A recent survey suggests that wealthy female investors are generally better off with female advisors.
Researchers at King’s Business School, Cass Business School, and Exeter Business School surveyed 500 women and men in Great Britain to learn more about their thoughts on financial advisors, risk, and how they relate to gender. Those surveyed had portfolios worth the equivalent of $65,000 to $3.2 million.
Even though working with an advisor tends to create more comfort with risk, results show that gender still matters. The survey, published in May, indicates that female investors who worked with a female advisor held slightly less in cash and considered themselves to be more risk-tolerant than male investors.
“We find that advisor gender is important for female investors and having a male advisor appears particularly toxic,” write Ylva Baeckstrom, Ian W. Marsh and Jo Silvester. “Female investors whose advisors are male report significantly lower risk tolerance, knowledge and confidence and hold 10.6%-points more cash in their investment portfolios compared to women advised by female advisors.”
In 2018, Fidelity released a survey that profiled female investors. The firm found that if participants were given $25,000 to invest, just 44 percent of women knew what steps to take to invest it.
Part of the gender gap stems from a lack of women being part of the conversation. This has created an environment in which female clients are less inclined to discuss finances.
According to Hilary Hendershott, president and chief advisor of San Jose, CA-based Hendershott Wealth Management, when first-time female clients come to her for advice, "[they] nearly always lack organization and strategy,” she says. “And they tend to hold more cash than men. Cash is always a harbinger of fear.”
Karen Altfest, principal advisor and executive vice president of New York, NY-based Altfest Personal Wealth Management, says people often assume that women aren’t interested in the topic. She remembers a time when husbands were asked to bring their wives to meetings and recalls fathers, husbands, and even grown sons talking over the women at the table.
Those days are over. The new trend Altfest observes is one where, with enough education, “If [women] know more, they want to express themselves and may not [employ] their father or husband’s portfolio [strategy].”
While it’s incorrect to assume women lack interest in and an understanding of financial matters, women aren’t used to being spoken to as equals. Thus, when it’s time to discuss risk, questions naturally arise. But Hendershott says that getting to the bottom of risk requires thinking expansively about it.
Hendershott presents an analogy about going out at night with her purse and risking being mugged. This jeopardizes her purse and wallet, and possibly her phone and keys. The losses are tangible and effectively an all or nothing proposition. The risk in investing is more about probability and a range of potential outcomes.
“Risk in investing is completely different, but people don’t understand that,” she says. “The term is often used to describe monetary losses, that some investment you’ve purchased will go down in value, and you’ll lose money.”
Is risk dependent upon gender? Nina O’Neal, partner and investment advisor at Raleigh, NC-based Archer Wealth Management, says “In general, I have seen women who have had a big life change be more cautious and having another female at the table to talk about why or if they need more risk can get them to a more comfortable space.”
Exceptional circumstances aside, preferences are based more on personality than gender, argues O’Neal, with women increasingly concentrating on the bigger picture while ignoring day-to-day market fluctuations.
Most notably, female clients often worry about outliving their money and becoming a financial burden to others. “The conversation is more ‘am I ok?’” she says. “We have a conversation around what risk is and show them they won’t run out of money.”
