Want to Boost Your Bottom Line? Add More Women

Indeed, a recent WIN newsletter cited a March 2014 white paper dubbed “Innovation by Design: The Case for Investing in Women,” published by the Anita Borg Institute, which found there are four key advantages that firms and organizations can expect to realize by increasing the number of their female employees:

• Improved operational and financial performance

• Increased innovation

• Better problem solving and team performance

• Enhanced firm reputation among prospective hires and clients

Last year, the Credit Suisse Research Institute conducted a study of almost 24,000 global companies and found that those with female directors outperformed those without female directors in return on equity, average growth and price-to-book value multiples. The bottom line: Companies with at least one female director had better share price performance than companies without women for the last six years.

The CFP Board and other industry groups have noted the surge in interest among planning firms to reach more female clients—after all, stats show that women control more than $20 trillion in investable wealth in the world—but there’s also an increasing desire to have planners look more like the clients they serve.

A recent Cogent Reports study evaluating the unique needs and behaviors of affluent female investors found that 73% of those investors work with an advisor or investment professional to manage their portfolios versus 67% of affluent men.

The Cogent study also addressed misguided notions around female investors, for instance, in risk tolerance. In households where there is a sole decision maker (female or male), the study found the smallest proportion of assets in low-risk-tolerance investments. When looking at shared decision maker risk tolerance, the household becomes more risk averse, the study found.

Another example is with female sole decision makers—nearly half (46%) are married or partnered so being in a committed relationship does not necessarily dictate a woman’s financial decision-making role, the study asserted. Regardless of gender, the decision-maker role can influence household investment decisions, which could have a substantial impact on portfolio return, the study found.

A 2012 McKinsey & Company study, “Unlocking the Full Potential of Women at Work,” found that more than 80% of participating companies’ HR leaders believe that gender diversity is a “business imperative.” Said the study: “CEOs articulate simple, compelling rationales: ‘getting the best brains to work on the problem’ or having ‘a work force that better matches their customer’s demographics.’”

An interesting finding by Anita Woolley, an assistant professor of organizational behavior and theory at Carnegie Mellon University, and Thomas Malone, the Patrick J. McGovern Professor of Management at the MIT Sloan School of Management and the founding director of the MIT Center for Collective Intelligence, that women added to the “collective intelligence” of teams was published in the Harvard Business Review in June 2011.

The study’s finding: “There’s little correlation between a group’s collective intelligence and the IQs of its individual members. But if a group includes more women, its collective intelligence rises.”

Indeed, Malone said the following regarding the study’s findings: “The standard argument is that diversity is good and you should have both men and women in a group. But so far, the data show, the more women, the better.”

Music to my ears.