Men on average are likely to be more confident investors, but more prone to placing too much faith in their expertise and trading too much compared to women, according to a unique international behavioural finance study1 looking at female and male characteristics when it comes to investing.
The research from behavioural finance experts, Oxford Risk and leading wealth manager, Investec Wealth & Investment shows there is an investment gender gap but stresses that it should not necessarily be a prescriptive guide for advising female and male investors.
The independent study with up to 2,000 people in the UK, Hong Kong, Taiwan, and Singapore identified four common types of investors based on financial personality assessments. They looked at four key criteria of confidence; composure in the face of market volatility; willingness to balance financial and ESG outcomes; and the need to invest in familiar assets.
It broke the results down further to reveal the investment gender gap showing nearly one in three men (34%) fall in the group that tends to have highest financial confidence (but low composure and impulsivity) compared with less than a quarter of women (24%). By contrast, nearly two out of five (38%) of women are closest to the group which are low on financial confidence but higher on composure compared with 23% of men.
In general, over half (52%) of men are categorised in groups that tend to be high or very high on financial confidence, compared with 37% of women.
The table below shows the four common investor types and what percentage of female and male investors fit roughly into each group.
|GROUPS||% OF FEMALE INVESTORS||% OF MALE INVESTORS|
|Low financial confidence and low ESG preference but high composure||38%||23%|
|Low composure, low ESG preference and low familiarity preference||25%||28%|
|High financial confidence, very high ESG preference, high composure, high familiarity preference||13%||16%|
|Very high financial confidence, high ESG preference, very low composure||24%||36%|
Michelle White, Co-Head of Investec’s Private Office, said: “The results of the study are fascinating, showing that a higher proportion of men are more confident and more willing to take risks than women while women who are invested are less over-confident, trade less, and on average achieve higher returns.
“Recognising investor types enables wealth managers to tailor their messages and advice to address people’s views and help them. It is not just about gender gaps, but it is the case that lower financial confidence will mean people investing less and having higher cash balances which in turn means missing out on potential returns over the long-term.”
She added: “At Investec, we pride ourselves on having a diverse workforce and team of investment managers and wealth planners in order that we can match the right advisors to each client so as to make them feel comfortable on the important and long-term journey to financial freedom, thinking both about our clients today and future generations of their families.”
Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said: “Some of these attitudinal groups will naturally have higher proportions of women, and some of men, so by targeting engagement to these natural financial personas women and men will be engaged differently. But it will be because of different investment preferences, not blunt assumptions associated with their sex.
“Of course, not everyone fits neatly into these four groups, but with effective profiling tools and digital engagement platforms, narratives and behavioural interventions can be hyper-personalised, ensuring maximum effectiveness in improving investing behaviour.”
Investec Wealth & Investment works closely with individual clients to plan and manage their wealth, and with charities, trusts and clients of professional advisers to help deliver optimal returns on their investments and bring financial peace of mind.
As one of the UK’s leading wealth management companies Investec Wealth & Management focuses on a relationship-based approach to Financial Planning and Investment Management with the purpose of making a tangible and meaningful difference to clients and their families.
Based on market-leading behavioural research, Oxford Risk’s suitability and sustainability tools continue to evolve, providing solid scientific grounding to questions of how much sustainable investing is suitable, and how much assets should be weighted towards specifically environmental causes.
The company, which builds software to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases, has developed proprietary algorithms which rank products, communications, and interventions for their suitability for each client at a particular time.
It believes the best solution for each investor needs to be anchored on a holistic view combining stable and accurate measures of Risk Tolerance, an understanding of their overall financial circumstances, and knowledge and experience. Behavioural assessments of financial personality then add the opportunity for investors to learn about their own attitudes, emotions, and biases, helping them prepare for any potential anxiety that is likely to arise. This should be used to help investors control their emotions, not define the suitable risk of the portfolio itself.
Notes to Editors
1. Oxford Risk’s study Sex and Suitability is based on up to 2,000 interviews with investors in the UK, Hong Kong, Taiwan and Singapore
For more information, please contact:
About Investec Wealth & Investment
As one of the UK’s leading wealth management firms, we are trusted with managing £40.7 billion (as at 31 March 2023) of our clients’ money. Our wealth teams work hard at providing Out of the Ordinary levels of service to our clients and with an investment heritage dating back to 1827, we’re built for the long term.
Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange and the Investec Group. Investec Wealth & Investment Limited is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN
About Oxford Risk
Founded in 2002 by leading decision science academics from Oxford University, Oxford Risk are experts in behavioural finance and financial well-being. They understand how people perceive risk, make judgements about risk, and behave in risky situations. They know how best to elicit and convey information to ensure those perceptions, judgements, and behaviours reflect true intent.
Oxford Risk applies behavioural finance expertise and technology to help its clients deliver superior advice and service more efficiently.
Benefits of behavioural finance-based solutions:
Produce more consistent and objective advice with a robust digital audit trail and future-proof regulatory requirements.
Engaging digital delivery streamlines human decision processes, improves efficiency, and focuses human effort where it is most valuable.
Deeper client insight and engagement increases satisfaction, ultimately driving share of wallet and word of mouth referrals.
Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.