The future of the financial services industry, as it seeks to better itself in an ever-changing regulatory landscape, could hinge on a resource that is already present in its day-to-day operations but largely ignored. That resource is women, but their importance at lower levels in the industry is often taken for granted—and they’re usually squeezed out before they can rise much higher. That’s something that is suddenly getting a lot of attention and not a moment too soon.
How Many Are There?
Women make up a good part of the work force in the industry. Globally, nearly 60% of those who work in financial services are female, but that’s where the good news stops. The higher one goes, the fewer women one finds.
Only 19% of senior-level positions in the industry are filled by women. Among board seats, only 14% are held by women, and in the rarified atmosphere of the CEO, that number shrinks to only 2%. That’s the situation laid out in PricewaterhouseCoopers’ (PwC) report “Mending the Gender Gap: Advancing Tomorrow’s Women Leaders in Financial Services.”
Not only that, but according to a recent Pershing study, only about 30% of financial advisors are women—and that number is falling. That’s a problem too, with Pershing calling the recruitment of female advisors critical to growing business.
Amy Glynn, founder and president of the Pension Resource Institute and active in the professional group Women in Pensions Network (WiPN), said she’s been in the financial services business for about 25 years. “It’s interesting, because [when I] started with Smith Barney back in ‘90, there were no female branch managers, and only 5% of the sales force were women. It’s still very male dominated.”
She added, “Female producers in a branch are still only around 15%. When I think about women in terms of leadership and professionals, 20 years later, the stats haven’t changed that much.”
And that’s not good.
Why Does It Matter?
The PwC report offers a number of alarming statistics—alarming to anyone who’s interested in growing business, that is, or even anyone who wants to remain profitable. Just a few of the reasons are these:
Gender-diverse boards produce better results. Boards with women among their numbers bring in a 42% higher return on sales, 66% better return on invested capital and 53% higher ROE.
Women’s increasing board presence may become mandatory. Some countries are pushing to significantly increase the number of women who serve on companies’ boards, said the PwC report. While some countries are considering action, others are already adopting such requirements. The European Commission (EC) has adopted a legislative proposal that mandates the imposition of sanctions for companies that fail to boost the number of women on their boards of directors to 40% by 2020. Where the EC has gone, others are sure to follow—probably sooner rather than later.
Let’s not forget investors who are increasingly concerned with the lack of diversity on boards, particularly in the wake of a study by the EC that demonstrated that “gender-balanced boards are more likely to focus on risk management throughout the organization.”
Institutional investors have been exercising that concern in the United States, said the PwC report, by filing shareholder resolutions with 20 cross-industry U.S. companies that lack female board members. The resolutions ask for companies to change their charters to support board diversity and to include women and minorities on their boards. The resolutions, said the report, were a follow-up to letters that were sent to 168 companies without women on their boards. Those letters were cosigned by institutional investors with more than $1.2 trillion in assets under management.
Women control lots of money. Just in the United States, women are the ones who determine what’s to be done with 50% of private wealth. They also head more than a third of U.S. households. According to the report, “Female leaders bring a unique vantage point for attracting and serving this powerful and profitable customer segment.” Profitable is right; globally, women control $12 trillion—64%—of the total $18.4 trillion in discretionary consumer spending.
National Financial, in a recent presentation, had this to add on women’s importance as clients: They account for 60% of university graduates, 40% of the higher-earning spouses in a couple, and will outlive their spouses by between five and seven years. Not only that, nine out of 10 will end up carrying the full burden of responsibility for their own finances.
Women as Clients Aren’t a Happy Lot
Just for a moment, let’s stay with that last point, since it has the most direct effect on financial advisors. Women control half the private wealth in the United States, but here’s another tidbit from that National Financial presentation to make you sit up and take notice: 73% of women are unhappy with the way they’re treated by the financial industry, rating advisors and their firms lower than men do in every single category, and more than 70% will dump their advisors within the first year after a spouse has died.
Those numbers are hardly surprising when you consider some of the faults women feel their advisors are guilty of: talking to their husbands, but not to them; pushing them to make a decision, instead of allowing them to think things out; being clueless about their lives and focused only on their portfolios; and talking at them instead of to them, complete with jargon that goes over their heads.
Glynn backed that up with personal experience. “My dad died at 51,” she said, “and I helped my mom interview financial professionals—and these guys just walked away; they were not going to deal with all her questioning. I would bet my bottom dollar that a female advisor is not ignoring a woman in the household.”
