Making Investment Decisions: Men are from Mars, Women are from Venus


The role of gender difference has been acknowledged in many aspects of modern life. Recent research suggests than men are different than women when making financial decisions but to what extent should advisers take this into consideration?

In a recent article in US based publication AdvisorOne, psychology professor Paul Greenberg noted that the classic male stress response of ‘fight or flight’ and female’s stress response of ‘tend and befriend’ also plays out when making investment decisions. “We can see gender differences in the number of trades and risk aversion. Men can be more motivated by euphoria-driven behaviour” he pointed out.

This view is supported by a study conducted by Barclays and Ledbury Research in 2011, which found that women were ‘more likely to make money as investors in the financial markets, mostly because they didn’t take as many risks as men. Usually, they buy and hold. Women trade this way because they are not very confident or overconfident as men.’ Put simply women are far better investors and are more likely than men to have a greater desire for self-control.

Men tend to measure investment success in terms of beating a benchmark or their friends. In other words, winning “makes their brains happy!” To women, investment success isn’t about winning or losing, but about meeting their life goals and objectives—in other words, surviving and thriving.

But if you think all this is just a matter of perception and social norm, think again. Evidence from brain science shows that the female brain is wired differently than the male’s and this may be responsible for the differences when making investment decisions.

Take for example these specific physical differences in the brain

  • The amygdala and limbic system (center of emotion, fear and aggression; responsible for “fight or flight”) is larger in the female brain than in males’. Scientists hypothesize that this may contribute to women’s tendency to feel responsible for their loved ones, even at their own personal and financial expense.
  • The corpus callosum (connector that transmits signals between the left and right sides of the brain). Women have more connections between the left and right hemispheres, accounting for their proficiency in multitasking and verbal communication. Men’s more limited number of connections makes them less verbal, but enables them to concentrate more fully on individual tasks.

So how do advisers take this into account when dealing with clients? Is this just one of those gobbledygooky nonsense that scientists and academics come up with all the time but has little or no practical application?

Is there a need to adapt conversations when dealing with each gender? For instance, when dealing with a female client, a greater attention to the emotional aspects driving the decision and less emphasis on the rational stuff? (without being condescending off course.) If you rely solely on rational arguments, are you likely to miss the point?

And when dealing with male clients, do you want to cut out the fluffy stuff and just get to the point? Is it more helpful to present a rational and logical argument simply by using facts and figures?

Psychologists also suggest that women are more likely to tune up to an adviser who takes time to listen when they share details of their lives, choices and goals. Therefore by referring to specifics of a woman’s situation, you are perceived as being genuinely caring about her and her future. But is this really unique to women? Aren’t men also more likely to tune up to an adviser who takes time to understand them?

And would you go as far as an adviser I know of who has built their very successful practice around dealing mostly with women and when they do take on a male client, it’s usually someone who is married and they insist on their other half being part of the planning process? Given that men tend to chase returns and focus on beating the market, making their better half take part in the meeting helps steer the conversation towards more important issue of goals and aspirations. In addition it is easier to drive home the need for protection and estate planning when the woman, who is likely to survive her husband, is involved.

And given that women are better at making investments decision, why is financial services dominated by the less able species – men?  What about the age old argument about whether female advisers are better with dealing with female clients? 







Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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