Behavioral economics and women investors

Behavioural economics provides valuable insights into how women make financial decisions.

Many studies across different domains have shown that women tend to be more risk-averse than men.¹ A recent study found that women are often less willing to take risks because they focus more on possible loss and anticipate the pain associated with it.¹ Women are also significantly less optimistic than men¹, which can influence their investment choices.

This cautious approach may lead to more conservative portfolios or being more heavily invested in cash and fixed income, which may not always align with their long-term financial goals.

Advisors can help by educating women investors about the benefits and risks of different investing styles and helping them determine a strategy that supports their goals and risk preferences.

Trends and statistics

Women are increasingly becoming a significant force in the investment world. According to a report by Women of Influence+, women are expected to control nearly $4.0 trillion of assets by 2028 as compared to approximately $2.2 trillion today.²

An area in need of significant improvement is the way the financial industry uses certain language that may be perceived as unwelcoming to women. Excessive use of jargon for example, can come across as demeaning and unwelcoming.³

Retirement trends among women

Retirement planning is a critical area where women face unique challenges. Although the life expectancy gap between genders has been narrowing⁴, on average, women still live longer than men. This means that women need to save more for retirement; however, women often have lower lifetime earnings due to career breaks and wage gaps⁵.

In Canada, the average retirement age for women is 63.6 years, slightly lower than the 65.5 years for men.⁴ Additionally, unretired women aged 55-64 are more likely to feel unprepared for retirement, 62 per cent of women compared with 48 percent of men.⁶ Advisors can play a pivotal role in helping women plan for a secure retirement by offering tailored advice and strategies.

The role of female advisors

The financial advisory industry is seeing a gradual increase in the number of female advisors. While exact statistics are hard to come by, some research has shown that women represent between 15-20 per cent of advisors overall.⁷

More women are entering the field and bringing valuable perspectives, and women advisors often excel in building strong client relationships and understanding the unique needs of female clients. This trend is crucial as it helps bridge the gender gap in wealth management and ensures that women’s financial needs are adequately addressed.