When it comes to investing, women are generally less tolerant of financial risk than men, and in just one in U.S. six couples will it be the female who is the bigger risk taker. The data tells us what we have always suspected: Men like to take chances with their money a bit more than women.
According FinaMetrica data, in 67% of U.S. couples, men have a higher tolerance for financial risk than their female partners. Where there is a material difference in their risk tolerance levels, in 83% of cases it is the man who is the risk taker.
This is slightly higher than risk tolerance levels reported for male partners in the U.K. where, according to FinaMetrica data, in 64% of U.K. couples, men have a higher tolerance for financial risk than their female partners. Where there is a material difference in their risk tolerance levels, in 87% of cases, it is the man who is the risk taker.
In Australia, in 65% of Australian couples, men have a higher tolerance for financial risk than their female partners. Where there is a material difference in their risk tolerance levels, in 82% of cases, it is the man who is the risk taker.
So while this male/female difference is a global phenomenon, its magnitude varies. In the U.S., Australia, as well as New Zealand and Canada, the male/female difference is more or less the same, but in the U.K., females are comparatively less risk tolerant than in other nations.
This indicates the difference is not just a sex difference but is also influenced by cultural factors and attitudes towards women.
The main point is that financial advisers must not ignore the needs of the less risk-tolerant partner, who is usually the woman. Financial advisers often skip the process of separately assessing a couple's risk tolerance and either apply the male's risk tolerance in determining a financial plan or superimpose their own preferences on the couple, which is a dangerous and unethical practice.
Any differences between male and female risk preferences must be considered. It's also not unusual, for example, for females in couples to be several years younger than their male partners. This presents a significant challenge about how to communicate and advise a couple when the female not only has a lower tolerance for risk but needs her investments to last longer.
Open discussion often leads to longer-term tranquility and satisfaction within the couple as each partner becomes empowered by their involvement with decisions about their future. These conversations will also help engender trust in the adviser, as he or she actively seeks and takes the couple's input in the development of their financial plan which caters to each individual's needs.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.