Recent research shows there is no such thing as “the female brain” and that a brain cannot be identified as coming from a male or female human without other evidence.
But that does not preclude the evidence that female investors think differently toward investment decisions than men do. As such, females might require a different approach from advisors who want to work with them.
A number of companies have sprung up in the United States that directly market investment advisory service to women. The sudden growth in women-directed advisory services is a direct result of more women achieving significant wealth, as well as the fact that women have different points of view regarding investing than men do.
There are other issues as well. There is overwhelming evidence that women are treated differently when discussing finances and investing.
Spectrem’s study Advisor Relationships and Changing Advice Requirements shows that 21 percent of Millionaire investors with a net worth between $1 million and $5 million would change advisors because the financial professional spoke only to the investor’s spouse (and it is fair to assume the investor being ignored was the female spouse).
Advisors need to be aware of their own perceptions of female investors, whether they are investing alone or married women working with their husbands on a portfolio. While gender equality is a huge talking point in the United States today related to income, women are also more involved as investors and expect to be treated by advisors the same way men are treated.
Women with funds to invest also approach the matter differently. Spectrem’s e-zine High Income Women Investors repeatedly indicates the unique ways women approach investment decisions. Whether they are part of a two-income household or control all of their financial decisions alone, their approach to investments and their relationship with financial advisors are very different than for men.
“Women have a greater interest in a financial planning-based investment program, with an eye toward how their investments will affect other parts of their life,’’ said Spectrem President George H. Walper, Jr. “Investment strategies should be developed and articulated in the context of how they impact matters such as financing college and retirement concerns. Elder care is also more important to women. ”
According to the Spectrem report, among women making $200,000 in annual income, 54 percent are willing to take a significant risk with a portion of their investments in order to earn a high return. That is well above the 32 percent of all other affluent investors who are willing to do so. That research also flies in the face of a perception that women are more careful and less risky with their investments than men.
High Income Women are also far more likely to concern themselves with all of the factors involved in making an investment decision, including the reputation of the company to be invested in, the track record of the investment, the tax implications, and the social responsibility of their investments.
High Income Women are far more likely to invest in money market funds and investment real estate than other investors. They are more likely to report dissatisfaction with their current advisor, and are more likely to use more than one advisor than other affluent investors.
This is information key to advisors who simply do not comprehend just how involved female investors are. A recent Harvard University study of advisor behavior found that women are often asked less detailed questions about their salaries, expected career paths and hopes for future economic prospect than men are. It also showed advisors are more likely to demand women turn over a greater portion of their investible funds to advisors.
Top Takeaways for Advisors
While female investors expect to be treated by their financial advisors with the same amount of respect as male investors are treated, they do not expect to be treated the exact same way. Women often have different investment priorities than men do, and advisors must be cognizant of that. It is exactly why some investment firms are popping up to service women specifically; if they were getting what they wanted from their usual advisors, the female-centric firms would not be cropping up.
Historically, the main difference between male and female investors, besides actual numbers of investors, was attitudes towards risk. But research shows women are now becoming less risk-adverse, and advisors must make sure to correctly measure a female client’s attitude toward risk without assuming they are unwilling to invest in riskier products.
While keeping in mind that women are not risk-adverse, also keep in mind that they will want details about their investments and how that investment achieves their objectives. Those objectives will be wrapped around life events such as paying for college, retirement and even caring for elderly parents.
*According to Spectrem research, there are currently 29.8 million households with $100,000 - $1 million in net worth (not including primary residence, NIPR). There are 9.1 Millionaire households ($1 million - $5 million net worth, NIPR), 1.21 million Ultra High Net Worth households ($5 million - $25 million net worth, NIPR) and 145,000 households with more than $25 million in net worth, NIPR.