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Advisors must better serve women, social media-savvy millennials

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Women hold more than $5 trillion in investable assets and more than 90 percent of them manage home finances at some point in their lives. Yet women continue to be underserved by a financial services community that remains dominated by men and is male-centric in its outlook.

That’s the judgement of Sallie Krawcheck, a former Wall Street executive and owner of the professional women’s network Ellevate. Presenting the opening general session of the IMCA 2015 New York Consultants Conference in New York City, Krawcheck offered insights in the future of the financial services business.

The opportunities for advisors looking to build a female clientele are huge. Krawcheck said that women retirees now control about two-thirds of the investable assets held by men. And they live six to eight years longer than men.

But in Krawcheck’s telling, much of the advisor community is not adequately serving women because it lacks an understanding of their financial needs and concerns. Worse, she notes, many insurance and financial service professionals adopt a patronizing attitude toward women, believing them to be disinterested or inclined to defer to a male spouse on issues involving finances.

When women do engage an advisor, too often the relationship is an unhappy one. Women surveyed in studies, said Krawcheck, frequently indicate that their advisors failed to account for their financial priorities in planning engagements.  Upshot: More than 70 percent of the time, they drop their advisor for another.

“The irony is that women are more interested in seeking financial guidance than men are,” said Krawcheck. “But the financial assistance they’re getting is oft-putting.

“They’re not interested in outperforming the market, knowing where stocks are headed or learning about the latest products,” she adds. “And they don’t care about industry jargon like Monte Carlo simulations.”

Women are, in sum, not interested in being marketed to, but rather being served.  

And that means advisors need to be attuned to their financial priorities. Topping the list: securing downside protection against market dips and building a stable income stream that will last throughout their retirement years.

To that end, they desire holistic planning that accounts comprehensively for their lifestyle and financial objectives; and in respect to products, they’re looking for “curated” choices (i.e., a limited range of best-of-class solutions pre-vetted by the advisor on the basis of cost, risk, and performance).

A growing number of women, Krawcheck added, are also keen to invest in companies that maintain high environmental, social and governance (ESG) standards. These socially responsible investors are guided as much by the environmental sustainability and the ethical impact of an investment decision as they are by the performance of the product.

Women also increasingly look for companies that promote diversity among their ranks and the promotion of women into senior management positions. This focus is motivated in part by a desire for superior yields: Companies that are well diversified, said Krawcheck, bring a wider range of views to bear on strategic business decisions, and thus are better positioned to serve the needs of their markets.

“Diversity is the only [reliably good] driver performance, higher returns on equity, lower risk, greater innovation, greater client focus and longer-term focus,” said Krawcheck. “It’s the only quantified driver of superior returns in management results that I’ve seen. [As a result] the ESG market now boasts several trillion dollars in invested assets.”

Diversity in recruitment and socially responsible investing also tend to be more prominent concerns among a new group of investors: millennials, or those born between the early 1980s and the early 2000s. Penetrating this market entails its own challenges.

For one, said Krawcheck, millennials tend to be more distrustful than older generations of financial service providers, in part because the industry’s reputation was damaged during the 2007-2009 financial crisis. And, compared to their older demographic groups, they also tend tend to be more risk-averse.

They are, to boot, less amenable to doing business face-to-face over the kitchen table. To reach millennial clients, said Krawcheck, older advisors need to become social media-savvy.

More than 90 percent of mass affluent millennial investors, she noted, used social media during the past year. More than half did so to engage a financial services provider. And over one-third used social media to make a financial purchase.

Close to half of advisors, she added, report they secured business through social media during the year past. And a still greater percentage anticipate doing so in 2015.

“Social media can be a big positive [for your practice],” said Krawcheck. “It enables you to show yourself to be an expert on certain topics and engage people in discussions [remotely] with a certain informality.

“These exchanges can be as intimate as a one-on-one conversation,” she added. “So you need to be on social media because your millennial clients and prospects are there.”