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Industry Spotlight > Women in Wealth

Female Firm Owners More Likely Than Men to Be Financial Planners

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Women are more likely than men to run financial planning practices, according to the September 2017 issue of The Cerulli Edge – U.S. Monthly Product Trends Edition.

Female advisors in the early stages of their career report entering the profession because they have an interest in helping people reach their financial goals. This is a major factor for 94% of women and 84% of men in the industry.

While both genders consider this factor important, women are more likely to be highly driven by this motivation.

Comparatively, an interest in investment topics is less likely to inspire women to become financial advisors than it is men (59% for women versus 91% for men).

“For advisors who enjoy working with clients toward goals, the goals-based planning process allows them to navigate a client through the emotional tradeoffs of investing and setting meaningful milestones,” the report states. “A comprehensive wealth management process is also more likely to emphasize the softer aspects of a client’s financial well-being, such as family dynamics.”

On average, Cerulli finds that female advisors tend to be more interested in engaging with clients holistically than measuring a product’s performance or constructing a portfolio in isolation.

Women’s preferences for financial planning and lesser interest in investment topics are also reflected in the types of practices they operate.

The report finds that these early-career sentiments continue to play out in the business models advisors settle into further in their careers.

Cerulli examined the principal owners and senior financial advisors of different advisor practice types, segmented by gender, and found that women are more likely than men to run financial planning practices and less likely to focus exclusively on asset management as money managers.

One-third (31.3%) of women who run firms are financial planners, compared with 21.6% of men. Only 6.4% are money managers, less than half the percentage for men.  And only 2.9% of women are wealth managers compared with 6.2% of men. Nearly equal percentages of men (59.1%) and women (59.4%) are investment planners, the report finds.

“An advisor’s chosen business model reflects their service menu and potentially their client core market,” the report states.

Perhaps another indicator that women tend toward financial planning is that the number of women that are certified financial planners is higher than the percentage of women overall in the industry.

“I think the biggest telling statistic is 23% of CFP professionals are women, and that’s a higher percentage of women than in the overall traditional advisor channels,” Joe Maugeri, CFP Board’s managing director for Corporate Relations, told ThinkAdvisor. “I think that says, there’s another proof point that women gravitate toward getting deeper, more holistic arrangements with their clients, and they see that as their strength.”

Overall, women comprise only 15 to 20% of financial advisors in the U.S.

While the number of CFP professionals who are women has remained stagnant over the last 10 years, Maugeri does have hope that’s changing. He said that in 29% of those who took the CFP exam in July were women.

“That’s a nice kind of leading indicator that we’ll get more women and a higher percentage of women going forward,” he said.

As Maugeri sees it, women’s interests in financial planning may even be an asset for the future.

“[Women] are really ahead of most of their male counterparts in terms of thinking about what’s going to be important in the future,” Maugeri said. “Because technology has been automating many tasks — particularly around investment management – firms are seeking to justify the fees they’re charging clients. And they need to add more value — and one of the ways they do that is through financial planning.”

According to the Cerulli report, female advisors’ inclination toward planning also affects how receptive they will be to certain resources and communications from asset managers.

“As asset managers evaluate how they approach distribution for different advisor segments, they should consider how gender and its ties to practice type may affect preferences for doing business,” the report states.

Close to three-quarters (73%) of women find unbiased product recommendations from wholesalers very valuable, compared with only 43% of men. Women advisors are also more likely than their male counterparts to consider advanced financial planning techniques (59% for women versus 44% for men) and portfolio construction recommendations (55% for women versus 31% for men) to be valuable offerings from their wholesaling partners.

Female advisors who have oriented their practices toward wealth management are more likely to appreciate sophisticated planning techniques to address complex cases.

“Portfolio construction recommendations are helpful because women advisors generally dedicate less time toward investment management in favor of other planning-focused services,” the report states.

The report also notes that individual preferences still differ regardless of gender.

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