19 Oct 2016

Women take savings hit by opting for less investment risk

Australian women are missing out on tens of thousands of dollars in savings during their lifetime because of their tendency to shy away from taking appropriate levels of risk in their portfolio, a national survey from NAB Asset Management has revealed today.

NAB Asset Management Portfolio Specialist, Kajanga Kulatunga, said there had been plenty of debate over the gap in super savings and pay gap between the sexes, but few had looked at the asset allocation differences between men and women and the profound long term implications it could have.

In the first major analysis of gender based risk preferences of women and men across Australia, the NAB research has found that women’s investment risk tolerance across all ages is notably below men.

The research – based on more than 100,000 advised clients around the country – showed that across all age groups, the percentage of women with a high risk allocation was at just 30 per cent, 7.5 per cent lower than men.

The difference in the high risk allocation among women in the 30-40 age group is 5 per cent, while for those in the 60-80 group, the gap was nearly 6 per cent.

“We believe this is the first major study in Australia to demonstrate that women’s lower super balances are not only impacted by career breaks and lower pay, but also investment preferences.’’ said Mr Kulatunga.

“This lower preference for risk could negatively impact women’s savings balances over multiple decades ’’.

The research also showed that female investors change their asset allocation 20 per cent less frequently than men.

Lara Bourguignon, NAB General Manager of Corporate Superannuation, said that these results weren’t surprising given women were significantly less likely to feel  prepared for retirement than their male counterparts, at 57 per cent and 32 per cent respectively.

“We know that women are feeling unprepared, and that of the women currently retired, over half fear outliving their nest egg.

“When we look past the super balance differences and dig a little deeper into how Australian women feel about their financial position, we find this lack of confidence seems to contribute to holding women back from bridging the retirement gap,” explains Mrs Bourguignon.

Mr Kulatunga said this paper was part of a growing effort within NAB to use insights from behavioural economics to help investors make better decisions about money and the intermediaries they chose.

As part of the research, Mr Kulatunga also looked at whether anatomical differences in the male and female brain influenced investment decisions.

“Our research shows there are three regions of the brain that are anatomically different in men and women, which may have a major impact in financial decision making.’’ he said.

“We need to be careful about liberally throwing the phrase ‘financially illiterate’ to describe the financial choices women make. Our research shows these choices may be consistent with anatomical structures of the brain.

“By understanding these and other fundamental psychological differences between men and women, financial advisers can make a significant impact to their clients’ financial decisions. Relying on simple advice and knowledge cannot, on its own, shut the gap between the genders.’’

NAB Asset Management will be releasing the findings of the research in a number of educational papers for investors, as part of an investor education program.

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