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FINANCE
Bloomberg Businessweek
October 8, 2018
32
A couple came into Mike Giefer’s Minneapolis
oice in late September for some inancial plan-
ning advice. The woman presented herself as the
risk-averse one and her husband as the inancial
maverick. Then Giefer had them take a test. “It
turned out the exact opposite,” he says. Giefer,
an adviser at the Johnston Group, uses Riskalyze,
an online tool that gauges clients’ risk tolerance
by walking them through various inancial scenar-
ios and then assigning them a “risk number.” The
woman scored a 70. Her husband, only a 52.
Women are often cast as conservative when it
comes to investing, but the results for Giefer’s cli-
ents should be no surprise. In a sampling of 5 mil-
lion users over the last ive years, women fell
pretty evenly across the risk spectrum, Riskalyze
found in data provided exclusively to Bloomberg.
Only 37 percent of women have a below-average
tolerance for risk, 25 percent have an average tol-
erance, and 38 percent have an above-average
tolerance. “The data show that the stereotypi-
cal risk-averse woman is not a reality,” says Aaron
Klein, chief executive oicer of Riskalyze.
Riskalyze did ind that more men—about 51 per-
cent—showed an above-average taste for risk. But
when it comes to picking investments, women
don’t act particularly risk-averse, even compared
with men. Another recent survey of 640,000
investors by Stash, an investing app, found that
about 50 percent of women using the app have
put money in higher-risk assets including equi-
ties or aggressive exchange-traded funds, such as
an asset-allocation fund that favors stocks. Men
and women devoted about the same percentage
of their portfolios, on average, to stocks—the more
volatile investment.
“It seems especially small-minded to believe
that the genders think completely diferently,”
says Carol Fabbri, an adviser in Denver with Fair
Advisors. “I believe experiences with money
shape people’s risk aversion, not their hormones.”
The idea that women are inherently less likely
to take risks comes from conirmation bias, says
Julie Nelson, an economics professor at the
University of Massachusetts at Boston. In other
words, people, including researchers, think of
women as less aggressive, so they look for ways
to prove it. In a book and two meta-analyses of
the studies on the subject, Nelson has found this
notion doesn’t hold up. “It turns out the evidence
is very mixed, and where a diference exists it is
small,” she says. Any differences in investing
behavior between men and women have little to
do with biology. “To the extent diferences are
found, it can be from investment advice, it can
be from social pressure: Don’t stick your neck
out,” Nelson says.
Sallie Krawcheck, co-founder and CEO of
Ellevest Inc., an investing platform for women,
has said that in addition to the gender pay gap,
there’s an investing gap. Only about half of women
have started saving for retirement, compared with
65 percent of men, according to a 2015 survey of
27,500 investors by BlackRock Inc. Even those
who’ve started saving have accumulated less than
half the savings men have.
And there lies the real difference between
male and female investors. Men tend to have
more money than women, which colors their
investing behavior. People with a bigger income
have a higher risk tolerance, and that applies to
women, too. A report from Spectrem Group found
that 54 percent of women who earn more than
$200,000 are willing to take “a signiicant invest-
ment risk” to earn higher returns, compared with
32 percent of the broader population of investors.
Kerri Kimball, a inancial adviser in New York,
confirms that her clients, who are primarily
women executives and professionals, are “very
competitive” investors. “They’ll take risks, but
they’ll be calculated risks,” she says. There’s
something to this. One famous study from the
University of California at Davis did ind a difer-
ence in how men and women traded. Due to over-
conidence, men traded more often and had worse
returns as a result. Many inancial planners say
their female clients tend to prepare more before
making investment decisions.
Still, many women have internalized the mes-
sage that they don’t like to take chances with their
savings. The Stash survey found that only 13 per-
cent of women rated themselves as having a high
risk tolerance; 35 percent of female users rated
themselves as having a low risk tolerance. Those
numbers don’t line up with their behavior.
“There are many stereotypes that persist about
women and money that are likely due to the fact that
women have been left out of the inancial-services
industry for so long,” says Alexandra Phelan, the
data scientist who led the Stash study. “We’re told
that money is the man’s world. It’s not hard to
believe that women perceive themselves as more
risk-averse.” That’s a problem if it means women are
guided by advisers to take less risk than they can
handle. Because higher risk can mean higher returns
over the long run, playing it too safe can make the
investment gap even wider.
—Rebecca Green eld
THE BOTTOM LINE Women are less likely than men to describe
themselves as high-risk investors. But the diference may have
more to do with labels than actual behavior.
○ Share of women with
above-average risk
tolerance, according
to Riskalzye
38%