Over and over again you have been told about a demographic phenomenon, which concludes in several years with women controlling almost all of the available wealth assets. What you haven’t been told is how threatening this revolutionary disruption is to male financial advisors. This is no time for complacency. Read on.
Recently, my team at Wealth2k introduced, Women & Income, the first retirement income solution developed expressly for “boomer” women. Before committing to this project, we delved deeply into the research on women’s investing objectives and preferences. In this article, I will share much of what we learned.
I think it’s safe to say that the financial services business is at a crossroads. Because they represent the future of wealth management, the industry’s center of gravity must necessarily shift to women. But are we prepared to serve their needs?
Consider this question: How would you describe an industry that, in seven out of 10 instances, is rejected by its current customers?
You might say that it is unhealthy. Or in need of reinvention. Or even destined to fail. Most surveys on this subject are not overly scientific, but when combined with anecdotal evidence, it's clear many, perhaps most, widows ditch their husbands' advisors.
This is the unfortunate state of the financial advisory business, where widows choose to fire seven out of 10 male advisors following the passing of their “boomer” husbands. This is nothing less than a massive indictment of the status quo in the financial advisory industry.
Why does this happen? What are its long-term implications in the larger context of societal transformation? And what does it tell us about needed change?
Firstly, the industry needs to recruit more female financial advisors. While women represent 25% of CFPs, their share of the overall financial advisors population is just 14%. Both numbers reflect poorly on the industry. Even if aggressive recruiting efforts are undertaken, progress in attracting women into the planning field will not be nearly enough, soon enough.
For the foreseeable future, and driven by the composition of the financial advisor population, divergent investment objectives and contrasting priorities, what I call "the great mismatch" is likely to continue.
In an industry where 75% to 86% of the financial advisors are male, but where the future is all about women, it’s time for men to acknowledge that, "Maybe I don’t relate so well!”
Clearly, men need to get better at building authentic relationships with women clients. That is the best outcome we can hope for over the short term.
Consider women’s investing priorities and how they differ from men. The importance of goals, risk-reduction and confidence are three findings that are seen repeatedly across multiple research studies. But these critical dynamics not being recognized.
BCG found that, "Women remain largely underserved by the wealth management community."
BCG also determined that, "Too many firms rely on broad assumptions about what women are looking for, resulting in products, services and messaging that can feel superficial at best and condescending at worst.”
The American College Center for Women in Financial Services says that, “To date, wealth managers and advisory firms have been slow to respond to the demographic and social changes that are transforming the market for financial advice, and many are missing the significant market opportunity that women represent.”
How would we quantify the scope of the lost opportunity?
Oliver Wyman estimates that financial services firms are missing a $700 billion revenue opportunity by failing to meet women’s needs.
J.P. Morgan recently stated, “We see a huge opportunity to help women build their wealth for the long term—however they choose to do it. That starts by actually listening to them.”
And, I would add, as an industry, viewing women in more than an inaccurate, historical context.
McKInsey says that, “Women are more likely than men to expect to encounter gender stereotypes...”
If these problems are not addressed, I’d go as far as saying that, in the retirement income market, within five years, it will be impossible for a male advisor to remain successful unless he can relate to, and work effectively with, “boomer” women.
Let us explore the dynamics of the great mismatch that led to the status quo.
When it comes to money, too often men make flawed assumptions about women. This can make her feel undervalued, by unintentionally talking down to her. And by:
• Assuming a man is the decision-maker
• Assuming a woman wants direction
• Assuming that a couple’s finances were merged and jointly invested
• Assuming that all women are more risk-averse
• Assuming that women are less knowledgeable than men about investing, and,
• Misinterpreting her silence and nodding as agreement
Over time, by focusing his attention on the husband, the male advisor can ignite a process of low-grade, systematic alienation of the spouse.
Marcia Mantell, a longtime friend and one of our greatest experts on retirement income, the author of two books on retirement planning for women, leads the financial advisor coaching component of Wealth2k’s Women and Income solution.
In a recent Financial Advisor magazine article, Marcia addressed the alienation of the female spouse:
Mantell says she’s often spoken with jilted advisors who surprise her with their naivete.
"After losing a woman client, an advisor will say he never realized there might be a problem in the relationship," she says. "That’s not accurate. What he never realized was, there wasn’t a relationship."
So, what accounts for the great mismatch? I’m sure the answer is multifactorial, including outdated perceptions, stereotyping and the fact that husbands have traditionally made the majority of investment decisions.
According to UBS, “Just 20% of couples participate equally in financial decisions, with seven in 10 men taking the lead on long-term financial decisions.”
McKinsey says, “In two-thirds of affluent households in the United States, men are the key financial decision makers. But this is about to change.”
It won’t remain this way.
There is no denying the fact that women are the future of wealth management. Thirty trillion dollars says so.
According to BCG, “96% of males…base their investment decisions on an asset’s track record for growth and yield.”
EF finds that, “Unlike men, women view achieving their personal goals as more important than investment performance.”
“Men place a stronger focus on historical performance and the process for individual stock picking…”
“Women tend to prioritize risk reduction,” concludes UBS.
IPC Private Wealth says, “Most women, seek security over prosperity.”
It’s crystal clear that women value, “… risk reduction and doing good, men place a stronger focus on historical performance.”
McKinsey finds that, “Female decision makers tend to be less risk tolerant and more focused on life goals.”
And, “Women seek hyper-personalized, outcome-based financial advice that meets their real-life goals.”
I think you could describe the difference as ROI versus ROR.
Men care about investment, growth, yield, performance and stock picking.
Women care most about having an authentic relationship.
Women want to be listened to, have their objectives understood and their investment strategy aligned with their values, goals and priorities.
BlackRock summed it up rather nicely: "Simply put, when it comes to money, women and men today see the world quite differently."
Male advisors should know that women are happy to work with them, as long as these are the qualities that define the relationship. There is no time to waste. With almost 12,000 Americans turning age 65 each day, and the initial “baby boomers" now 76 years of age, retirement income planning needs are going o remain the signature business opportunity for years to come.
I believe the future is bright for financial advisors, including the male majority, if they're just willing to move past the great mismatch.
Author’s Note: You may watch a video that addresses the issues I cover in this article by clicking here.
Wealth2k founder David Macchia is an entrepreneur, author, IP inventor and public speaker whose work involves improving the processes used in retirement income planning. David is the developer of the widely used The Income for Life Model, and the recently introduced Women And Income. David has authored many articles on the subjects of retirement income planning and financial communications. He is the author of two books, Constrained Investor and Lucky Retiree: How to Create and Keep Your Retirement Income with The Income for Life Model.