The secret has been out for a long time. The wealth management industry has a great deal of work to do towards gender equality, especially in the area of client engagement. Long held assumptions around women having smaller risk appetites have no doubt played a role in delaying the adaption of advisor service models. To move the conversation forward, FlexShares set out to discover whether these pervasive beliefs were applicable to high-net-worth women primary breadwinners. We commissioned a national study of men and women primary income earners.
Our results indicate that risk management stands as a highly-prized investment management tool for both genders. When thinking about working with a financial advisor, equal portions of women (31%) and men (31%) gave risk management an importance rating of 10 (extremely important) as a service. Overall, the service garnered at least a 7 in importance from 82% of men and 77% of women.
We also uncovered evidence to suggest it is time to abandon the stereotype of women as the more risk-averse gender. Overall, 86% of women versus only 69% of men expressed comfort with taking on a higher than minimal degree of risk in exchange for higher returns. Male wealth creators were more than twice as likely to rate themselves as conservative investors vs. female wealth creators – 31% men versus 14% women said they prefer the lowest level of risk when seeking investment returns. Further, more men (52%), than women (44%), indicated that they were moderately conservative or conservative albeit in a narrower spread.
Moderation is Key
The variance in the results is tighter, but women also came out as the leader in preference for the moderate risk approach. They indicated a greater willingness than men (30% versus 22%) to balance potential risk with higher potential investment returns. Within the collective higher risk appetite categories, women (26%) and men (27%) represented nearly the same. The difference came down to women more often preferring the moderate-aggressive approach, as 19% indicated they would accept somewhat higher risk for higher investment returns, versus only 16% of men. Only 7% of women and 11% of men were comfortable with the label risk aggressive.
Making Room at the Table
Financial advisors may want to consider using this information about women's risk appetites to modify best practices in their firms. It appears that women can be confident enough to take on risk when they have the information necessary to adequately assess the risk and rewards of the opportunity. In essence, this makes women prudent risk managers, as opposed to gamblers who take blind risks. Like male clients, women may simply want to find risk management opportunities uniquely suited to their personal wealth management objectives and professional goals.
FlexShares saw an opportunity for financial advisors to better understand their executive clients and to understand that women are increasingly creating wealth by earning it rather than just receiving a wealth transfer. We invite you to download the white paper and follow our weekly series of briefs on this topic.