Female Clients Shun Wall Street; Indies, Step Up!

While the Certified Financial Planner Board of Standards may have hitched its business model to Wall Street (see “A Category Is Born: CFP Professional Practices,” Investment Advisor, April 2016), the independent advisory industry — which, ironically, was started by financial planners in the early 1970s — was built as an alternative to the Wall Street marketing machine and big-firm conflicts of interest.

In recent years, the independent advisory world got a major boost by the market meltdown in 2008, and then by the brokerage industry’s widely publicized resistance to the DOL’s seemingly reasonable attempts to apply ERISA’s requirement to put retirement investors’ best interests first to advisors who “help” investors with IRA rollovers. Back in December, Pollara Strategic Insights conducted a survey for online investing platform WorthFM.com that identified a major — still underserved — market for independent advisors: women (see “Why So Many Women Diss Wall Street,” ThinkAdvisor.com, March 18).

I know, there are a number of current industry initiatives aimed at attracting and serving female clients. Yet according to WorthFM, there is still substantial opportunity to serve this apparently woefully underserved market. What’s more, its survey revealed a number of opportunities for independent advisors to fill this void.

I have to admit that in this age of doctored data, I was a bit skeptical of a survey, sponsored by a website launched and run by women that offers financial advice and information for female clients, that found women are underserved by the financial services industry. Yet what I found was an excellent, very professional survey offering a great deal of detail on how a wide range of female investors answered 83 well-worded, well-organized and revealing (as opposed to leading) questions. The results, which are broken down by age group, provide considerable insight and a few surprises about how women feel about investing, financial advice, the financial services industry and what advisors need to offer to meet their needs.

The survey involved 1,501 women, divided evenly between 500 baby boomers, 502 Gen Xers and 499 millennials. Surprisingly, the answers to most questions were evenly spread across all three age ranges. Over three-quarters of them had some college, or a college or graduate degree. Fifty-eight percent worked part-time, full-time or were self-employed. Over half were married; of those who weren’t, most had never been married. Sixty-two percent had children. Twenty percent had pre-tax household incomes of more than $100,000, and 20% had more than $25,000 in investable assets. While this doesn’t exactly fit the target market of most independent financial advisors, it seems reasonable to assume that the older participants would have incomes and assets much higher than the averages.

One of the most surprising — and encouraging — findings of the survey was the answer to Question 10M, in which participants were asked to agree or disagree with this statement: “I was raised to believe that in a household, it is the man’s responsibility to manage household finances.” Only 27% of the women surveyed “agreed,” while disagreement ranged from 65% to 68% across all three age groups.

This upbringing seems to have translated directly into reality, as shown by Question 2: “How much responsibility do you currently have when it comes to your/your family’s decisions about investing money?” Some 44% of respondents indicated they have “primary responsibility” for household investments (from 42% to 48% across age groups). Another 45% said they share that responsibility. In case math isn’t your strong suit, that’s 89% of the women surveyed actively participating in their family’s investments. I’m sure many advisors have already figured this out, but for those who haven’t: Failure to actively include wives or significant others in portfolio decision making may be seriously damaging your client relationships.

If that doesn’t get your attention, try Question 1: “Have you ever been, are you currently, or do you expect one day to be solely responsible for managing your finances?” Eighty-four percent answered “yes,” ranging from 82% for millennials to 85% of boomers. Advisors who want to keep their AUM long term had better get both spouses on board today.

Another surprising answer came in Question 10L: “When saving and investing is discussed in the household growing up, it has a positive impact on money habits down the road.” Some 74% of respondents agreed, evenly spread from 73% to 76%. This represents another opportunity for advisors to strengthen their relationships by guiding clients in how to have these discussions with children and even actively participating in them. Forming educational relationships with clients’ children can go a long way toward the Holy Grail of the advisory business: building a multigenerational firm.

Why Women Do (and Don’t) Get Advice

Another interesting insight from the survey came in Question 9A: “Which of the following have prompted you to invest?” Answers broke down as follows:

• A new financial goal, such as retirement, buying a house, paying for college: 30%

• A sudden windfall, such as an inheritance, a bonus, a raise: 27%

• Life event: marriage, a baby, divorce, death of spouse: 27%

• A new job: 22%

• An employer communication about its retirement plan: 21%