Men & women are different when it comes to risk

It was interesting to read an article in the trade press this morning, which featured a comment from my Informed Choice colleague Mary Waring.

The article in FT Adviser contained news of research which found 66% of couples in the UK contained men with a higher tolerance for financial risk than women.

The research found that risk attitudes in couples was more varied in the UK than in other countries.

In fact, men were identified as the main risk taker in five out of six UK couples.

Adding her voice to the article, Mary commented:

“A lot of them (women) do not necessarily want double-digit returns. Their main concern is looking after their pot of money, rather than getting it to grow lots.”

In our experience, the risk profiles of men and women in a couple tend to differ, sometimes by a large extent.

This is one reason why we always ask couples of each complete a separate risk profile questionnaire, which we then use as a starting point for a more detailed discussion about investment risk.

Following this detailed discussion, a final risk level is agreed which could be based on the higher or lower score, or a compromise between the two levels.

A suitable investment recommendation should always be based on how much investment risk an investor is willing, able and needs to take with their money. It is the combination of these three factors which determines a suitable risk level, rather than the simple outcome of a risk questionnaire.

It should probably come as no surprise that men and women are different when it comes to investment risk, but it is also important that we as Financial Planners do not make assumptions about risk profiles.

Every investor is different when it comes to their risk tolerance; one job of the Financial Planner is to help individuals decide what a suitable level of financial risk might look like and what impact this would have on achieving their financial goals.

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