Sometimes conventional wisdom and scientific research agree.
Women, in general, do care more about social responsibility and charitable contributions than do men. Asking a person on the street which gender is more caring about others, the answer is more often than not going to be “women”.
Spectrem research has always borne that out. In the Perspective Investor Perceptions of Socially Responsible and Impact Investing, 21 percent of women dedicated at least 25 percent of their investment portfolio to socially responsible investing, while only 16 percent of men had that much invested in socially responsible products or services.
Perhaps advisors ask all of their investors, not just the females, about their interest in socially responsible investing. It’s not a popular or widespread approach to investment strategies, but occasionally an investor will respond positively, and when they do, they are likely to respond very positively. That strong positive response is more likely to come from a female investor than a male, but it is wrong to assume or stereotype female investors as wanting to involve themselves in socially responsible investing.
In our recent study on wealthy women – Successfully Growing Your Business with Wealthy Women - we asked the study participants about their interest in charitable and socially responsible investing, and found that their interest is notably high for charitable works but only middling for socially responsible investing.
Asked to place their interest in “being involved financially or donating time with charitable activities” on a 0-to-100 scale, the women in the study placed their overall interest at 72.38. Millennials and Gen Xers placed it much higher, at 78.57, while women investors with a net worth over $5 million placed it at 83.47.
The prompt regarding social responsibility in investing was “making investments in socially responsible companies’’ and the interest was much lower than the charitable prompt, averaging at 58.30, again higher for the wealthier investors.
The relatively low response for socially responsible investing indicates that women are just as interested in their rate of return as men are. And, rightly or not, socially responsible investing carries a stigma that while it might be a nice product to invest in, it is not going to pay off the way other less morally worthy investments do.
Advisors must avoid stereotyping female investors, or assume they know the mind of the average wealthy woman. Sure, women love their kids, and they want to try to benefit others financially when it is possible, but they are going to invest with a bottom line approach just as male investors do.
Extra care should be taken when discussing the financial fortunes of children with female investors, again avoiding the stereotypical thinking that women are going to care more about their offspring than men and will invest accordingly. The wealthy women study asked numerous questions regarding parenting and finances that produced surprising results.
Asked again to place their reaction on a 0-to-100 scale, women were given the prompt “as children become older, they have an obligation to be financially independent without the help from their parents”, and the women overwhelmingly agreed, placing their rating at 88.60, with similar responses among all segments.
Conversely, they were asked to respond to the prompt “parents should continue to help their children financially after their formal education” and the response was very low, at 37.37, an indication that these women are willing to release themselves from the financial burden of supporting their children. The younger the wealthy women, the less they believe in maintaining financial support of their children.
That attitude is even shown in consideration of estate planning. Responding to the prompt “as parent make their estate plans, they should plan on leaving an inheritance for their children’’, the women placed their overall attitude at 59.19, which at the very least indicates there is not an overwhelming maternal need to provide for children even in death.
The bottom line is this: maternal instincts are strong, and may have nothing at all to do with investment strategies. Wait for the female investor to let you know which way she tilts.