Risk profiling firm FinaMetrica, which analysed the level of risk in UK couples, found that five out of six men are bigger risk takers than their female partners.
Financial advisers who fail to assess the risk tolerance of each partner is “dangerous practice”, said the Sydney-based business, suggesting it is both legally risky and ethically wrong to ignore the needs of one or both partners.
Of those couples analysed, men were found to have a higher tolerance in 64% of cases. When there is a big difference in partners’ risk tolerance levels, men were found to be the high risk takers in 87% of cases.
“Skip the process”
“Each partner is an individual and likely to have different financial goals and needs,” said FinaMetrica co-founder Paul Resnik.
“Still today, financial advisers often skip the process of separately assessing a couple’s risk tolerance and either apply the male’s risk tolerance in determining a financial plan or superimpose their own preferences on the couple.
“When advisers are dealing with a couple and developing a financial plan, they need to take into account the needs of both partners and, just as importantly, set aside their own beliefs and values.”
“Numerous benefits”
Resnik said a good risk tolerance test only takes 10 minutes to complete but has numerous benefits, namely empowering both partners to become more involved in crucial decisions about their financial future, and therefore leading to longer-term tranquillity and satisfaction.
“The key to a more harmonious relationship between a couple and their financial adviser is the informed consent of each to the risk in their financial plan,” said Resnik.
“This will help engender trust in the adviser, as he or she actively seeks a couple’s input in developing a financial plan. This can pay big dividends for the couple and the adviser.”
