From the April 2010 issue of Investment Advisor • Subscribe!

Clark at Large: Venus Rising

A new book shows how to tap into today's hottest new client niche

Do women make better financial advisors? I've long suspected that they do. An affinity for listening and teaching, usually light on ego and strong on compassion, a preference for advising rather than selling, and a deep sense that money is merely a means to a higher end, all add up to a pretty good description of a great advisor.

My sense is that best advisors are firmly in touch with their feminine side no matter how many X chromosomes they have.

But there's one area where female advisors have what's likely an overwhelming advantage over their male counterparts: advising female clients. At least, to hear Eleanor Blayney tell it, they do. As many of you know, Eleanor had her name on the door of Sullivan, Bruyette, Speros, and Blayney in McLean, Virginia, one of the most successful and high-profile advisory firms in the country. She also one of the smartest advisors I know, with one of those piercing intellects that make you feel three or four steps behind in every conversation (OK, in my case, that's not very unusual, but the feeling's even more acute in Eleanor's presence).

After retiring in 2007, on her partnership proceeds from the sale of SBS&B to Harris Bank, Blayney founded Direction$ LLC (cleverly tag-lined "Because Women Ask for Directions" and found at directionsforwomen.com), a company with the two-pronged goal of empowering women to manage their own finances better, and helping female advisors to help them do it. Partly based on the principle that women tend to learn better in groups, Eleanor has started to give workshops herself to successful women between the ages of 40 and 65, and intends to greatly broaden that scope by enlisting other female advisors to facilitate these financial "circles" around the country.

Most recently, she's compiled her experience and wisdom on approaching personal finance from a woman's perspective into a book titled Women's Worth: Finding Your Financial Confidence due out in May, published by Direction$. Her book is intended to both help women to better understand the basics of personal finance, and to guide financial advisors toward the vast--and growing--underserved market of affluent female professionals. It's not the only book out on personal finance for women, yet a quick search of Amazon.com reveals surprisingly few on the subject, and as far as I can tell, none by a leading financial advisor (don't get me started on Suze Orman or David Bach, and I'm sure there's a "Rich Mom, Poor Mom" in the works somewhere). It's also the only book intended to help advisors better serve this market, as well. Blayney accomplishes both goals admirably--I suspect her book will become THE textbook for advisors who want to better serve women clients.

To my mind, the best part of Blayney's book is in the Intro and the first chapter, where she makes the case both for professional women as an untapped market for financial advisors, and for why a woman's financial perspective is markedly different than a man's. Despite having friends, family, and many clients who are women, her Road to Damascus came in a speech she gave at her alma mater, Mount Holyoke College. (Yes, that's one of the Seven Sisters: If you really want to be impressed, she also has a Masters degree from the University of Cambridge, in England, and an MBA from the University of Chicago. Did I also mention she's one of the best-educated advisors I know?)

Anyway, as Blayney tells it, she gave her talk to what has to been one of the most erudite and affluent groups of women in the world, covering how to accumulate wealth through effective financial planning, and being smart about philanthropy, including due diligence on charities. With heads nodding throughout her speech, she figured it had been well received. At least until the hands went up for questions. "I had been expecting this well-educated group to raise some difficult issues--about the new legislation on making gifts...or the use of reminder trusts," she wrote. "Instead, their questions were fundamental: 'Whom can I talk to about my 401(k)...?', 'How do I get my mother to tell me about her finances?' My 'Aha moment' was more of an 'Oh, dear!'"

Blayney concluded that even Mount Holyoke grads--"they were scientists, business owners, managers, and elected officials; they were wealthy"--lacked the confidence to be financial decision makers. Sure, she'd worked with many women clients, but she realized that was a skewed sampling: those women had overcome their fear of financial matters to seek her advice. "Until that day," she says, "I had discounted the depth and breadth of that feminine fear."

So, Eleanor deliberately redirected her professional life to focus on helping women overcome their fear. The problem, she believes is two fold: The financial services industry was created by men for men; and it's largely ignored women as a market for advice, even though their professional ranks and wealth have been growing dramatically since World War II.

