For all the talk of “embracing change,” the majority of independent firms and financial advisors continue to struggle with one shift that could redefine our industry in the decades to come: the increasing importance of women as financial advisors and clients.
Despite the fact that women are the primary breadwinners in 40% of U.S. households and own 30% of our nation’s privately-held businesses, women remain starkly under-represented in senior home office positions and advisory practices around the country.
Although current advisors – both male and female – are doing a great job servicing clients today, the gender gap is a real issue because it directly impacts our industry’s long-term success. Women represent only an estimated 16% of the total advisor population today. With numerous studies estimating that women will own two-thirds of the country’s wealth by 2030, advisory practices and firms are leaving significant growth opportunities on the table if they aren’t proactively thinking about how to attract and service this unique client segment.
(Related: Wealthy Women Prepping for Wealth Transfer)
To put it simply, this is one change our industry cannot afford to ignore.
Increased Diversity Will Fuel Growth
The growing community of female investors wants to work with female advisors, whether one-on-one or as part of a team. Multiple industry surveys demonstrate that female clients trust female advisors more than their male colleagues to act in their best interests, and that they have more confidence in the investing skills of female advisors. In fact, a study by the Insured Retirement Institute found that 70% of women who are seeking a financial advisor would prefer to work with a female.
Why? Anecdotally, it seems evident that both female investors and advisors tend to prefer a financial planning approach that prioritizes quality of life over the long run versus asset accumulation for its own sake.
This alignment of preferences strongly suggests that, in order to effectively capture, engage and serve female clients, our industry must educate and incentivize more women to become advisors and empower them to succeed once they have entered the profession. This is crucial not only to advance the role of women in the industry, but to ensure that our industry can continue to grow in a way that aligns with the changing face of the client community.
A recent Cerulli study offers signs of encouragement. While established female advisors only make up about 16% of the overall advisor population, almost one-quarter (24%) of new advisors are women. This means there’s clearly interest among women in entering the advisor profession, and it’s up to our industry to actively cultivate it.
We can achieve this by, among other things, aligning them with opportunities to excel in building relationships with clients – including Gen X and millennial investors, who are often very receptive to a female advisor’s approach to the business.