She’s right about that. If you’re up for more statistics, consider these from another Pershing report, this time one that looks at the investors of the future. The report laid out some specific and disturbing disparities between how male and female advisors relate to their clients.
Among client couples, 78% of those with a male advisor will find that their advisor has contact information for both of them. However, 88% of female advisors will know how to reach both of them. When scheduling client meetings, 71% of male advisors will often meet with both husband and wife, but 80% of female advisors will be sure to include both spouses in the meeting.
When it comes to same-sex client couples, only 61% of male advisors will communicate equally with both partners; 73% of female advisors, on the other hand, will do so. And with regard to business owner clients, 56% of male advisors will have visited their clients’ places of business, compared with 67% of female advisors.
Since client contact is such an essential part of the business, female advisors would seem to have the edge in an increasingly important aspect of caring for clients. Bhushan Sethi, financial services people and change leader at PricewaterhouseCoopers, said that among his clients in the retail wealth management space, “a number of HNW clients have longer and deeper relationships with female financial advisors than with men. Women are really good at establishing relationships and trust.”
Glynn added another facet to this, saying, “Women have different lines of questioning and different needs. Most men who need teams to support their [pension] plans will have women to do it; they’re patient and answer [participants’] questions. The representation of women in pensions is probably higher than in hedge funds or other areas.”
Sethi added, “There are certain roles where businesses are starting to understand how women build relationships and trust, and [how they are] able to manage high-net-worth individuals and portfolios. There’s a role there that women can play better.”
Unfortunately, they’re leaving the business instead of moving up the ladder.
Baby, Don’t Go
The position of women, both as financial professionals and as clients, offers the promise of growth even in tough competition, yet the statistics speak of an industry that has lagged decades behind in its efforts to make women a part of the business. News reports still reveal old boys’ networks and discriminatory atmospheres that keep women out and block their ascent, despite other statistics that indicate their value on both sides of the desk.
An Edward Jones survey revealed that two-thirds of the general public point to financial services as the toughest industry for women to succeed in, citing a male-dominated environment, inadequate workplace flexibility, the need to balance family and work obligations and lack of mentoring and career paths.
What is actually stopping them? The PwC study cites unintentional discrimination—women are not seen as executive material by the executives considering successor candidates, nor are their traits appreciated or identified as leadership qualities. There are also fewer opportunities for advancement and a high turnover among millennials (those born between 1980 and 2000), among other reasons.
Sethi said, “Staff turnover and retention is a big issue.” Really qualified women, he said, “leave the workplace because they feel that by having a family or for other reasons there’s no way back. [Leaving the workplace is] looked at with some disdain, and in this environment, where there are such excruciating work demands, women taking time out to raise a child [find that] the catch-up you have to play now is exponentially higher than when there was less tech, less demands. It goes back to the loss of skills, and that doesn’t allow you to drive the right business outcome.
“Where are the clients’ influences, the client buyers? They’re women,” said Sethi. “Women are controlling the household. They drive the allocation of household resources. Women are driving those buying decisions. Companies are saying, ‘We need corresponding women on the other side of that,’ but there’s a talent drain and a talent shortage.”
One problem that has to be solved is that when women take maternity leave and return to the workplace, there’s not enough flexibility or support available. Sethi said that not only do women need support while on maternity leave to avoid losing ground, but they need support when they return—such as limited travel schedules, as well as changes that accommodate where and how people want to work. “Many clients are waking up to the fact that we need to look at work force flexibility,” he said, because it plays such a big role in retention as companies consider their pipelines for higher-level positions.
Two other things women need are mentoring and networking, since being able to draw on others’ wisdom and experience is such a necessary part of climbing the corporate ladder. That in itself can be a problem, since there can be hostility toward women’s network groups. Glynn, who said that the almost 3,000 members of WiPN “predominantly want networking” because they’re “still so isolated from the work force on a day-to-day basis,” added that to really succeed, networking must include men as well. Men must support women’s initiatives to stay in the business and move up the ladder.
Sethi agreed. “There’s a huge role men play in being part of an affinity group. My personal opinion is that the way we’ve gotten a number of women’s groups—women talking to women—we have to get men in there, too. It’s good, but not sufficient, to have all women. We need millennials, [those new to the business]; [we need the] old guard. We have to fuse people together to solve the problem instead of separating affinity groups.”
We invite you to read all the articles and opinions in Investment Advisor's special report on Women in Wealth Management.