New data suggests men are more risk tolerant investors than women, but the company behind the data has urged advisers to objectively measure risk tolerance for all clients.
Data from FinaMetrica shows the average risk tolerance level for males is 53.44, compared to 46.82 for females. Within couples the tolerance gap is similar. Men score 52.75 for risk tolerance, while women score 47.26.
But FinaMetrica co-founder Paul Resnik has warned advisers to objectively test the risk tolerance of all investors rather than superimposing their own preferences.
"It’s also very important that financial advisors don’t superimpose their own risk preferences onto clients, whether male or female, and there is a risk this will happen if advisors don’t scientifically test a client’s risk tolerance in an objective way," he said.
Resnik suggested that the discrepancy in risk tolerance could even point to evolutionary differences.
“Part of the reason we believe for males’ greater propensity to take financial risk could be buried in Darwin's views of successful and adaptive behaviour. Nature enabled aggressive males to flourish. They were successful hunters and gatherers and the more aggressive males flourished while the passive males never got to eat. So, over time, this has transferred over the males’ behavior generally, including their appetite for financial risk."
But Resnik said the gap in risk appetite isn't as great as some might think.
"Both men and women on average sit in the same risk group, so what we are seeing are slight differences. Individually, however, males and females may vary widely in their risk tolerance levels. Either way, before they make financial decisions, each person should have their risk tolerance objectively measured, which is possible through scientific testing. Ultimately, how a person feels about financial risk will affect which type of investments suit their needs and those with which they can sleep well at night."
