Women are not a niche.
In addition to being the majority of the population, they also constitute 9% of all billionaires worldwide. They also refer their advisors to others at four times the rate of male clients. They tend to favor the fee-only wealth manager model at a 2-to-1 rate over the broker or money manager model.
Women control 80% of U.S. household purchases, 50% of private wealth, 40% of businesses and more than 48% of estates worth more than $5 million. They will inherit 70% of the estimated $40 trillion in intergenerational wealth transfers expected over the next 40 years.
In sum, women control over $9 trillion but fewer than 20% of women use a financial advisor. The “female economy” represents a major opportunity for advisors, but they are also underserved by the advisor community.
These were just a few of the takeaways delivered on Saturday by Heather Ettinger (left), co-author of the Family Wealth Advisors Council (FWAC) study of high-net-worth American women, at the FPA Retreat 2013 in Palm Springs, Calif.
Rebutting Sigmund Freud’s famous question, Ettinger, managing partner at Fairport Asset Management in Cleveland, said that “women know what they want,” particularly when it comes to financial advice, and especially those “women who have gone through a significant transition,” such as divorce or widowhood.
Since women tend to be more “kinesthetic, more visual learners” who “don’t want to be told what to do,” Ettinger suggested that advisors act more as educators than experts. “Give them a couple of scenarios” on what they can do in financial planning, including the one that you think is most appropriate. When it comes to what is most likely to “put a financial plan into a tailspin” for women, in her experience it’s one of two things: illiquid real estate (not limited to women) and “supporting adult children in crisis.” Women of every wealth level continue to be the primary caregiver not only for their children but their aged parents, and Ettinger said that 72% of long-term care insurance claims goes to women.
About widows, Ettinger said the median age for when a woman is widowed in the U.S. is 59, and there are 8.7 million widows age 65 or older in the country. Pointing out that in the U.S. 700,000 women a year experience the death of a spouse, particularly nonworking women view the death of a spouse as a major financial risk. Ettinger then dove into suggestions on how advisors should advise widows, many of whom may well fire their existing advisor following the death of their husbands.
“Widows lose all their short-term memory,” Ettinger said, suggesting that when advisors hold an initial meeting with a widow that the woman bring a friend with her to the meeting to take notes. Otherwise, says Ettinger, “She’ll forget everything.”
Serving Widows and Divorcees
For new widows, Ettinger suggests advisors hand them a simple spreadsheet that lists a prioritized transition plan for their new life that includes the assets and approximate value of those assets, the beneficiaries of those assets, and who is responsible for managing them. Include as well a simplistic cash flow spreadsheet that she can refer to that will show her how much cash she has to spend.
In the initial meetings with a widowed client, she suggests a male-female advisory team is best, and to “watch the body language” to see whether the widow prefers to work with a male or female, younger or older advisor. Since women tend to value more a “quarterback” advice approach where the primary advisor coordinates with a network of professionals, make sure you highlight that approach. Finally, remember a particular fear of women. “Every widow,” says Ettinger, regardless of their level of wealth “is convinced she’ll become a bag lady.”
To best serve divorcees, Ettinger suggested that advisors consider attaining the certified divorce financial analyst designation, as she has, since it will “give you credibility” with divorce attorneys and helps establish you as a valuation expert. As with all women, make sure your role is an educator in addition to being an advocate, she said, and show sensitivity to the expenses a divorcee will continue to feel responsibility for, particularly in the areas of future education and medical expenses for her children.
As for married women, Ettinger argues that as with other female clients, it’s important to educate, particularly using anecdotes and case studies, and to make time in client meetings to get questions answered in a safe environment while acknowledging the complexity of the married woman’s needs and her family’s. For working women, many of whom are worried about their career prospects, in her own practice she brings together female clients for educational and networking events, which she says have been well received by her clients.
Reiterating her most important points, Ettinger said women tend to make financial decisions based on their values and priorities—such as children’s education—rather than on current “hot” investing strategies. Building trust through regular education, using visual and anecdotal cues, will help advisors to attract female clients and keep them satisfied with your offerings.
Read Desperately Seeking Women: IRI Research Explains Advisor Gap on AdvisorOne.