When it comes to money and investing, men and women have different priorities at different times. At a recent financial event, a young man asked why women expected customized plans by their financial adviser. Several women immediately responded with: "We spend more time out of the workforce, taking care of children or parents." and "We live longer than you." and "We get paid less."
Many women are concerned about outliving their financial resources, says Duane Green, president and CEO of Franklin Templeton Investments Canada. That is a big concern because, according to Statistics Canada, women on average live to 84 years of age, versus men's 81 years of age. "Generally speaking, their income during their working years may be lower, though the gap appears to be narrowing; and women are more likely to take caregiving breaks from the workforce that may leave them with reduced financial resources, both in terms of investments, and government and workplace pensions," says. Mr. Green. Franklin Templeton did a recent survey and found that the chief worry for nearly 31 per cent of female participants was running out of money.
Women are also expected to be beneficiaries of a huge wealth transfer between generations. "It's estimated that women make more than 80 per cent of all purchasing decisions and will control two-thirds of all wealth within the next decade," Mr. Green says. "As with any investor, investment horizon, level of risk tolerance and goals are the types of factors that determine investment decisions."
Some of the issues women face are the many stereotypes about women investors: they're not interested in investing, they're risk-averse or they're only interested in socially responsible funds. That was proven wrong when Barbara Stewart, chartered financial analyst and author, released the seventh edition of her "Rich Thinking" study this year. She found that women are as savvy and financially smart as their male counterparts, have no problem with risk and will consider environmentally friendly funds only if they meet their criteria and make sense in their portfolio.
Even with all this data, women are still underrepresented in the financial planning, wealth and asset management professions, says Mr. Green. And financial firms need to understand and include women in how they develop products and services to better serve their needs. With that in mind, Franklin Templeton has been participating in programs like Women in Investing, where they work with the industry to address the underrepresentation of women in executive roles and as financial advisers. They're also developing programs to help advisers work more effectively with women investors and address their individual needs.
Women may be smarter investors, as well. According to Mr. Green, they tend to take a very close look at current and future life circumstances. "Research published in the International Journal of Bank Marketing found that women tended to take into account a greater amount of detail before making an investment decision, whereas men were more likely to simplify data and make decisions based on the overall message." It seems to be working. Mr. Green mentioned a 2001 study, "Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment," which found that men trade 45 per cent more than women and end up reducing their returns by 2.65 per cent due to excessive trading and higher portfolio volatility. That was 16 years ago, and not much has changed since then. A 2017 study by Openfolio, a U.S. investment tracking app, found that women have outperformed men in investments in the three years since it began tracking the results.
Acknowledging and working with these priorities is key when working with any investor, says Mr. Green. "Stereotyping investments as being more appealing to women – for example, assuming that women are more likely than men to focus on socially responsible and environmentally sustainable investments – could prove to be a costly mistake," he says. "If someone assumes that women have preferences for a certain type of investment, they might not present the full range of choices available. Having less choice could lead to lower potential returns for the client."
This content was produced by The Globe and Mail's Globe Edge Content Studio. The Globe's editorial department was not involved in its creation.