Gender Differences in Financial Advice

51 Pages Posted: 4 Mar 2015 Last revised: 8 May 2020

See all articles by Tabea Bucher-Koenen

Tabea Bucher-Koenen

ZEW – Leibniz Centre for European Economic Research; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Johannes Koenen

ARC Econ GmbH

Christine Laudenbach

Goethe University Frankfurt

Annika Weber

Goethe University Frankfurt

Date Written: May 5, 2020

Abstract

Financial advisors are more likely to recommend costly products to women than to men. We use minutes from about 27,000 advisor-client meetings plus archival data on client portfolios and show that there are systematic differences in why men and women receive expensive fund recommendations: For men, the likelihood of risky funds being recommended is higher and these are generally more expensive; on the other hand, within any given risk category, funds recommended to women are more costly on average. Beyond this, men are significantly more likely to receive rebates on funds’ upfront fees. These results can be predicted by a stylized model where advisors observe imprecise signals of clients’ financial literacy – in this case gender – and less literate clients are more likely to follow advice, even when it is not optimal. In line with the prediction, we show that objectively knowledgeable clients signaling low financial aptitude reject advisor recommendations more frequently than equally knowledgeable clients with high signals.

Keywords: Financial advice, consumer protection, household finance, financial literacy, discrimination, credence goods

JEL Classification: G02, E02, D08

Suggested Citation

Bucher-Koenen, Tabea and Hackethal, Andreas and Koenen, Johannes and Laudenbach, Christine and Weber, Annika, Gender Differences in Financial Advice (May 5, 2020). Available at SSRN: https://ssrn.com/abstract=2572961 or http://dx.doi.org/10.2139/ssrn.2572961

Tabea Bucher-Koenen (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

HOME PAGE: http://mea.mpisoc.mpg.de/

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Johannes Koenen

ARC Econ GmbH ( email )

Berliner Platz 13
Limburgerhof, 67117
Germany

HOME PAGE: http://arc-econ.de

Christine Laudenbach

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt, 60323
Germany

Annika Weber

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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