A new study has found that financial advisors assume female high net worth investors have less control over their investments.
But it was not male advisors that gave women the lowest score for financial independence, but females themselves, according to a study carried out by Dr Ylva Baeckstrom of King’s Business School.
“Female advisers gave the lowest knowledge and control ratings to the female clients, and recommended lower risk portfolios to them than to their male equivalents,” the study found.
The opposite was true when it came to males advisors who would recommend higher risk portfolios to HNW men.
These results echo those of The Share Centre, which, in July last year, found that one in three women (31%) believe that a lack of information and too much jargon are core reasons why fewer women invest in the stock market.
Dr Baeckstrom’s study involved 129 UK-based investment advisers who specialised in millionaire investors. Each was provided detailed information on ten fictitious clients whose genders were switched and whom they were asked to rate on their likely financial independence before recommending appropriate portfolios.
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“The potential ‘interference’ cause by gender biases that advisers have internalised has not been explored,” notes Dr Baeckstrom, who has previously worked at private banks including Standard Chartered Bank, Coutts & Co and Morgan Stanley.
Online wealth managers should pay attention
Dr Baeckstrom notes that her study “is important for the financial services industry as it tries to serve the needs of a growing market of independently wealthy women.”
But the results should also be noted by the fast growing industry of online wealth management, commonly known as ‘robo-advisors’.
Just over half high earning females in the UK noreceiveve online advice on their investments according to a study by EY.
Those that program the algorithms behind these tools could, therefore, be affected by the same assumptions as financial advisors.
Dr Baecksrtom says this is her next area of research: “This is why I am extending my research to investigate gender bias in advice for clients on more moderate incomes, and the role played by the robo-advisers that are establishing themselves as alternatives for this market.”