Do Women Get Riskier Financial Advice?

By Mary Anne R. First Posted: Sep 08, 2020 03:38 AM EDT

Bad financial advice is just one of the many things that women could possibly get when planning on making a financial investment. It could potentially widen the gender investing gap, according to a report.

A research conducted at the Hong Kong University of Science & Technology found that financial advisors often push women into making riskier financial investments.

The two-year academic research included trained undercover men and women acting as potential clients, visiting all of the 65 local financial advisory firms in Hong Kong.

Each participant was advised to have a high-or-low risk tolerance for investing, have high or low confidence, and be interested in investing domestically or internationally.

The research showed that 37 percent of women were told by financial planners to have undiversified investments domestically in things such as real estate investment trust, individual stock, or insurance products. This results in fewer profits.

On the other hand, 14 percent of men were encouraged toward riskier investments. Researchers suggested that financial planners planning to have big commissions were more likely to convince female investors than men.

"Women who signal that they are highly confident, highly risk-tolerant, or have a domestic outlook are especially likely to receive dominated advice," the researchers said in a report.

The research's finding could be a factor in an already alarming gender investment gap. Only eight percent of investors are women, and they hold 71 percent of their assets in cash, instead of investing in building on their wealth. Men held sixty percent of this. Also, fewer women have started saving for retirement compared to men.

Eighty percent of women are more likely to be impoverished in retirement. It differs even more for people of color. Black women retire with less money than white females.

Meanwhile, a survey from Bank of America Corp. found that wealthy women who have bad experiences with financial advisors are more likely than men to fire them.

The survey said that 35 percent of women decided to switch, even though they were less likely to complain than 30 percent of men who were more likely to confront their advisor or complain.

The Merrill Lynch study also found that younger women are also poised to transform wealth management.

Those younger than 55 are 4.5 times more likely than older women to consider themselves knowledgeable about financial services. They are also three times more comfortable making financial decisions on their own.

Millennial and Gen-Z women take more control of their own finances. With this, they are becoming less tolerant of biased advisors.

"The time for wealth management to catch up to and fully address the financial experiences of women is overdue," Andy Sieg, head of Merrill Lynch Wealth Management, said in a statement.

"By shining a new light on the stereotypes that still exist, we hope these insights will help the industry at large take a more informed approach to confronting them, and to best serving women throughout their financial lives," Sieg added.