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 study 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.
