Future Focus: The perils of the new financial system
This International Women’s Day, I explore the risks of the new financial system, and how they mirror those of the established system.
International Women’s Day often focuses on progress – the milestones reached, the doors open and the representation gained. I support these efforts but they often obscure one of the most powerful and consistent themes across history. Quietly and with a nod towards practicality, women have built their own systems to protect their financial independence and grow their wealth when traditional institutions haven’t met their needs.
These systems didn’t look like formal advice models. They were makeshift ways to fill the gaps when women were legally and systemically excluded. Workers associations, mutual aid societies, cooperative banks, rotating savings groups and the social financial networks, that I wrote about last year.
They were pragmatic responses to exclusion and grassroots solutions to structural gaps.
What’s emerging now is a modern version of the same historical pattern. When formal systems feel inaccessible or untrustworthy, women once again turn to alternative networks.
Today millions of women are forming digital communities and following financial influencers. With this, is opportunity and risk.
When institutions excluded women, women built alternatives
Throughout history and across cultures, women repeatedly created parallel financial structures to serve themselves when they were excluded from formal structures.
In India, the Self-Employed Women’s Association (SEWA) was founded in 1972 by Ela Bhatt. SEWA began as a trade union for self-employed women with low earnings – street vendors, artisans, labourers. These occupations were invisible. They didn’t fall under labour law, weren’t supported by banking systems and couldn’t get insurance.
In response SEWA built their own bank.
This bank was built around the realities of its customers’ lives. It allowed small deposits, flexible contributions and microloans. It gave women direct control over savings, credit and insurance. Members were empowered and gained agency over their own lives. Research has shown that SEWA members experienced improved income stability, higher asset ownership and greater financial resilience compared to non-members in similar circumstances.
SEWA was never a charity. It was simply part of a long string of female led initiatives to serve women’s financial needs.
Long before SEWA and across multiple regions, women participated in rotating savings and credit systems (ROSCAs). I ran through some of the names and various global iterations last year. They allowed women to convert irregular savings into usable capital. It was not just about being thrifty and budgeting. It was about liquidity and taking back financial agency where banks were unavailable or inaccessible.
During the 19th and early 20th century in Britain, Australia and the United States women played central roles in mutual aid societies. These were member-owned organisations that provided sickness benefits, funeral coverage and financial support before commercial insurance markets were available or accessible. These societies pooled risk and created safety nets where formal insurers wouldn’t.
There’s a consistent pattern here. When financial systems failed to include women, women did not wait. They engineered ways to fill the gaps.
Today
Today, the legal barriers to the financial system are largely gone in the developed markets. Women can open brokerage accounts, own property, access credit and build portfolios in their own names. The playing field looks level on paper. In practice, many women still feel that the financial services industry does not serve them and this is one reason for an enduring participation gap.
There are numerous studies and surveys, including from Vanguard, Fidelity and UBS, that show that women are less likely to describe themselves as confident investors and more likely to delay investing. Women are likely to hold excess cash relative to their long-term needs, and more likely to say financial products feel complex or misaligned with their goals.
It isn’t just women who are impacted. The investing industry has cultivated a reputation as being inaccessible for the average Australian. It is filled with jargon and there’s high barriers to entry.
Women and Money conducted a survey that reported that trust was a major issue for women. Women cited a ‘hidden agenda’ and felt that advice coming from financial professionals would be biased. This study was conducted years after the Royal Commission in 2023 and following the mediation and revision of practices in financial services industry.
Given this trust deficit many women desire women-centred services. This representation is important for many women to overcome their reluctance to invest. Greater representation matters and is a fundamental step in building trust and loyalty. It is not just how advice is given but also who is giving the advice.
The key issue is trust. Edelman’s Trust Barometer has shown lower trust levels among women towards financial institutions compared with men. Industry research bodies have also found that women are more likely to seek multiple information sources before investing, and take longer between starting research and taking action.
Where are women turning? The ASX Investor study shows that there is a rising reliance on non-traditional sources of financial information including social media, friends, family and online personalities. This shift is particularly pronounced among newer and younger investors, a cohort that includes many women who entered markets after the Covid period.
The friction that we are seeing today is not legal – it is structural.
A familiar pattern turns digital
Today the community-based approach that women are taking to support each other is occurring in the digital domain.
Female-focused financial education accounts, money communities and finfluencers have grown rapidly across social media. The motivation is great – to remove intimidation, jargon and cost barriers. Content is delivered in plain language, they are accessible daily and mostly, they feel relatable.
This is not inherently bad and mostly helpful. Behavioural finance research consistently shows that relatability and narrative increase engagement and follow through. People trust people. Research shows that it is far easier to build a connection with an individual than a faceless corporation.
