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Krawcheck: Want to Shrink Your Business? Ignore Women

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Sallie Krawcheck, the former head of wealth management at Bank of America (BAC) and Citigroup (C), says advisors can ignore women and millennials “only if you’re happy to see your business grow stagnant and shrink.”

Giving a lunchtime keynote speech Thursday at the 2015 Morningstar Investment Conference (MORN) in Chicago, the former research analyst explained that women are set to control about 70% of the $40 trillion generational wealth transfer in the coming 30 to 40 years.

“We have a retirement savings crisis, that’s about $14 trillion in size, assuming Social Security and Medicare remain solvent, which they probably won’t,” said the chairwoman of Ellevate Network, a group for professional women.

“Yet women have more money and wealth and are on their way to controlling the majority of wealth in the country … and more wealth than most of us recognize,” she said.

They currently own some $5 trillion in assets, and another $6 trillion when the assets they jointly own with a spouse or partner are taken into account. “That’s $11 trillion, and that wealth is growing faster than [that of] men,” she said.

Still, some 80% of men die married, and 80% of women die single. “The retirement crisis is a women’s crisis,” Krawcheck explained. “We retire with two-thirds the money that men do and live longer by six to seven years.”

Fund Diversity?

Earlier this month, Morningstar released a study that found women manage just 2% of mutual fund assets and open-end funds. Men run about 74% of assets and 78% of funds; teams of both female and male managers account for the remaining assts.

Furthermore, the research group says less than 10% of all U.S. fund managers are women.

“It’s the same as it ever was, sadly,” said Krawcheck, in an interview after her speech. It’s about a loss of momentum in the field.

“It’s not a performance issue, but a cultural issue,” she explained. “We are all more comfortable hiring people like ourselves.”

“There’s less gender diversity in the field of equity analysts today than during my timeframe [with Sanford Bernstein],” Krawcheck said.

Advisor Weakness

When it comes to female clients, advisors have a long way to go in keeping assets under management after the loss of a spouse or partner.

Two-thirds of women who work with advisors are not satisfied with them, while 90% of men are, Krawcheck says.

Many of these women fire their advisors, especially widows and divorcees, research shows.

Where do they take these assets? “They go to the banks,” Krawcheck said, where the money often sits in money market funds.

This situation requires advisors to address female investors holistically, she notes. “According to an LPL Financial report, women value wealth preservation seven more times more than they value investment upside.”

This means financial professionals need to drop the jargon and embrace broader discussions about, for example, a female client’s salary and how an FA can help her overcome the pay gap she may be facing vs. that of her male colleagues.

“If you’re going to be my financial advisor,” she said, “how about coaching me on how to get that raise?”

Keep in mind, Krawcheck stressed, “Most women’s wealth today is not invested, and 86% of affluent women say our industry does not serve them well.”

“All of us in this room can have an impact” on this situation, she added.

The best strategy is not to simply tell women “to lean in,” the wealth expert said. “That’s not working for us in the financial services industry or at companies” in general. Instead, advisors should ask female clients and prospects, “What are you looking for?”

Overall, “Women look for a holistic view [of their wealth], not just for a view of their [financial] assets,” she said. 

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