The World Economic Forum’s recent Global Gender Gap Report notes that 85% of the 135 countries surveyed in 2011, Saudi Arabia included, have “made progress in the past year toward gender equality.”
A little closer to home, most especially in issues related to the financial advisor-client relationship, things don’t appear quite as progressive.
To put it plainly, when receiving investment advice, many women are fighting an uphill battle to be related to as being firmly entrenched in the financial driver’s seat.
That’s not to say financial advisors are actively diverting their attention away from female clients. It speaks more to an inherent lack of understanding on the part of advisors, mostly males, that women have a different set of expectations and requirements from the financial advice process than do men. Since females generally have longer life spans than males and likely will require financial advice for longer than men, it behooves advisors to pay careful attention to what their female clients expect from them.
According to the National Center for Women and Retirement Research (NCWRR), as many as nine out of 10 women will be solely responsible for their finances at some point in their lives, whether due to the death of a spouse or divorce. The NCWRR also says that women are widowed at an average age of 56, and one in four of these women are bankrupt within eight weeks of being widowed. Less than 15% of women who are married or living with a significant other feel responsible for planning retirement and only 41% of women participate in their employer’s 401(k) plan.
For many financial advisors, this should spell “practice-building opportunity.” Investment management firm Brinker Capital took a closer look at the way advice-directed investors, women in particular, perceive the way they’re being related to by their financial advisor to identify some of the major disconnects between what women expect and what they receive from their advisor relationship.
The research reflects input from 323 advice-directed participants—57% female and 43% male—working with financial advisors at 78 major financial institutions.
The result: Both client and advisor gender play critical roles in determining the relationship’s quality and outcome. Even more important, however, is the way in which female clients construe the manner in which their advisors relate to them because of their gender. This so-called gender bias strongly influences myriad facets of the client-advisor relationship, from initial selection to tolerance for underperforming investment decisions.
Let’s review some of the key findings.
For starters, about one in every four female clients appears to prefer working with a female advisor, while only one in every 10 men selects an advisor of the opposite sex. Other than making some fairly obvious inferences, it’s not entirely clear why women skew advisor selection to their own gender, but perhaps it’s rooted in the way women believe they’re going to feel about the relationship based on the experiences their same-gender counterparts are having with their own advisors. Moreover, 44% of females working with a female advisor said they were “extremely satisfied” versus 24% of women working with a male advisor who answered the same.
Part of the dichotomy, it appears, boils down to the way women say advisors understand (or don’t) their investing needs and help them build financial knowledge. To this end, 84% of women say their female advisors listen to them and understand their investing needs, compared with 15% of women who said their male advisors “sometimes” listen to them and understand their investing needs.
That women feel less knowledgeable about their investing expertise than men has been well-documented. What’s not as well-known, however, is that advice-directed women want a role in the advisor relationship that’s every bit as active and engaged as males, whether they’re single or meet with the advisor along with their husband. They want to learn about investing and expect their advisors to teach them, not preach to them. Sixty-three percent of women say advisors of the same gender actively help them build knowledge, while 23% of females with male advisors say they “sometimes” get help in building investing knowledge. This may be why almost twice the number of women (19%) working with female advisors express higher levels of financial acumen than women working with male advisors (10%) who say the same.
Of note, women appear to be far more tolerant of investment decisions that don’t meet their expectations if they’re working with a female advisor than if they’re working with a male advisor. Forty percent of females with same-gender advisors said they are “very” or “extremely” tolerant of poor investment decisions; only 22% of women with male advisors answered similarly.
Advice-directed women are more loyal to their advisors than men, with 47% indicating they’re “very” or “extremely” likely to retain their advisor in the event of death or divorce. Just 32% of men said the same.
While there are many differences between female and male clients, they do share similarities, particularly related to issues of concern, including being able to retire, becoming a financial burden to their family, leaving an inheritance to their children and fear of another market meltdown.
At the end of the day, research is valuable only if it helps us understand where we are today and provides some clues as to how we can shape our actions for the better in the future.
For advisors, particularly those who either have or want to build their female client base, consider the following four lessons learned from the research:
Women and men are from the same planet, right? Well, yes, but it may be helpful to you to think as though they’re not. Women and men have enormously different investing needs, aspirations, knowledge, confidence and requirements from their advisors. Study these differences. Pay attention to them. Relate to your female clients based on what they tell you they need, not what you think they want.
“When people talk, listen completely. Most people never listen.” Ernest Hemingway was right. Apply his wisdom to your own practice and watch it grow.
A client is a client is a client. That doesn’t hold true from male client to male client and it certainly doesn’t bridge the chasm between female and male clients. Snowflakes and stars all look the same, but they’re all unique. Think about your clients the same way. While some basic requirements may be shared among both genders, the manner in which they want to reach their investment goals will differ greatly.
How do you define “advisor?” The dictionary defines an advisor as a “teacher responsible for advising students.” Advice-directed women want to learn about investing, so relate to them as people hungry for knowledge. Bring them into the advisory process by helping them understand what you’re recommending, why, and the basics of the asset classes in which you’re investing.
Read Top Tips for Women at Tax Time at AdvisorOne.