February 24, 2014

Widows Not Likely to Fire Advisor After All: Russell

Advisors should encourage women to be family ‘CIO,’ not just ‘CFO,’ Russell says

Research published by Spectrem in 2011 and repeated often shows that 70% of widows fire their advisor within a year of their husband’s death. However, a new report from Russell Investments came to the opposite conclusion.

Russell Investments released a study in mid-February that found majorities of women would stay with their advisor even if their spouse or partner died. The report is based on two surveys conducted by Mathew Greenwald & Associates in March 2013; one among more than 900 female investors and a smaller survey of 340 advisors.

Russell found 93% of silent generation women, those born between 1925 and 1942, would stay with their advisor, while 78% of Gen X women would do the same. Furthermore, 64% of silent generation women and 54% of Gen X women said they have recommended their advisor to someone else.

“We felt that there has been a lot of information put out on the boomer generation, but less so on Gen X and the silent generation,” Jaylene Howard, consulting director for Russell Investment’s U.S. private client consulting group, told ThinkAdvisor on Monday.

Advisors’ perception of their female clients is that they are more likely to think long term than men, the report found. More than half said their female clients were more likely to focus on long-term planning issues, compared to just 5% who said the same of male clients.

“Women think a lot about long-term issues and worry about issues like how to plan for retirement and health care expenses, and yet the action that they take in relation to their worry isn’t quite as high,” Howard said. “If there is concern and if there is, I think even more important, interest in focusing on longer term issues, than the plan can be a step-by-step way to get there.”

Both Gen X and silent generation women share financial responsibilities with their spouses for the most part. More than half of Gen X women said they split responsibilities, although nearly 30% said they have more responsibility than their spouse. Among silent generation women, 63% share responsibilities and 24% have more financial responsibility than their spouse.

However, while more than half of Gen X women said they have little to no knowledge about investing, just 35% of silent generation women agreed.

Confidence is a big factor in women’s low levels of understanding, Howard said.

“Women in general tend to look at ourselves as not as knowledgeable as someone else,” Howard said. Over 60% of Gen X women said their spouse was at least moderately knowledgeable about investing, she said.

She suggested ways advisors can help improve their female clients’ level of understanding. “It’s the small things,” she said. “Constantly bringing in education to the meetings, sending them articles — especially the younger generation is very apt to read things on social media — advisors can establish that personal connection, and all these things go a long way.”

Advisors could also require that both partners be at client meetings, Howard suggested, although even if they don’t, she encourages women to go to every meeting with the couple’s advisor. “For women, it’s about owning their perspective and bringing it to each and every meeting. That will help the education part naturally, just because you’re exposed to it more often.”

Because they’re so likely to be the one making day-to-day financial decisions in their household, women are frequently called the “CFO” of their family. However, Howard said a more useful handle would be “CIO.”

“Women make a lot of budget decisions, day-to-day planning and saving decisions and tend to pass off the investing decisions. I think that’s an area where advisors can jump in and help them build confidence that women can be the CIO of their household. That’s a soft way to help empower a lot of women; to say, ‘You already make decisions here and you’re really good at making budget decisions. Let’s talk about how that translates into investing. We can identify the goals and help you make a plan to get there. You can do exactly what you’ve been doing [with budgeting] over here in the investing world.’”

Russell asked what factors were most important in an advisor and found similar percentages of Gen X and silent generation women agreed active listening was the most important skill an advisor could have. Eighty-six percent of Gen X women and 87% from the silent generation said active listening skills were necessary to build a lasting relationship.

Effective recommendations that meet their concerns, providing explanations that meet their level of understanding and explaining how decisions may play out in the future were the biggest drivers of satisfaction among Gen X women. Silent generation women were more interested in personal service and a connection that extends beyond the business.

Interestingly, only 27% of Gen X women and 36% of silent generation women said their advisors knew everything about their financial goals and concerns.

“There has been a change since the global financial crisis from the advisor’s perspective. Clients required a lot of attention and interaction and in turn advisors responded,” Howard said. Part of the reason so many women said they would stay with their advisor is simply that their relationship has gotten stronger over the last five years, she added.

Russell asked female investors to describe how much support an advisor could provide in certain situations. Both generations agreed that an advisor’s support was more valuable if their partner died than when either part of the couple retired. Interestingly, half of silent generation women said an advisor would be no help at all in preparing to send children to school. Just 9% of Gen X women were so dismissive of an advisor’s help in the area.

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