Her solution is two-fold, as well: tailor advice to the way women relate to finances; and encourage more advisors to deliver that advice. In both cases, the key is to identify--and change--the way financial matters are discussed with clients, today. Here's a sampling of those matters, and how advisors can better address them with their female clients:

A woman's financial perspective is truly different. Blayney compared a 65-year-old man and woman, both of whom have had similar careers. Say, the man retires with $1 million, conservatively allocated into 60% stocks and 40% bonds. Using a Monte Carlo simulation, for our working man to have an 80% likelihood of not running out of money before he dies, he can spend up to $4,300 a month.

Now, because the woman is likely to live at least 5 years longer, with the same $1 million portfolio at an 80% certainty, she'd have to live on $3,800 a month, 12% less. But if she, like many women, didn't save as much, due to lower pay, and time off to raise children and/or care for parents, she might have only $700,000, which means she'd have to live on $2,660 a month, or 38% less. What's more, women tend to be less comfortable with risk: If she only put 25% of her portfolio in stocks and 75% in bonds, she'll have to live on only $2,520 a month, or a little more than half of what the man retires on. Which of course, means that she'll have to have almost double the AUM to enjoy the same lifestyle as her male counterpart.

Now, Eleanor calls this differential a "gender tax," which, from my male perspective, is an odd way of describing the "cost" of living longer than men (if I'd gone to Mount Holyoke, I might have a more feminist view, too). I can only speak for myself here, but I'd take the bonus years in a heartbeat, and happily worry about a way to pay for them.

Still, these divergent perspectives call for alternative solutions. "Clearly, financial planning for women requires different assumptions and different analysis," Blayney concludes. "Traditional financial planning does not pay enough attention to these uniquely female circumstances."

Women want more context and less absolute. "When women hear that their portfolio out performed a benchmark, such as the S&P," Blayney writes, "they are likely to respond; 'so what does that mean?'" It's no secret that men tend to be more competitive than women. Sociologists tell us that's because we need to know where we fit in the "pecking order" of rivals. So, being "one up" or "one down" tells us what we need to know, and out performing a benchmark is exactly the kind of thing that makes our day.

Women, on the other hand, prefer to see things in a larger context: What does this financial performance mean for my lifestyle today, tomorrow, or in retirement? How will it affect where our kids go to school, where we go on vacation, or that second home in Santa Fe? Consequently, Blayney puts her advice to women in a context that men are usually impatient with: "I preface my counsel...with the phrase: 'It depends.' It depends on your risk tolerance; it depends on your family situation; it depends on where you want to live."

Women learn differently than men. Research shows men prefer to learn independently, while women learn in "collaborative environments." Men like to learn by doing, while women "prefer to stand back, listen, and observe." That's why she's built her company around creating group situations for women to talk about finance. "Learning about money in a community of women makes the work seem easier and even enjoyable," she writes. "It's also a safe place to discover one's financial identity and to find answers to what women may fear are dumb questions."

Women think about investing differently. A 2005 Merrill Lynch study showed a majority of women vs. a minority of men said they wanted to spend "as little time as possible managing their investments." Ironically, the same study showed that when they do it, women are actually better investors: they make fewer mistakes, sell losers sooner, are more concerned about concentrated holdings, are less impulsive about "hot" stocks, trade less, and are far less likely to repeat their mistakes. In fact, female investing prowess is become so widely observed that according to Blayney, a soon to be released book about the great investors will be titled Warren Buffett Invests Like a Girl.

Blayney appears to be an indexer, relying heavily on the Efficient Market theory. She writes: "The realization that markets are efficient keeps us realistic and grounded: trying to beat the market is a loser's game." And it's also a man's game. Rather than trying to "beat" the market, it seems far more consistent with the female psyche to simply take what the markets give. And as many independent advisors have discovered over the years, it also yields better returns with lower risk.

Blayney's book also covers how to handle such feminine issues as chronic overspending, maximizing your working potential, finding the right advisor, and why women need to be especially knowledgeable about estate planning (hint: they end up with all the money). Taken together, it's a virtual library of the latest research and the best thinking on how to position an advisory practice to tap into the hottest client niche of the 21st century. There's so much good stuff here that I'll bet even a few of the more "sensitive" male advisors could make a go of it.


Bob Clark, former editor of this magazine, surveys the advisory landscape from his home in Santa Fe, New Mexico. He can be reached at rclark7000@aol.com.
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