Studies into financial advisory firms in Hong Kong and the US have found that both male and female consultants consider women investors as less-skilled money handlers.
Consultants tend to provide less in-depth analysis to women investors due to their "perceived ineptitude." This often results in misunderstandings and miscues during meetings and women asset holders in the US have been found to snub the relevant securities and even advisory firms.
Men, on the other hand, prefer to counter their advisers or complain against miscues. Increasing numbers of miscues in dialogues with women investors likely lead them to switch options. Whatever the reason, the American wealth management sector, which is dominated by men, will have to come up with new approaches to treat women customers and improve pre-existing gender conceptions, according to McKinsey & Co.
American women control more than $10 trillion in US household financial assets, an amount likely to triple within a decade, Bloomberg reports citing a McKinsey & Co report.
In Hong Kong, a two-year academic study covering every local financial-planning firm, found consultants frequently pushed women into riskier options than they recommended for men even if both groups had similar risk appetites.
The motivation behind this approach–researchers suggest–is to pocket the commission from risky securities issuers. Consultants think women are more likely to buy products if the recommendation is consistent with what they wanted to do anyway.
"Advisers think they can fool the women and get away with selling them advice with sub-par results," study co-author Utpal Bhattacharya of the Hong Kong University of Science and Technology said, suggesting that is because they perceive women to be less financially literate than men. "This is what we call statistical discrimination."
Merrill Lynch Wealth Management in the US, tracked financial advisers' eyes during meetings and found that both male and female advisers looked at men more than 60% of the time when speaking with heterosexual couples. Wealth managers made an average of 10 so-called miscues in every 30-minute meeting, such as defaulting to the men as financial decision-makers; inferring that the couple's finances were merged; or assuming that women want direction, are more risk-averse and are less knowledgeable than men. Male financial advisers were twice as likely to commit miscues, the analysis showed.
Getting less appealing options
Researchers from the Hong Kong University of Science and Technology hired 32 mystery shoppers, half men and half women, to pose as potential clients in Hong Kong. Each was randomly allotted three traits: a high or low risk tolerance, a high or low level of confidence, and an inclination towards domestic or international investments.
Giving all participants such characteristics, which they were told how to convey to the planners, enabled the academics to control, for reasons other than gender, why varied advice may be given.
The results showed over a third of women, 37%, were directed towards undiversified investments–such as individual stocks, complex insurance products and real estate investment trusts. Just 14% of men were funneled towards such risky strategies.
Women were also advised to invest more in domestic assets than internationally compared with men.
Sally Wong, chief executive officer of industry organisation the Hong Kong Investment Funds Association declined to comment on the findings of the study.
So if you are a woman in Hong Kong looking for investment advice, what can you do to protect yourself?
If you have good financial knowledge and you know what you want, you could do the trades yourself via a brokerage house where the cost of transactions is very low, Bhattacharya suggests.
"If you have less financial knowledge, then you have a problem."