All things being equal

As advice professionals, how can we be sure that assumptions based on a client’s gender aren’t baked into recommendations?

What do you think of when you hear the words ‘gender equality’ in relation to financial advice?

I asked myself this question and the first thing that popped into my head was the EU Gender Directive for insurance and annuities – from 2012! Surely there has to be more than this? I feel like maybe some things have passed me by or perhaps I have become blasé about gender issues. Perhaps everyday sexism is so prevalent, I just don’t see it anymore?

Last year, Barnett Waddingham published research about the gender pensions gap. It’s a really interesting read which extrapolates the gender pay gap into the gender pensions gap. I have to say, this isn’t something I had particularly challenged before, as with a lot of these things we just take them for granted. But it stands to reason that those who earn less can save less.

The report talks about the compounding effect of the gender pay gap on later life planning, how gender inequality is heightened when people become parents and how that carries on through to retirement. Helpfully, there are also some considerations in the report which may help with client discussions.

Sometimes we don’t realise just how recently changes have been made which affect peoples’ finances. Hard to believe that it wasn’t until 1990 that married women gained the right to independent taxation in the UK for example. Many of the pensioners mentioned in the Barnett Waddingham research will fall into that category. Thankfully things have changed, but there is always room for improvement.

Gender disparity is something that has also been on the FCA’s radar. Read this post and you’ll learn that, of the people who participated in its Financial Lives Survey in 2020, women reported a ‘lower willingness to take risks’ than men.

Last November I attended the excellent Empowered Live conference. One of the sessions opened my eyes to how we can hold biased views on gender related attitudes and behaviour. This can lead to damaging stereotypes for clients. The session was run by Dr Ylva Baeckström of Kings College London and it turns out that she has also written a book on gender and finance. I’m reading the book at the moment and I recommend it.

Exploring this topic has made me realise I might make assumptions about a client’s risk tolerance and investment preference based on their gender.

Looking at the idea that women are naturally less risk tolerant than men, if you take the results of the 2020 FCA survey at face value you might think this is true. However, Ylva’s research shows that there can be many facets to this. Including the gender of their adviser. She says:

‘….my research shows that women who are wealthy and successful may be exceptions but those who observe women (ie financial advisers and others), assume that women should invest more conservatively.’

‘This suggests that women’s risk tolerance is situationally – rather than universally – true for all women. My research shows that it matters how you treat women investors, who gives them advice and how they feel in the advice interaction.’

A recent Paraplanners Assembly on planning for couples also discussed the significance of involving and potentially educating the ‘passive partner’, especially with conversations around risk.

So what does this mean? 

It’s insights like these that have led me and the team at The Paraplanners to try to notice if we’re making gendered assumptions about the cases we work on.

For instance, if your hunch is that a client is more or less of a risk taker, or more or less confident, ask yourself what you’re basing that judgement on.

Consider what you may be reading into your client’s apparent levels of confidence. Less confidence could be a prompt to offer more clarity or time so your client can consider things.

In any case, test your assumption by asking whether – if their gender was unknown – you would advise a client in exactly the same circumstances in exactly the same way.

Reducing the risk of gender bias in advice requires each of us to break the habit of falling back on ideas that are the product of years of assumption rather than actual and discernable differences as a result of gender.

And to break the habit we need to form new and positive habits instead. So – first of all – why not begin to break the habit and forget the gender of clients altogether? And, second, consider looking at what you’ve been doing already – in particular, in terms of risk assessments.

If the thought of that feels a little bit uncomfortable, take a moment to think about why.

It’s good to think. And a topic like this is really thought provoking.

Just challenging yourself about how you think and feel is a step further towards reducing gender bias.

And if you want to explore more, you can. This is a good place to start.