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.”