New pink tax unlocked

Louise Nordström had already been thinking about her retirement when her bank called her with an offer. “I had no clue about finance, and this guy from my bank convinced me very quickly, with words I did not understand, to invest my money. It just sounded great. I trusted him,” she told The European Correspondent. “Then, when my boyfriend at the time came home and heard about this call and all this jargon… He told me to just get out of it as quickly as I could, so I did,” she said. “I was the perfect target: a young woman with quite a lot of money in my savings account.” Nordström is not alone: while almost one in three men in Europe have a high level of financial literacy, less than one in five women do. Banks know this and take advantage of it, according to a paper based on 27,000 advisory meetings between employees and customers at an unidentified large German credit institution. That comes with a price. The authors ran “back-of-the-envelope” calculations on the most recommended fund in their sample, and found that after ten years, female customers would end up paying around €1,455 more in fees for an investment of €10,000. They found that “advisors engage in price discrimination based on clients’ gender, offering more expensive and self-serving advice to women.” This happened more often when the advisor was male. Bank employees seemed to engage in price discrimination against women “based on their lower financial sophistication.” Another concerning finding: women had a limited understanding of these costs, which could further increase the gender wealth gap and reduce women’s long-term financial well-being. In an additional experiment, when advisors were not given the client’s gender, they estimated a similar level of financial knowledge for both sexes. When the gender was disclosed, they took for granted that women were less capable. Gender acted as a proxy for financial literacy, the researchers conclude. Women were also considered “less price-sensitive”…