Who run the financial advising world? Definitely not “girls.”
While women have made strides to earn acceptance into a variety of political and personal domains, the financial advising industry “stubbornly lags,” a new report finds.
According to a report from global research and consulting firm Cerulli Associates, women remain a minority presence among financial advisors.
Women represent 50.8% of the population according to the U.S. Census Bureau, but only 15.7% of the financial advisor headcount. Of the 310,504 total advisors across all channels, a mere 48,631 are women, according to Cerulli.
“Women remain outnumbered in financial advisor communities despite efforts to recruit more female advisors; only 16 in every 100 advisors are women,” Marina Shtyrkov, analyst at Cerulli, said in a statement.
The good news is that Cerulli found a slight uptick in female rookie advisors, which it says could indicate a positive trend toward an even gender distribution.
Compared with the industry average of 14.8% for established female advisors — excluding insurance BD and retail bank BD channels to match the rookie advisor sample — women make up a greater percentage (23.8%) of new advisor cohorts.
In the report, female advisors identify barriers to entry for more young women considering the profession.
Cerulli finds that close to half (49%) of female advisors believe that a lack of familiarity with the financial advisor profession is a major factor hindering women from joining the industry.
“As they search for entry-level jobs out of college, look to re-enter the workforce, or decide to pivot into financial services, women often simply do not consider financial advising an option,” the report states.
According to Cerulli, the commission lifestyle associated with financial advisors can also be a deterrent among many women.
“Variable compensation structures present risks that women who seek security and stability from their careers find prohibitive,” the report states.
Broker-dealers and registered investment advisor custodians that address these barriers holding women back will be better positioned to compete in an evolving marketplace.
“It is imperative for firms to closely evaluate the gender makeup of their advisor community and gauge influences that negatively contribute to an unequal gender breakdown,” the report states. “Skirting the issue may prove disadvantageous in an evolving competitive landscape. Advisor diversity presents more than just an opportunity to vary the perspectives and backgrounds of their advisor force for the sake of inclusion.”
In fact, the report makes the case that increasing women’s representation among advisors brings concrete business advantages. According to Cerulli, increasing the number of women advisors could offer a solution to the industry’s impending succession crisis and talent shortage as advisor retirement accelerates.
“Close to 40% of advisors plan to retire within the next 10 years, leaving the industry scrambling to groom replacements,” Shtyrkov said in a statement. “Women present an untapped talent pool that offers a solution to the industry’s recruiting problems. By expanding their focus and altering their recruiting strategies to appeal directly to female candidates, broker-dealers (BDs) and RIA custodians can help fill the gaps left by retiring advisors.”
Another business advantage, Cerulli says, is women’s proclivity for goals-based planning, which fits well into a comprehensive advice model.
According to Cerulli, the reasons driving women to become advisors can differ from those that inspire men to enter the industry. Nearly all (94%) female rookie advisors — 10 percentage points more than their male counterparts — consider the desire to help people reach their goals to be a major factor for becoming an advisor.
Cerulli also finds that the technical aspects of investment management are also less likely to draw a woman to the industry when compared with a man; 59% of women versus 81% of men cite their interest in investment topics as a major reason to pursue a financial advising career.
“[Broker-dealers] and custodians will have better success recruiting prospective women advisors and safeguarding against a future headcount shortage if they accentuate the social impact that an advisor has when working with people to achieve their financial goals,” Shtyrkov said in a statement.
— Check out Investors Increasingly Willing to Pay for Financial Advice: Cerulli on ThinkAdvisor.