Financial advisers tend to give female clients poorer advice and recommend riskier assets compared to male clients, a new study shows.
Women are significantly more likely to receive undiversified financial advice than men, researchers from the Hong Kong University of Science and Technology found.
Between 2018 and 2019, the academics led by professor Utpal Bhattachary, trained men and women to pose as potential clients of 65 Hong Kong securities firms and financial planners that cater to retail investors.
They found a male client was offered undiversified advice 13.5% of the time, while a female client was more than twice as likely at 36.8% to receive advice that did not diversify across asset classes, products or geography.
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The advisers recommended riskier products such as complex insurance products, stocks, REITs and warrants to women, and to allocate their money to local securities. Across both sexes, advisers recommended to 38% of clients to invest in individual, risky securities only.
Another worrying finding was advisers working in securities firms that earn revenues from trade commissions are more likely to recommend products that trade frequently.
Since these firms tend to compete more with one another on service charges than on personalised service, these advisers do not differentiate between clients on the basis of clients' attributes, the paper entitled Do Women Receive Worse Financial Advice? reads.
The researchers suggested that the gender differences in advice quality are not just a response to client characteristics, rather the incentives of the adviser.
Securities firms, which earn revenues mostly from trading commissions, tend to favour recommending traded individual risky securities, they said, noting their limited range of products and the fact they are not incentivised to provide customised advice as opposed to financial planners.