How much the gender of an advisor and their client affects the investment advice they give is part of instructive new research from King’s College London.

Focus on the number of women represented in wealth management, the growing wealth being accumulated by women, and the investment advice picture can look a little bleak. 

A new study conducted by a female former private banker and academic at King’s Business School sheds light in this direction, and the role played by gender biases in dispensing investment advice. Equally, it challenges how "skewed" advice can go on to affect a woman's pension and whether she can retire in comfort.

In the study, advisors were asked to look at detailed information about 10 fictitious clients whose genders were switched. They were asked to rate each client on their likely financial knowledge and the degree of control over their investments. They were then asked to recommend the most appropriate investment portfolio for each client, with seven -- ranging from lower-risk to higher-risk models -- to choose from.

While the research, recently published in full in the European Journal of Finance, found that male and female clients were rated equally on their knowledge of investing, the female clients were rated as having less control over their investments. On average, there was no variation in the risk profile of the portfolios selected for the male and female clients.

Arguably, most instructive for the wealth management industry was that gender bias was more pronounced when the gender of the advisor was taken into account.

On average female advisors rated  female clients lower on investment knowledge and control, and recommended lower risk portfolios to them than to their male equivalents.

Similarly, the highest risk portfolios were more likely to be recommended by male advisors to male clients.

Dr Ylva Baeckstrom based the study on working with 129 senior UK-based investment advisors specialising in millionaire clients. The former investment specialist, who managed HNW clients for Standard Chartered, Coutts and Morgan Stanley, said she wanted the research to highlight the complexity of ensuring that women receive the right financial advice to fund a comfortable retirement.

“Previous studies have looked at how investors rate their own financial knowledge and attitude to risk, but the potential ‘interference’ caused by gender biases that advisors have internalised has not been explored.

“This is important for the financial services industry as it tries to serve the needs of a growing market of independently wealthy women,” Baeckstrom said.