June 27, 2012

What Do Wealthy Women Want?

Ninety-five percent of UHNW women use advisors; TDAI webcast cracks the code for working with them

It’s no great secret that advisors frequently lose women as clients after they divorce or when they become widowed. The bigger secret is figuring out how to make them stay.

Eileen O'Connor, McLean Asset ManagementIt comes down to this, according to Eileen O’Connor (left), a vice president of wealth management at McLean Asset Management of McLean, Va.: women need more education and validation than men to make financial decisions, and they can easily detect whether an advisor is really listening to them.

“Advisors complain about this a lot,” O’Connor said Monday during a TD Ameritrade Institutional webcast, Crack the Code: Working With Women of Wealth. “But I remind them, ‘It’s your responsibility as the advisor to be sure she understands. If she keeps asking questions over and over, she’s not challenging you; she’s trying to understand.’”

Case in point: “Lillian” was recently left with a significant estate when her husband died unexpectedly, O’Connor said of a new client she recently signed on. When Lillian phoned her husband’s wirehouse advisor, Bob, she knew that her husband had “a cordial relationship but not a big comfort level” with Bob.

“She reached out to Bob but was left with the feeling he was on another planet,” O’Connor recalled.

 ‘It’s OK to Ask Emotional Questions’

 “I have found the value in asking really powerful questions,” O’Connor said. “It’s OK to ask, ‘What makes you feel most comfortable and productive in meetings?’ And it’s OK to ask emotional questions: ‘I notice that you are not as upbeat as you normally are, can I ask why?’ I find that clients appreciate advisors asking those questions, and it gets easier asking them over time.”

In Lillian’s case, she contacted her husband’s former human resources director and asked for the name of three advisors to interview. O’Connor was the only one who responded to Lillian’s email by saying, “I’m so sorry to hear about the loss of your husband.”

It was that small act of human kindness that persuaded Lillian to give O’Connor her business.

When Lillian met with O’Connor, she spent the entire first meeting asking Lillian questions and letting her talk. In their second meeting, O’Connor worked with Lillian on a to-do list, and then over time she created a straightforward sheet that showed Lillian’s assets and a simple cash flow report to reassure Lillian that she would be all right.

To be sure, that kind of reassurance can pay off for an advisor. Kate Healy, a TDAI director and webcast moderator, noted that at least two-thirds of the nation’s wealth will be in the hands of women by 2030, and O’Connor added that an increasingly significant portion of generational wealth transfer now goes to daughters. In short, both said, these factors represent a phenomenal opportunity for advisors.

”The financial industry’s process problems are in the discovery process, and 80% of women don’t feel understood,” O’Connor. “It’s not about technical expertise. It’s about softer skills.”

The Vast Majority of UHNW Women Use an Advisor

Perfecting those soft skills can certainly pay off for advisors: The higher the net worth, the more likely women are to work with advisors, O’Connor said, pointing to two facts: only 5% of ultrahigh-net-worth (UHNW) women don’t use an advisor, and studies show that women are less price-sensitive than men when it comes to paying for services.

Key findings from a women of wealth study commissioned by the Family Wealth Advisors Council confirm an increase in the number of women controlling the United States’ investable assets. Of 551 total participants, with 70% married, 14% divorced, 9% widowed and 7% single, nearly 50% of HNW women were employed full time.

Other findings show that female entrepreneurs are starting businesses at more than twice the rate of men. In addition, women-owned companies are projected to create more than half of the nearly 10 million new small-business jobs by 2018, and women under 30 are earning higher salaries than men in many cities.

So what exactly do women of wealth want?

To be understood in term of their unique profile and values, Healy said. Transitional times, such as a job change or divorce or the death of a spouse, define what women need from their advisor—and influence who they choose to work with.

Healy outlined the financial planning needs of four distinct demographics within the broader category of UHNW women:

Married Women: A total of 96% of married women viewed health challenges as a major risk, followed by the death of a spouse (at about 33%) and divorce (16%). One-quarter didn’t feel comfortable calling advisors to ask about anything other than a portfolio question, leaving them feeling short-changed compared with widows and divorcees, who were much happier to e-mail their advisors or pick up the phone to talk about financial planning or to ask for some networking assistance and life coaching. “Interestingly, women who had never worked outside the home preferred male advisors over women,” O’Connor said.

Working Women: Whether they were changing careers, working toward promotion or transitioning back into the workforce after raising their children, working women were “probably the most interesting group,” according to Healy. “Eighty-six percent were fearful that their earning power would erode or become obsolete. You wouldn’t think that about top executives.” More than 90% said they wanted to work with a fiduciary, yet they were least likely to actually use a fiduciary in the wealth management firm they chose and used a broker instead because they were too busy to focus on finding an advisor who’s their best match.”

Sandwich Generation: In providing for both aging parents and children, sandwich-generation women lose more in earnings and are more likely to drop out of the workforce to care for others. The big surprise in this group was that 32% of this group were single women who identified caring for others as the biggest issue they were facing over the next 12 months. “They’re always assumed to be the go-to person in a family because they don’t have children, and that coincides right with their peak earnings years,” O’Connor said.

Retired Women: Similar to men in retirement, retired women view a decline in the economy and overpaying for major assets as their primary concerns. “Regardless of net worth levels, even at $5 million plus, it’s a big worry,” Healy said, “so don’t assume that if you think everything’s OK that she feels OK.”

“Changing the font to pink doesn’t change the service,” O’Connor quipped, adding that more than anything else, UHNW women want to work with an advisor who recognizes the importance of an authentic relationship.

Because of that desire, 80.3% believe it is critically important to have an advisor who is a fiduciary, which is a primary indicator of whether the advisor has a client’s best interests at heart.

Good communication pays off in the long run, Healy concluded. “Women are two times more likely to refer you,” she said.

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To learn more about working with women of wealth, click here and look for TDAI’s “Female Friendly Marketing” PDF. Or, to receive a copy of the Family Wealth Advisors Council’s Women of Wealth: Why Does the Financial Services Industry Not Hear Them? study, e-mail practicemanagement@tdameritrade.com

Read Women Are Not a Niche by Pershing’s Mark Tibergien at AdvisorOne.

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