Whether or not they believe that men are from Mars and women are from Venus, financial advisors who want to better understand their clients’ financial behavior could be well-served to take gender into account.
Men and women, studies have shown, think, feel and act differently toward money and, unwittingly, realize their financial and investment goals differently.
“Being aware of gender biases can help in formulating a proper investment plan, by making clients aware of the biases that they, as a man or a woman, are susceptible to,” says John Longo, professor of finance at Rutgers University in New Jersey and CIO at Morristown, N.J.-based MDE Group.
In a 2004 paper on gender and personality biases and how they pertain to behavioral finance, Longo noted several differences between men and women, most importantly the fact that men are far more susceptible to overconfidence than women—a trait, he says, that can sometimes be counterproductive when it comes to proper financial planning.
Overconfidence definitely stands out as a clear trait among men, agrees Greg Davies, head of behavioral finance and quantitative finance at Barclays Wealth in London, and leads to men being greater and more active traders than women, with a far greater degree of self-reliance and independence.
“Most of us are overconfident in some way or the other, but men seem to be far more prone to overconfidence than women and it can be detrimental in an investment context, where men will think they are right more often than they actually are,” Davies says.