Much has been made in the public policy world of the so-called gender wage gap, the 30-point disparity in on-the-dollar earning power between women and men. Depending on who you ask, the inequity is attributed to all sorts of things — occupational choices, glass ceilings in managerial and executive positions, cultural mores and even genetic predisposition. For an already prickly issue, that’s a lot of briar to wade through if you’re trying to make sense of a very complicated social phenomenon. Rightly or wrongly, there are differences in what and how the sexes earn their living. It’s not surprising then that there comes to bear a striking difference in how the genders approach investing what money they earn.
A recent study fielded by Regions Bank in conjunction with Vanderbilt University has found that women are by and large less likely to profess confidence in both their abilities to manage finances and make gainful investment decisions. The self-doubt associated with those endeavors contrasts with a national trend of growing wealth accumulation by women. The Federal Reserve reported in 2010 that women control 51.3 percent of private wealth in the U.S., a number expected to rise to more than 60 percent by 2020. Over 48 percent of estates worth more than $5 million are controlled by women.
While the gender pay gap has remained stubborn, and glass ceilings more or less uncracked, that number demonstrates a staggering growth in women’s share of wealth. You would expect that soaring ledgers would contribute to more confident investors, but the Regions study shows that, particularly among women under 50, there exists a pervading skiddishness about entering the market.
But that lack of “confidence” in contrast to their male counterparts doesn’t necessarily contribute to bad investing. The Regions study shows that women are more likely to seek professional assistance in making financial plans and to engage in conservative investment strategies, with a much lower tolerance for risk in their investment practices than men. The short of it is, when it comes to investing, women are much more conservative and patient than men.
Joseph “Bo” Billeaud, president of Billeaud Capital Management, corroborates that women, in his experience, tend to be more conservative in their choices — a trait he says makes them great investors.
“Women tend to be much more patient and, on balance, will give an idea more rope,” Billeaud says. “That’s an excellent quality to have as an investor.”
For Billeaud, sound investment involves patience and fortitude through choppy market waters.
“Most people have no business being in the fi nancial markets,” he adds. “Everyone wants to gain, but very few people can handle the periods when it’s not going well. They think they can and they say they can until they’re in the middle of the storm. And then they freak.”
But whether women’s conservative investment tendencies are a matter of nature or nurture is far from clear. Just like in debates surrounding the gender pay gap, it’s difficult to quantify if gender differences in investment practices and financial planning are constrained by stratification or preference.
For Billeaud’s part, he ascribes the phenomenon noted in the Regions study to differences in wealth acquisition, making particular note of the wealth obtained by widows. Women, on average, live five years longer than men, and the aging population in general has the lion’s share of the nation’s private wealth. When death makes a wife a widow, she often assumes a role she didn’t learn to play. Unfamiliarity with the ins and outs of financial management may contribute to the reported unease with the field among the Regions respondents.
To be sure, this whole reading of why’s and who’s and how’s in the varied investment habits of the genders is like reading tea-leaves. The available data is somewhat descriptive but leaves sizeable gaps in determining cause and effect that are filled inadequately filled by armchair psychology. Regions’ study itself is selfselected — it’s an online survey of 30,000 capital investment clients — and doesn’t really give much insight into why women would approach investment that way.
Nanette Soileau Heggie, financial advisor for Heggie Investment Partners, a Raymond James firm, says that investment experience and education play larger roles in investment practices and confidence than gender itself.
“I have personally found that the more conservative bias in investment choices is usually more correlated with a lack of education and experience with investments than with gender.”
— Nanette Soileau Heggie
“I have personally found that the more conservative bias in investment choices is usually more correlated with a lack of education and experience with investments than with gender,” Heggie says. “The conservative bias difference tends to decrease over time as the investor increases their investment knowledge and becomes more comfortable with the markets and the financial planning process.”
What can be said of women in the Regions cohort may not apply to women acquiring wealth today, it would seem. Even though the Regions study does indicate a decline in financial confidence as responders get younger, that doesn’t necessarily preclude Heggie’s insight that much of insecurity is due to a lack of experience.
To the extent that women may have lower incomes over their lifetimes and thus less money to invest, that would contribute to a generational divide in financial acumen. For decades, women have been kept out of highly gainful employment that would correlate with lower involvement in finance and less knowledge acquisition.
“Women now reaching retirement age certainly had a lot less job choices and mostly lower-paying career options to choose from, than women do today,” says Heggie. “Careers in sales and previously male-dominated fields like engineering, real estate and finance have done a lot to reduce the gender pay gap. However, current research still shows that women are less likely to apply for promotions or request a higher starting salary than men are. Lower paying careers obviously lead to having less money available to invest.”
While the differences in investment practices among the genders are demonstrable, the advice for sound fiscal management remains the same. Choose a financial planner that best suits your financial goals and disposition. Save early and save often. And don’t bet it all on one horse.