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Merrill Lynch Study Debunks Myth of Gender-based Differences in Investing Behavior

Viewed Through a Gender Lens, Men and Women Are More Alike Than Not

Monday, December 9, 2013 9:00 am EST

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"Women and Investing: A Behavioral Finance Perspective"

Myths about the innate differences between men and women when it comes to investing behavior and performance are debunked in a new research report published today by the Merrill Lynch Wealth Management Institute. A study of 11,500 investors found that while men and women differ in their approach to investment decision-making, gender is less a determinant of investing success than other social, demographic and circumstantial factors.

The Merrill Lynch report, “Women and Investing: A Behavioral Finance Perspective,” suggests that the basis of previous research, which focuses on investing behavior of men versus women, has relied on stereotypes that are limiting in scope. The goal for researchers and advisors is to move away from gender comparisons and instead focus on women’s varied and unique perspectives.

Numerous studies have found that compared to men, women are more averse to investment risk, less engaged in investment decision-making, trade less often and establish investment goals that put the needs of family and community ahead of personal needs.

Merrill Lynch analyzed the behavior and preferences of women investors through a wider lens of social and demographic factors, and found that men and women are far more alike than many people have thought.

Key findings of this research include:

  • Eighty-five percent of women agree that risk-taking is beneficial, and 81 percent of women feel they can adapt to changing market conditions and investment outcomes.
  • Men and women who have a similar level of financial knowledge share similar risk behavior. The greatest differentiating factor among investors is their perceived financial knowledge, and women are more likely than men to say they have lower levels of financial knowledge. More than half (55 percent) of women, but only 27 percent of men, agree they know less than the average investor about financial markets and investing.
  • One-half (50 percent) of women and 55 percent of men want to be personally engaged in making investment decisions.
  • Approximately one-half of women (51 percent) are concerned they might not reach a key investment goal: having enough money for the rest of their lives. While 58 percent of women say their focus on investing is to meet the needs of their family, more than 40 percent said they do not feel they should put financial support for other family members ahead of their own goals.

“Our research reinforces the importance of concentrating on the unique, personal goals of each investor. Doing so can identify a deeper understanding of the individual’s concerns and priorities which may better align investments to achieve the outcomes the investor desires,” said Michael Liersch, head of Behavioral Finance for Merrill Lynch Wealth Management. “We believe we need to change the dialogue with both men and women, to discuss what really matters to them and what they want their investments to achieve.”

The Merrill Lynch report provides three key action steps action steps for advisors to better understand the unique perspective of men and women clients:

1. Engage both men and women in dialogue about the investment process. Identifying the right level of engagement can be useful in gaining experience and confidence with investing and managing investments toward desired outcomes.

2. Make investing personally meaningful. Articulating specific, personally meaningful goals – such as meeting lifestyle needs or leaving money to family members – can help investors develop the right investment strategy.

3. Structure communication with key decision makers. Identifying various perspectives on investment can help joint decision makers come to the right set of investment-related actions.

A copy of the Merrill Lynch paper “Women and Investing: A Behavioral Finance Perspective” is available at http://www.wealthmanagement.ml.com/WM/pages/women-investors.aspx.

Merrill Lynch Wealth Management Institute
Merrill Lynch Wealth Management Institute offers clients insight on topics that complement traditional investment management and portfolio construction advice. The Wealth Management Institute helps clients and advisors create holistic and customized solutions by combining Merrill Lynch’s expertise in managing wealth for individuals, families and institutions with internal thought leadership and professional network of industry experts and leading academics. All Wealth Management Institute thought leadership is driven and vetted by the Investment Management & Guidance leadership team.

Merrill Lynch Global Wealth Management
Merrill Lynch Global Wealth Management is a leading provider of comprehensive wealth management and investment services for individuals and businesses globally. With over 14,000 Financial Advisors and $1.8 trillion in client balances as of September 30, 2013, it is among the largest businesses of its kind in the world. Within Merrill Lynch Global Wealth Management, the Private Banking and Investment Group provides tailored solutions to ultra affluent clients, offering both the intimacy of a boutique and the resources of a premier global financial services company. These clients are served by more than 150 Private Wealth Advisor teams, along with experts in areas such as investment management, concentrated stock management and intergenerational wealth transfer strategies. Merrill Lynch Global Wealth Management is part of Bank of America Corporation.

Source: Bank of America. Merrill Lynch Global Wealth Management (MLGWM) represents multiple business areas within Bank of America’s wealth and investment management division including Merrill Lynch Wealth Management (North America and International), Merrill Lynch Trust Company, and Private Banking & Investments GroupAs of September 30, 2013, MLGWM entities had approximately $1.8 trillion in client balances. Client Balances consists of the following assets of clients held in their MLGWM accounts: assets under management (AUM) of MLGWM entities, client brokerage assets, assets in custody of MLGWM entities, loan balances and deposits of MLGWM clients held at Bank of America, N.A. and affiliated banks.

MLPF&S is a registered broker-dealer, member SIPC and a wholly owned subsidiary of BAC.

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