Despite the widespread notion that women are more cautious investors, a new study says affluent women actually like to take more risk—as long as they fully understand the trades.
A study from Spectrem Group of women who earn more than $200,000 a year found that more than half are willing to take "a significant investment risk" to earn higher returns. That compares with about a third of the broader population of affluent investors who are willing to take significant risks.
Women are far more likely to use alternative investments, commodities and real estate to boost portfolio returns. They are three times more likely to invest in hedge funds, venture capital and private equity and twice as likely to invest in commodities and precious metals.
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But that doesn't mean women are bigger risk-takers. The study found that affluent women investors tend to be more knowledgeable about financial products than most investors. Three-quarters of high-income women say they are "very knowledgeable" or "fairly knowledgeable" about investing, slightly more than the overall affluent population. And 93 percent are college grads, compared with 73 percent of the broader affluent population.
Ninety percent of them credit education as a factor in creating their wealth.
"We found that women are more comfortable taking risk, but that's accompanied by more knowledge about the risks they're taking," said George Walper, president of Spectrem Group. "It's not risk for the sake of risk-taking."
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Affluent women investors differ from the broader population in other ways as well, the report said. Their number one financial concern is the financial situation of their children or grandchildren. For the broader affluent population, the top concern is the health of a spouse.
Women are more likely to use financial advisors, but they are also unhappy with their advisors. Eighty-one percent use a financial advisor, compared with 74 percent for the broader affluent population. Most use a full service broker or independent financial planner.
Yet 38 percent said they are relying less on their advisor and making more decisions on their own.
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"What we hear in focus groups is that they want an advisor, but they want their advisor to be the expert, to know more than they do," Walper said. "That's not always the case."
With women gaining in the workforce and claiming a growing share of wealth and income, wealth advisors need to better cater to their needs, Walper said.
"The key is to understand that they are highly educated and willing to take educated risks," he said. "And advisors need to focus more on overall planning rather than recommending specific products."
