Our brains are designed to create patterns and learn from them, helping us interact more effectively with others. It's a remarkable ability. Financial advisors, like everyone else, can rely on stereotypes to facilitate conversations and shape their advice. While this simplifies interactions, it often comes with hidden costs, particularly for women.
👀 Unconsciously Biased Financial Advisors
A study conducted by Merrill Lynch Wealth Management revealed that financial advisors, both men and women, spend more than 60% of their time looking at the man during appointments with heterosexual couples. This unconscious behavior reflects a deeply rooted bias that men are the primary decision-makers in financial matters.
Even more concerning, researchers observed an average of 10 sexist comments or actions per 30-minute appointment. Among the most common prejudices:
Assuming the man is the decision-maker
Thinking the woman needs more guidance
Presuming the couple's finances are merged
Considering women to be more risk-averse
Estimating that women have less investment knowledge
👩💼 Gender-Based Differences in Recommendations
A recent study by Bucher-Koenen et al. (2023) provides clear evidence of gender bias in financial advice:
Financial advisors are more likely to recommend more expensive products to women than to men.
Women receive significantly fewer recommendations to invest in pure equity funds, even when their risk preferences are identical to men's.
Advisors suggest lower equity shares for women's portfolios, potentially limiting long-term growth.
Women are often advised to invest in funds with higher management fees, even within the same risk categories.
The study analyzed data from about 27,000 advisor-client encounters, offering robust evidence of these biases. While this research focuses on product recommendations, gender biases extend beyond this, influencing retirement planning, risk perception, and the general orientation of financial advice.
🚫 Obstacles and Discrimination for Women in Finance
Moreover, financial influencers subtly reinforce gender biases in their content (Ben-Shmuel et al., 2024), and even large language models (LLMs) implicitly present these biases (Etgar et al., 2024). The roots of gender bias can be attributed to a mix of historical, cultural, and educational factors, particularly the financial literacy gap between men and women.
🤖 Towards Equitable Solutions: The Role of New Technologies
These findings highlight the urgency to act to eliminate gender biases in the financial sector. Concrete solutions can be implemented:
Train advisors to recognize and overcome their unconscious biases;
Encourage diversity at all hierarchical levels in financial institutions;
Implement policies promoting equal opportunities;
Raise awareness about financial issues from an early age, without gender distinction.
However, technology could also play a decisive role. At Odonatech, for example, our AI financial advisor, LiLa, eliminates gender from the equation. Whether it's a man or a woman interacting with her, LiLa offers professional advice solely based on investment goals and individual risk preferences. This approach, focused on equal opportunities, could well be a key solution for a fairer financial future.
Conclusion
Gender biases in financial advice constitute a persistent problem, with tangible consequences for women. Only collective awareness, concrete actions, and the integration of innovative tools like AI can help overcome these inequalities and establish greater equity in the sector.
References
Ben-Shmuel, A.T., Hayes, A. and Drach, V. (2024). The Gendered Language of Financial Advice: Finfluencers, Framing, and Subconscious Preferences. Socius, 10, p.23780231241267131.
Bhagwat, V., Dim, C., Shirley, S. E., Stark, J. R. (2024). Gender Biais and Crowd-Sourced Financial Information. Social Science Research Network (SSRN). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4669864
Bhattacharya, U., Kumar, A., Visaria, S. and Zhao, J. (2024). Do Women Receive Worse Financial Advice? The Journal of Finance. 79(5). https://onlinelibrary.wiley.com/doi/epdf/10.1111/jofi.13366
Bucher-Koenen, T., Hackethal, A., Koenen, J. and Laudenbach, C. (2023). Gender differences in financial advice. Available at SSRN.
Etgar, S., Oestreicher-Singer, G. and Yahav, I. (2024). Implicit bias in LLMs: Bias in financial advice based on implied gender. Available at SSRN.
Klein, G., Shtudiner, Z., Zwilling, M. (2021). Uncovering Gender Biais In Attitudes Towards Financial Advisors. Journal of Economics Behavior & Organization. 189(1):257-273.
Merrill, a Bank of America company and Waller, K. (2024). « Seeing the Unseen», s. d.
Monserrate, K., Brown, J., Birchall, N. and Brooks, K. (2022). Change Starts With Bravery. Simplify Consulting. https://www.simplifyconsulting.co.uk/wp-content/uploads/2021/07/Gender-Gap-White-Paper.pdf
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