Millionaire investors: financial advisors, attribution theory and gender differences

Abstract

To date little attention has been paid to how social cognitive bias can influence how financial advisors interpret and respond to the needs of millionaire investors, and if this varies depending on the gender of the investor. This research investigates whether experienced professional financial advisors who work with millionaire investors make different attributions for the control and knowledge that investors have of their investments, and if they make different investment portfolio recommendations to equivalent male and female investors. Using methodology novel to finance, this vignette-based study that controls for gender finds evidence that professional financial advisors judge millionaire female investors to have less control over their investment portfolios relative to men. Empirical results also show that female advisors judge women to be less knowledgeable about investments than men. Despite such perceptual differences, advisors recommend equally risky portfolios to male and female investors. These results have implications for wealth management institutions and the monitoring of financial advisors for millionaire individuals.

Do Financial Advisors Exploit Responsible Investment Preferences?

“…Previous studies have shown that the costs and content of financial advice can depend on a client's gender. Advisors may assume that women are financially less literate, which can lead advisors to charge higher fees to women (Baeckström, Silvester, & Pownall, 2018;Bucher-Koenen, Hackethal, Koenen, & Laudenbach, 2019;Bhattacharya, Kumar, Visaria, & Zhao, 2020). Our results hint toward the opposite, indicating a tendency of advisors to spend more time and effort on women while charging them lower fees.…”

“…Several studies show that gender affects the cost and content of financial advice (Baeckström et al, 2018;Bucher-Koenen et al, 2019;Bhattacharya et al, 2020). We therefore consider whether financial advisors charge different fees depending on a client's gender.…”

Adoption of Robo-Advisory Service in the Personal Financial Planning Industry in Australia

“…According to the Corporation Act 2001, the main obligations of financial advisors mainly include the following aspects. In other words, this might be interpreted as a "representative" making financial decisions based on their work and aptitude [4]. The Corporation Act 2001 s910A provides for representation as follows.…”

Disparate Impact Diminishes Consumer Trust Even for Advantaged Users

“…Second, algorithmic decision-making in such systems is highly impactful: it directly affects consumers' financial situations and thereby their life quality. Third, (human) financial advice has traditionally been gender-biased, underestimating and disadvantaging female consumers [24,5]. Historical data on financial advice thus contain these biases.…”

“…Such discrimination is referred to as algorithmic unfairness if a pre-defined notion of fairness is violated [27,42] and can easily lead to an undesired disparate impact [6,13]. For example, outcomes in advice from robo-advisors may differ between groups, given that financial advice has historically been gender-biased to the disadvantage of female consumers [5,24] and algorithmic unfairness often results from disparities in the historical data that is used to train the algorithm [27]. Although several methods have been developed to mitigate algorithmic unfairness [7], in many cases it is currently not possible to do so to a satisfactory degree [8].…”