ‘old boys club’ and most men have gotten into this industry because their father or golf buddy or college alumni was in it. I think women have a hard time breaking in because there have never been that many to begin with.”
Once women do break into the field, they kick it off in virtually the same way that their male peers do. It's not until later down the line that the gender gap really becomes evident. For example, 42 percent of students at the Harvard Business School, were women in 2019. And, according to a 2018 McKinsey report, women and men are pretty much on the same page when they first break into finance but, down the line, women move into just 19 percent of the C-suite positions.
Women are making serious progress towards owning powerful positions in the male-dominated finance industry. For example, banking has had the most progress within finance, according to the Russell 3000 index. Women hold 26 percent of the five highest-paid positions in banking, which is up from 11 percent in 2010. That's a pretty big jump in the last decade.
Still, women only account for 22 percent of corporate boards (though that is twice the percentage in 2000), according to Morningstar. About 30 percent of senior officials and managers in the finance and insurance industries were women (which is also marginally up from 29 percent five years ago), according to data from the U.S. Equal Employment Opportunity Commission. There's still a lot of work to do.
But, unfortunately, too many other women are still relegated to roles in human resources and investor relations — not higher-up, money-management positions.
“Those are good jobs, but if you don’t touch the money, you are in a different category,” Nori Gerardo Lietz, a real estate investor and founder of real estate advisory firm Areté Capital, told Barrons.
Some sectors of finance, like venture capital, are more equal than others. Venture capital has the highest percentage of women in positions of authority. That's 13.4 percent of women in higher-up positions, compared the 8.5 percent of women in senior roles in the worst sector, real estate, according to a Preqin study.
In fact, 54 women (a record number!) became partners at venture capital firms with more than $25 million in assets. That's promising, especially because two-thirds of venture capital firms still don't have a single female partner, according to diversity and inclusion nonprofit All Raise.
A whole host of studies conducted by the Harvard Business School suggest that finance is a tough industry for women. Among senior roles in venture capital and private equity, women hold just nine percent and six percent of the positions, respectively. As for hedge funds, women have just 11 percent of senior management roles.
But even despite the fact that women don't make up a big chunk of the finance industry (let alone a big chunk of the leadership teams in these companies), women are making quite the difference in finance. For example, financial services companies that have at least 30 percent of women in their management teams have witnessed higher subsequent one-year returns on equity in the last decade, according to research by Bank of America. In other words: Financial services needs women. But companies need to be doing a better job at recognizing the impact that a diverse leadership board can make, and then supporting women in their careers, which would ultimately support the whole company.
Women can make a real difference in the finance industry. And, when that difference is recognized, it certainly feels that much better. Federico, for example, also told Forbes that she loves the difference she gets to make in finance. For her, it's invigorating.
“I wake up every day with a fire in my belly because I know I am making a difference in the lives of people and families around me,” she said.
Danielle Kunkle, CEO of Boomer Benefits, also told Forbes that she loves educating people about finance. She gets to host webinars that shed light on some topics that are typically riddled with exclusive jargon.
“Our most exciting project to date has been offering free, no-obligation Medicare 101 webinars to the public,” she said, adding that she appreciates all of the grateful thank you emails she always receives after webinars.
By entering the field of finance, women are not only helping finance companies become more diverse by diversifying the field themselves, but they're also helping these companies make more forward-thinking, inclusive decisions. For example, female-founded start-ups attract just 2.7 percent of venture capital but, with more women in decision-making roles at these venture capital firms, we could see a substantial uptick in that percentage, according to PitchBook. Studies actually show that women are twice as likely to invest in companies that were founded by women and three times as likely to fund firms with female CEOs.
According to Morgan Stanley, venture capital could be missing out on $4 trillion for the sole fact that these firms are not investing in more women — and minority-owned startup businesses. This means that having more women in leadership could help finance with some serious D&I initiatives both inside and outside their own companies.
Keri Gohman, president of cloud-based accounting and payroll SaaS provider, Xero Americas, told Forbes that it was only when she stopped focusing so much on fitting the bill that she was able to do her best work. For her, it was all about refocusing her energy.
“When you take all of the energy spent on fitting into a narrow box and unleash that on your work — magic happens,” she said. “When I allowed myself to be the boldest version of myself, I realized I was more willing to take risks, to be more powerful — and my true capacity was unleashed.”
Finance isn't a static industry. It changes like the wind, which means that everyone who enters it needs to keep up. The good news is that, the more it changes, the more room it may make for women and minorities to have equal access to opportunities. Plus, the more it changes, the more learning opportunities everyone has.
Elle Kaplan, founder and principal of LexION Capital, told Forbes that finance helps satisfy her "deep-seated intellectual curiosity."
“The markets are impacted by everything, from climate change to politics; no two days are ever alike,” she explained. “It's always changing and evolving, and it never fails to galvanize me to do my best.”
At the end of the day, while the stats aren't super exciting for women right now, the future is bright. And women can be a part of the change we all want to see in the finance industry. The more bold women we see go out there and take opportunities, instead of waiting for them, the more women we'll see in the finance world (and the more women we'll see leading these finance companies!).
AnnaMarie Houlis is a multimedia journalist and an adventure aficionado with a keen cultural curiosity and an affinity for solo travel. She's an editor by day and a travel blogger at HerReport.org by night.