Why women are more informed investors

Share

Women control one-third of the wealth in North America and have become increasingly more involved in their household financial decisions.

But when it comes to portfolio construction, a large percentage of female investors continue to lack confidence in their investing abilities, according to results of a study to be released Thursday by BlackRock Asset Management Canada Ltd.

More than one in five women respondents admit to being "not confident" about their portfolio. The primary reason cited was that they feel uninformed about portfolio construction.

This may be reflected in their conservative approach to investing. According to BlackRock, 66 per cent of female investors are keeping funds in cash or cash-like instruments, including guaranteed certificates and money market funds. This is compared with 59 per cent of men who are in cash products.

Twenty four per cent of women are investing in the equities market, compared with 36 per cent of men. About 12 per cent are investing in bonds, compared with 18 per cent of men.

Even those women who do jump into investing in stocks and bonds reported they are less confident than men that they have the right mix of assets.

"Women are certainly becoming very different investors than they were 15 years ago," said Jennifer Reynolds, president and CEO of Women in Capital Markets. "But there is still a lot of work to be done around building confidence."

Still, there is an upside to taking on a more cautious approach, Ms. Reynolds said. "Underconfidence in our investing abilities tends to work in our favour because as a result, we tend to do more research and have more conversations with our investment advisers," said Ms. Reynolds. "Therefore, when we make investment decisions we are much more informed."

Julie Barker-Merz, president of BMO InvestorLine, says women need to take more responsibility to become more confident and educated investors. Since launching adviceDirect, a platform that offers virtual advice and instant alerts on portfolio rebalancing, Ms. Barker-Merz has seen a number of women gravitating toward the advice channel.

"Female investors tend to take more time with their investment decisions and as a result prefer an element of education before making that decision," Ms. Barker-Merz says. "Women like to have that tap on the shoulder when their portfolio gets out of line, but also have the freedom to take the time to educate themselves when they are looking to sell."

In a BMO study conducted last fall, it was found that one-third of women depend on advice with investing decisions, compared to only 15 per cent of men.

According to BlackRock, only 19 per cent of women who have an adviser say that they know exactly how their adviser is compensated, compared with 40 per cent of men.

With transparency of fees coming down the pipeline for financial advisers, female investors could be surprised by the dollar value of what they are paying for financial advice.

This could lead to a shift of female investors moving onto online platforms that still offer an element of advice, such as what are known as "robo-advisers."