Financial Advice, Wealth and Gender: Risk Tolerance, Knowledge and Confidence

45 Pages Posted: 20 Jun 2019

See all articles by Ylva Baeckstrom

Ylva Baeckstrom

King's Business School, King's College London

Ian W. Marsh

City University London - Sir John Cass Business School

Jo Silvester

City University London - Sir John Cass Business School

Date Written: May 11, 2019

Abstract

We examine gender differences in investment risk tolerance, knowledge, confidence, and portfolio cash allocations among a sample of advised and self-directed wealthy individuals. Our results demonstrate that gender effects are more complicated than previously assumed. First, while even wealthy women consider themselves more conservative and hold more cash than men, previous findings of lower confidence and knowledge do not extend to our sample wealthy women. Second, having an advisor matters. Advised investors perceive themselves to have a higher risk tolerance and hold 15% points less cash than self-directed investors. Finally, the investor-advisor gender combination matters, but only for female investors. Women with male advisors are more risk averse, and feel less knowledgeable and less confident about investments. They also hold 11% more cash than women with female advisors. Indeed, female investors advised by women report the highest risk tolerance and make the lowest portfolio allocation to risk-free assets across the full sample, including men.

Keywords: investment advice, investors, risk tolerance, financial advisors, gender

JEL Classification: G02, G11

Suggested Citation

Baeckstrom, Ylva and Marsh, Ian William and Silvester, Jo, Financial Advice, Wealth and Gender: Risk Tolerance, Knowledge and Confidence (May 11, 2019). Available at SSRN: https://ssrn.com/abstract=3286336 or http://dx.doi.org/10.2139/ssrn.3286336

Ylva Baeckstrom (Contact Author)

King's Business School, King's College London ( email )

Bush House
30 Aldwych
London, WC2b 4BG
United Kingdom

HOME PAGE: http://https://www.kcl.ac.uk/people/ylva-baeckstrom

Ian William Marsh

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 5121 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/i.marsh

Jo Silvester

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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