When it comes to investing, women are generally less tolerant of financial risk than their male partners, and FinaMetrica data reveals just by how much.
FinaMetrica data reveals that 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.
How does this compare to percentages in other countries? It's not too dissimilar.
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, according to FinaMetrica data. In Australia, the figures are 65% and 82%, respectively. So while this male/female difference is a global phenomenon, its magnitude varies somewhat.
In the U.S. and Australia, as well as New Zealand and Canada, the male/female difference is more or less the same, but in the U.K., women 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 toward women.
The important point is that financial advisors must not ignore the needs of the less risk-tolerant partner, who is usually the woman. Financial advisors often skip the process of separately assessing a couple's risk tolerance and either apply the man's risk tolerance in determining a financial plan or superimpose their own preferences on the couple, which is dangerous and unethical. The needs and risk appetites of both partners need to be taken into account by financial advisors, and risk tolerance must be separately assessed.
So why does risk tolerance matter? Risk tolerance is a comfort zone where the individual strikes a balance between making the most of their financial opportunities and putting their financial well-being at risk. It is a function of genetics and life experiences.
