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Male-female differences in investing suggest the need for two advisors per family

by Wayne Cheveldayoff, 2005-05-12

Should a family have two investment advisors? That’s a practical conclusion one could draw from a recent Merrill Lynch study that found that men and women invest differently.

Different styles usually require different advisors to get the right fit and engender trust in the relationship and for some families where both spouses want to be involved in the investment and financial planning process, this suggests two distinctly different advisors.

Since the study found women make fewer mistakes and don’t repeat them as often, having two advisors – one for the husband and another for the wife – would amount to a good diversification strategy for a family’s portfolio and one that could mean more money to play with upon retirement.

The study, commissioned by Merrill Lynch Investment Management (and published in a news release at, was based on a telephone poll of 1,000 U.S. investors – 500 men and 500 women – regarding their investment mistakes and their related attitudes, beliefs and knowledge levels.

While there are some differences in behaviour and attitude between Canadians and Americans in other areas, there is no reason to expect investors here would have answered differently if such a survey had been conducted in Canada.

The Merrill Lynch study found that while all investors make mistakes, women reported making fewer mistakes than men.

“Women are far less likely than men to hold a losing investment too long (35 per cent of women reported having done so at least once vs. 47 per cent of men) or wait too long to sell a winning investment (28 per cent vs. 43 per cent).

“Men are also more likely than women to allocate too much to one investment (32 per cent vs. 23 per cent), buy a hot investment without doing any research (24 per cent vs. 13 per cent) and trade securities too often (12 per cent vs. 5 per cent).

“Men cite holding an losing investment too long as their most painful mistake, while women say not starting to invest early enough was their most painful mistake.”

The study also found that not only do women make fewer investing mistakes, they are much less likely than men to repeat the same mistake twice.

Other findings include: (a) a significantly greater percentage of women (47 per cent) than men (30 per cent) report not being knowledgeable about investing; (b) women are significantly more likely than men to say they have a primary financial advisor (70 per cent vs. 50 per cent); and (c) women are also much more likely to have a formal financial plan in place (77 per cent vs. 62 per cent).

As important, however, are the gender differences in investment personality.

Men were found more likely than women to be “competitive” investors (60 per cent vs. 40 per cent), meaning they try to beat the market and chase hot investments, while women were more likely to be “reluctant” investors (53 per cent vs. 47 per cent) or “unprepared” investors (53 per cent vs. 47 per cent) who seek out professional help.

All families are different and it is quite possible that husband and wife approach things the same way when it comes to investing.

But where the opposite is true – where spouses are completely different investment personalities – why shouldn’t each have their own advisor?

Merrill Lynch Investment Management believes that a first step in eliminating or reducing investment mistakes is for investors to get a better understanding of their investment personalities.

“We think it is crucial for investors to understand their psychological makeup. Money is an emotional instrument, but emotions can get in the way of making the right investment decisions. Behavioural scientists have tended to look at investors as a whole, but each of us – men and women alike – are influenced by different emotions. If we can fathom our individual emotional tendencies, then we can take steps to anticipate and correct them.”

For this purpose, the firm has created a special website at where investors can anonymously run through a quiz to determine their investing profiles.

The site includes information on the differences between male and female investors, survey results, the most common investment mistakes and what to do about them, and how to work with a qualified investment advisor.

Wayne Cheveldayoff is a former investment advisor and professional financial planner. He is currently specializing in financial communications and investor relations at Wertheim + Co. in Toronto. His columns are archived at and he can be contacted at

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©2005 Wayne Cheveldayoff