How to close the gender wealth gap

How to close the gender wealth gap
More needs to be done to close the gender pensions gap. (FTAdviser)

Women's wealth outcomes tend to be worse than men's due to a range of behavioural biases, which can be overcome through sound financial advice, financial services commentators have said.

The head of psychology and behavioural insights at Dynamic Planner, Louis Williams, said: "Women are more risk averse than men but this is not the only factor we need to focus on."

He said the investing experience and financial literacy would mediate that relationship, rather than the attitude to risk. 

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Speaking to FTAdviser on the latest podcast, in recognition of International Women's Day, Williams said it was important to consider the way that women perceive investment risk and reward.

He also questioned whether the traditional language employed and methods used by advisers and wealth managers works for women or whether there are some adaptations needed.

Fellow panelist Sarah Ruggins, head of multi-asset research for St. James’s Place, agreed there were nuances and women were not a "homogenous group". 

She said: "It is difficult to boil this down to gender but there are trends that determine behaviour that can help [advisers] relate to women. 

"Women have wage gaps and wealth gaps and retirement gaps, live longer than men and need more money in later life. So when it comes to risk and reward, fewer women than men tend to invest and when they do, we see they may be more conservative."

For example, in workplace pension plans, women tend to have higher holdings in cash. Over time, because equities are the top-performing asset class, over the long-term, men's investment performance can outpace that of women.

Overcoming these kind of behaviours starts with good advice and conversations with advisers.

Williams added: "The relationship between an adviser and a female client can be very different, compared with a couple or a male client. So the adviser needs to encourage women whether in a couple or not, to build their understanding around the investment journey.

"In terms of understanding the psychology of a women, we know there are more behavioural biases - women may be less confident and have higher levels of loss aversion or regret aversion. 

"Because of that, this could lead to inertia and, ultimately, reflect in portfolio performance."

The podcast also featured a report on women's attitudes to risk, produced by graduate trainee Ellesheva Kissin. To listen to the full podcast, click on the link above.