Battle of the sexes

Men and women have vastly different approaches to managing their finances that all advisors should be aware of, write Franco Caligiuri and Marissa Elliott

Battle of the sexes
The needs and behaviours of men and women differ significantly in so many ways, it should come as no surprise that these differences also affect their attitudes toward financial planning. A 2014 survey in Money magazine turned up the stunning statistic that 70% of couples argue about money – more than they do about household chores, togetherness, sex, snoring or the eternal bugbear of what’s for dinner. The genders perceive and approach finances differently – and these differences in money-related perceptions create challenges when it comes to making financial decisions together.

Our empirical observations over the last 16 years as financial planners have left us with the impression that women have a stronger inherent need for stability and security in their lives. They do, after all, carry the responsibility of bearing children and being the primary caregiver to their offspring. This need for security becomes evident when assessing the risk tolerances of our clients during the financial planning process. Our female clients tend to be more conservative and are less willing to take risks than their male counterparts. Women often value the security of less risky investments over the potential for a higher return that could come from more aggressive investment vehicles.

It is appropriate to note, however, that while women may be more conservative in their investment strategies, this is not always the case when it comes to their spending habits. Neither gender is immune to impulsive spending; indeed, the inherent desire to feel security can often be temporarily satisfied by acquiring ‘things.’ Material possessions provide a temporary sense of abundance and security, which may explain why women are less conservative than men when it comes to spending.

In contrast, men have historically filled the role of the primary earner and provider of food and security to the family unit. Prior to the rise of ordered societies, duties such as hunting and fighting off threats were often the priority of the male. We believe these duties created an inherent need for conquest in men that is still present today, although no longer satisfied by hunting game or warding off competitors. It is now channelled through the acquisition of not only wealth, but also assets such as fancy cars, shoes, watches and other expensive toys. With regard to managing finances, a man’s desire for conquest translates into a higher risk tolerance and more aggressive investment decisions than women.

Despite this, when we put it all into context, our respective perceptions of security, protection and conquest are often nothing but illusions. Our ‘realities’ can be shattered with the loss of a job, a divorce, a poor investment or the death of a spouse. Paradoxically, these perceptions can be reinforced by a high-paying job, a strong marriage, a smart investment or an inheritance.

We have found that an effect of the dynamic of men being the primary earner and provider is that it disconnects women from the value of money and the energy required to acquire it. This creates problematic mindsets for women, such as a sense of entitlement when it comes to a certain standard of living based on their partner’s ability to earn, or a ‘things will always work themselves out’ type of attitude when it comes to finances.

It’s no wonder that men and women operate differently when it comes to making their financial plans. One is driven by the need for security and protection, while the other desires excitement and conquest. These differences not only play a role in financial planning, but also in making day-to-day business decisions.

On a more personal level, as long-time business partners, our road to success has seen many challenges along the way. Hours of self-development courses and working with a diverse range of clients, along with an understanding of the differences between genders, have helped broaden our awareness of what drives people when they make decisions. Not only that, but we have also learned to work effectively together by familiarizing and adapting ourselves to each other’s needs, desires and fears – not just as individuals, but within the context of our respective genders.