What do you call a group that makes up more than half of the population, 60 percent of college students, and the majority of U.S. wealth? They start businesses at twice the rate of men, buy first-time homes at a greater rate than men, and are breadwinners or co-breadwinners in 60 percent of households?
The group is women. And one wealth management industry publication recently called this group a “niche market,” terminology used by a number of the firms themselves. Names and labels are always revealing, and this one demonstrates the mindset of the industry toward women and begins to hint at the risk of this outdated stance.
But first, add to this that women live longer than men by six to eight years on average, live healthier, and that, on the death of their spouse, women stay with the couple’s financial advisor less than half of the time. As a result, the threat to the traditional wealth management firms begins to take shape.
How has this happened? It is likely some combination of the following: Gender roles have traditionally designated the “man of the house” responsible for financial matters. Research has shown that women tend to be more cautious in taking action in situations involving uncertainty. And, perhaps part and parcel of this, women tend to choose their financial advisor more slowly than men do. On well more than one occasion, I have heard from financial advisors that they have targeted women in their practice, but that they have been unsuccessful; I have also heard from women that they have been courted by advisors, but that, just when they were ready to sign on, the advisor had moved on.
Yet another hypothesis has related to the under-representation of women in the wealth management industry. Women make up a high-teens percentage of advisors at the largest firms and a smaller share at others, numbers that have been stagnant for years. While the research, and opinions, are split as to whether women clients prefer women advisors, the fact that the large firms have been trying mightily to increase this proportion for years but have failed to get the numbers above 20 percent, speaks volumes to an underlying mindset.
And this mindset can show in how the industry can speak to and about women. Ads that urge women to invest in the market instead of in a pair of shoes may be intended to be funny, but they come off as patronizing and condescending. Women can have different financial needs and approaches than men—often driven by their longevity—but in exactly no way are these different needs solved by the proverbial pink financial statements.
So what are the solutions? Well, one is the laissez faire approach, and it’s not a crazy one to trust that financial advisors will begin to move in this direction. Advisors have always done a much better job of updating their business than they are given broad credit for. Think of the industry’s move from straight-forward brokerage to the comprehensive wealth management offerings today as a case in point. There is reason to believe that savvy advisors—particularly newer ones looking to grow their business—will continue to move where the opportunity is, rather than battle to eek out tiny market share gains in relatively over-served market segments.
But the wealth management firms should note that women’s dissatisfaction with the current state of play has not gone unnoted by the industry disrupters. For financial service start-ups, there are few markets as large and appealing as this one. In fact, barely a week goes by that I do not hear from a start-up or a venture capitalist with a new approach for serving women. Someone will get this right at some point.
Thus, the traditional wealth management firms would be well-advised to provide additional training for their advisors on how to more effectively engage with women. Behind-the-glass observations of advisors interacting with clients have shown that male advisors have tended to spend much, much more time engaging with the male client than the female client. And they have spent much more time discussing trading strategies than solutions for longevity risk.
Another solution centers on getting more women advisors into the business; part of the answer may well be to continue the move to more advisor teams. Whereas the industry historically brought in advisors and gave them some training, a desk and a phone, chances for success increase significantly when new advisors join the business directly onto a team. The speed of knowledge acquisition is increased significantly, and the client experience is improved. The flexibility that teams provides for all advisors—and perhaps particularly those juggling work and primary family responsibilities—is of high value. (Interestingly, private banks, which have a greater team orientation, have a much higher proportion of female client-facing professionals in their ranks, with women approaching half of the total at a number of firms.)
Along the same lines is providing more opportunities for advisors to network with each other. Networking is the most cited “unwritten rule” of success in business. And research further shows that professionals tend to be more comfortable providing professional advice and feedback to their own gender. (Not great, I know, but it is what it is.) Before one notes that advisors tend to prefer to hold their secrets to themselves for fear of competition, one need only attend the Barrons Women’s Advisor conference to see the sharing of advice that occurs there. Others have solved the competition issue by setting up small best-practice-sharing groups with each member from a different part of the country; they get together and “open their books” on their best practices, with each participant improving as a result.
I have seen the power of relationships in my own career. As a young research analyst, I had a mentor who took years off my learning curve. I had strong advocates in certain jobs and was left to “sink or swim” in others.
As a result of my belief in the power of networking, and particularly for women, I recently invested in 85 Broads, a 30,000-strong professional women’s network. This network was started for Goldman Sachs alumni, but has since grown across industries and across countries, while maintaining a strong presence in financial services. By providing this forum for women to invest in their own professional development, as well as in other women, I look to help our industry make a dent in its biggest growth opportunity.
Sallie Krawcheck, past president of Bank of America’s global wealth and investment management unit, owns 85 Broads, a network of more than 30,000 female entrepreneurs and executives.