When it comes to measuring financial success, it is social, demographic and circumstantial factors - not gender - that wield the biggest influence, a new report argues.

It has been widely accepted that men and women have different approaches when making investment decisions, but when it comes to measuring financial success, it is social, demographic and circumstantial factors - not gender - that wield the biggest influence, according to a new study by the Merrill Lynch Wealth Management Institute.

The report, Women and Investing: A Behavioral Finance Perspective, analyzed the behavior and preferences of women investors through a “wider lens” of social and demographic factors. It found that men and women are more alike than previously thought, acknowledging nonetheless previous research which supports the idea that women don’t make investment decisions exactly as men do.

Despite preconceptions that women tend to be more risk-averse, for example, a hefty 85 per cent of the women participants for Merrill's report agree that risk-taking can be beneficial and 81 per cent are confident in their ability to adapt to changing market conditions and investment outcomes.

“Where differences do occur, they appear to be shaped more by social and demographic factors—such as education, employment status and financial circumstances—than by innate characteristics,” Merrill said, citing “Gender Differences in Preferences” in the Journal of Economic Literature. 

Biggest impact of gender: reported level of financial knowledge

The biggest differentiating factor among those investors surveyed is their perceived financial knowledge, with women more likely than men to say they have lower levels of financial knowledge, Merrill Lynch said. 

For example, over half (55 per cent) of women versus 27 per cent of men said that they know less than the average investor about financial markets and investing. But as the report highlights, “how much people think they know and how much they actually know can be two very different matters.”

Moreover, a near-equal amount (50 per cent of women and 55 per cent of men) said they want to be “personally engaged” in making investment decisions. “This is another area in which education level, wealth and other factors appear to play a far greater role than gender,” Merrill said.

Meanwhile, men and women tend to share similar views on financial issues related to preparing their estates and leaving money for family members, contrary to other previous studies which have argued that women and men have differing views when it comes to work, marriage and parenting matters.

Even when spouses' views differed as regards leaving money to family, there was “no clear pattern indicating which partner was more or less inclined to do so,” Merrill's latest report said. And when spouses work together on issues related to family legacy goals, they “tend to concur on most things,” it added. 

Interestingly, while 58 per cent of the women surveyed said their focus on investing is to meet the needs of their family, over 40 per cent do not feel they should put financial support for other family members ahead of their own goals. 

Conclusion

“We believe we need to change the dialogue with both men and women, to discuss what really matters to them and what they want their investments to achieve,” said Michael Liersch, head of behavioral finance for Merrill Lynch Wealth Management.

As stated in the report: “Realizing that the inherent differences between men and women aren’t really all that great can be enormously liberating, because it suggests that it’s within our grasp to take control of how we save, invest and deploy our financial resources.”

In March, the Luxury Institute predicted that in only two decades women will achieve the same or more success as men in terms of being in management positions, running businesses, earning money and overall net worth. The survey of women in households earning at least $150,000 found that 67 per cent were employed or running their own businesses and 41 per cent were earning more than half of their family’s total income – a jump from 2008 when 27 per cent were the biggest breadwinners.

On the other hand, Wells Fargo recently found that while a growing number of affluent women are now earning as much as their male counterparts, a lack of confidence about investing is preventing many of them to investing their earnings.

Merrill Lynch surveyed 11,500 US investors, around 5,000 of whom were women, for the report.