Today seems like a good one to restart my blog after a long hiatus. As director of FA’s Invest In Women conference, I am sure it won’t come as a surprise to you that I’m going to focus mainly on issues important to women—advisors and clients. I’d really like to hear what our readers have to say about any topics that I write about, as well as any that you think I should write about.
One topic that interests me in particular and that has repeatedly been raised in the financial advisory business is the shortage of women advisors. Study after study over the last 10 years has pointed out the benefits of having more women advisors and, for that matter, more advisors of color, yet their numbers have stagnated.
The industry knows how important it is to get more women into the business because clients are increasingly women. Contrary to persistent stereotypes, more than half of women now control their household finances and have responsibility for saving and investing. A lot of women have worked their entire lives in professional occupations and have saved significant sums for retirement. Women should not be looked at through one lens, even if they have had traditional roles in their families. All female clients don’t need to talk to a woman advisor, but enough of them feel women will understand their needs better than men that the industry recognizes it will hurt the business not to have more women.
The problem of not enough women is not limited to the financial advisory profession: It’s pervasive throughout the financial services business. McKinsey & Co. released a comprehensive report today on the subject. Its research provides perspective on what needs to happen for the underrepresentation of women in the financial services industry, particularly in leadership, to truly change. One important recommendation in the report, "Closing the Gap: Leadership Perspectives on Promoting Women in Financial Services," is that firms should set specific targets to hire and promote women and make parity a strategic priority. That level of commitment hasn’t happened yet in most firms.
The lack of women in leadership is not because women aren’t entering financial services. According to McKinsey, women and men make up roughly the same portion of entry-level financial services staff, but women account for only 19 percent of people in the business’s c-suite jobs, slightly lower than the 22 percent of women in such jobs overall. The lack of women in financial services jobs is not because women are leaving to have babies. McKinsey found company-level attrition among females is either equal or lower to men for every financial services role, except for the most senior positions. What’s happening is that women lose ground at every stage of their career, with the biggest drop happening early on. Women are 24 percent less likely to attain their first promotion than men, McKinsey found, and it’s not because women don’t ask for one. It’s worse for women of color; they are promoted at lower rates than white men and white women, the report said.
The report does include a lot of other recommendations, many of which you’ve heard before but are nevertheless good ideas, including better sponsors for women, eliminating bias in reviews and promotions, and giving employees flexibility to balance work and family. Setting targets for hiring and promotions of women is probably the most controversial recommendation; some people would call such targets quotas—reverse discrimination. Yet the idea at least is a dramatic one. Changing the business sooner than later seems to need more dramatic solutions.
What do you think?