Yet, that doesn’t mean that charisma and relatability is the only ingredient needed to deliver financial guidance. Most finfluencers are not experienced. Many come from marketing or non-financial backgrounds. The teachers are only a few pages in front of the student, with many of these online personalities having little investing experience. Their income is typically driven by engagement – views, clicks, sponsorships, affiliate products and platform payouts. This means they have an incentive to get and maintain attention through bold claims, emotional reactions and simplified certainty.
There is an inherent conflict of interest. An issue the industry at large is not unfamiliar with.
I follow many of these ‘finfluencers’ and I’ve seen it all. The speed with which wealth can be obtained is a common theme. Success is attributed to ‘gut feels’ and round number milestones frequently trumpeted - $100,000 gain in 24 hours, becoming a millionaire.
Research from multiple securities regulators including European Securities and Markets Authority (ESMA) warn that social media driven investing increases trading frequency and speculative behaviour – both strongly associated with lower long-term returns.
The other side of the coin
It is easy for people in the financial services industry to look down upon finfluencers. But the reason this new financial system exists is because traditional institutions have let investors down. Financial institutions also operate with incentives – commercial, distribution and product incentives. Investors and consumers have historically had to navigate this landscape as well. Their style may be different to finfluencers and new financial media, but there are similar pressures that arise from incentive structures.
I sit at an unusual intersection as a woman in financial services. I write and speak publicly about investing. I know firsthand how difficult it is to consistently create financial content that is both engaging and responsible. Sensible investing advice is often repetitive, slow and unexciting. It makes it hard for me to compete in the ‘attention’ market.
I also know that the industry has a long way to go. Some bad actors have contributed to mistrust and there is a reason why finfluencers are engaging with large cohorts of Australians, especially women.
It’s important to acknowledge a universal truth – nothing in finance or media is truly free. Institutions have commercial incentives. Content creators have platform incentives. Product providers have distribution incentives. Influencers have engagement incentives.
It is not in my wheelhouse nor in my capacity to present a way to reform the industry or refine regulation to be safer and more investor centric. I can however warn against blind trust, and advocate for informed discernment.
The real middle ground
The choice is often framed as institutions versus influencers. This is not the perspective we should take.
Both groups have incentives. Both can provide useful information. Neither deserves blind trust.
The stronger path is the one consistent with women’s financial history. I encourage all investors to focus on self-direct, structured empowerment. Stop treating investing as entertainment and stop searching for ‘quick wins’.
Seek out independent, outcome-focused information which is aligned with building wealth over the long-term and not just optimised for an algorithm.
Practical guardrails for financial media literacy, independence and control
Financial independence is not built from viral stock picks. It is built by structured decisions repeated over time. These are practical ways women investors can protect their long-term outcomes.
Build an Investment Policy Statement (IPS)
An IPS is your own personal investment strategy. Developing it takes time, commitment and a lot of self-reflection. However, once it is there, it will act as a behavioural anchor. When market noise or social media excitement appears, the IPS will provide a steadying influence against excitement and emotion. It contains information on your goals, what you will and won’t invest in, and your saving plans. It will automate your decisions, which prevents poor investor behaviour.
Separate learning from action
Consume information broadly and absorb different perspectives. Avoid confirmation bias where you continue to seek out information that confirms you’re taking the best approach.
The most effective strategy to improve your decisions is adding time between your research and your decision.
Check incentives and ask what the motive is
There is always a motive behind each piece of financial information that you consume. Ask yourself a few simple questions:
- How is this person paid?
- What are they selling?
- Do they benefit if I act quickly?
Measure your progress against your own goals
Don’t stress too much about benchmarks or what the market is doing. Focus on what you are trying to achieve and track your outcomes against your own goals.
Have a toolbelt of fiduciaries
When you need advice or additional information, have a list of trusted sources that you recognise as independent and aligned with what you are trying to achieve. As much as it is my job to understand a broad cross-section of financial news and commentary, I try to focus on the sources that I trust. This gives me more confidence in the quality of the advice.
Final thoughts
From mutual aid societies to SEWA, women have repeatedly demonstrated that when systems fail to deliver pathways for financial independence and control, women create their own.
Today, access is broader and the barriers are lower. Trust and clarity remain the real constraints.
The past challenge was getting more women into the market. We’ve made great strides and now turn our focus to equipping women with the frameworks to create and grow wealth on their own terms.
Invest Your Way
For the past five years, Mark and I have released a weekly podcast and written on morningstar.com.au to arm you with the tools to invest successfully. We’ve always strived to provide independent, thoughtful analysis, backed by the work of hundreds of researchers and professionals at Morningstar.
We’ve shared our journeys with you, and you’ve shared back. We’ve listened to what you’re after and created a companion for your investing journey – Invest Your Way. Invest Your Way is a book that focuses on the investor, instead of the investments. It is a guide to successful investing, with actionable insights and practical applications.
If anyone would like to support this project you can buy the book at the below links. It is also available in Kindle and Audiobook versions. Thanks in advance!
