Understanding their goals is more important than your investment track record.
Editor's Note: This is the second of three articles based on a recent survey of 743 women with at least $3 million in investable assets that examine: 1) who they are, 2) how they find and interact with financial advisors, and 3) which financial products and services interest them.
As every financial advisor knows, the days when women remained in the background as helpmates and let their husbands handle the finances have long since passed. Today, women are very obviously a force to be reckoned with financially, economically and, for the advisors who want to work with them, professionally.
To learn more about wealthy women, we conducted a study of 743 women who had at least $3 million in investable assets (excluding business and real estate property interests that were not easily converted into cash) and were also the principal financial decision-maker when it came to the disposition of those assets. All told, they had $4.85 billion in investable assets, or just over $6.5 million each, on average.
The Story So Far
In last month's article, we cited statistics that underscored the financial clout of females, including the fact that 43% of Americans with more than $500,000 in assets are women, according to Merrill Lynch. The majority (61.5%) of respondents in our study were from 45 to 54 years old and had a college degree (61.0%). Many of them, 40.1%, were married for at least the second time, compared with 34.2% who had been married only once. As for their wealth, those in the largest group, 31.4%, were wealthy because they owned a business or operated a family business. Another 24.8% got their money through inheritance, and 21.9% became wealthy through their job. Finally, we found that the respondents had very strong feelings about managing their own finances, with 76.4% saying they didn't want to be dependent on anyone else. At the same time, they understood the importance of professional help, and 79.0% said they wanted to rely on experts for guidance.
Women Of Wealth And Advisors
This time, we're going to see what affluent women expect from their financial advisors, how loyal they are to those advisors, how often they change advisors and why they do so.
As Exhibit 1 illustrates, women have somewhat different criteria than men when it comes to what they want from their advisors. The top two responses in particular, values and listening skills, call for more of an emotional client/advisor connection than male advisors might be used to forging with their male clients, who are more often most interested in their advisor's technical skills and investment returns. One other commonly held expectation, the advisor's problem-solving ability, was very much in keeping with what we have heard from affluent clients of both sexes over the last few years, particularly during the extended stock market downturn. Wealthy clients understand that the unexpected does happen-they are fired, they inherit millions, they get sued, they get divorced and remarried-and they want their advisors to be both attuned and capable enough to help them handle whatever situation may come up.
Slightly less than half of the respondents wanted to be sure that their advisors understood-and could help them clarify-their goals and values, and made sure to set the parameters for the relationship, especially when it came to how often to be in touch. The desire to be charitable, a natural extension of coming to understand their values, was important to about one-quarter of the respondents. At the bottom of the list and almost off the radar were the need for their advisor to be a friend-they wanted a professional and empathetic counselor, not a pal-and the desire for any kind of personal financial management.
They'd Rather Stay, But Still Switch
Nearly two-thirds of the respondents (61.4%) said they would transfer their assets to stay with the right financial advisor, yet nearly all of them had at one time or another switched advisors while trying to find the right match (Exhibit 2). Clearly, the loyalty of women of wealth can't be taken for granted.
And while we already know what women prize in financial advisors-exemplary personal values and superior listening skills-what compels them to leave one advisor for another? The answer was definitive: nearly three-quarters left because they felt that their advisor did not understand their goals, with poor investment performance finishing a distant third on the list (Exhibit 3).
Again, this is very much in sync with what we have learned from other surveys that we've conducted examining the trends and behaviors of affluent investors. While wealthy clients may be initially drawn to an advisor because of great investment returns, it is a poor interpersonal relationship, not poor investment performance, that most often sets them looking for a new advisor. Whether the client is male or female, making money is simply one element, however important, of an integrated relationship that must take into account every aspect of the client's financial and personal lifestyles.
In next month's article, we'll see which financial services and products interest women of wealth. Hannah Shaw Grove is managing director and chief marketing officer of Merrill Lynch Investment Managers. Russ Alan Prince is president of the consulting firm Prince & Associates.