The following is in response to Lisa Kueng’s article, The Top Three Myths about Women Investors, which appeared on March 27:
In her recent article, Lisa Kueng identified several flawed assumptions that financial professionals often make when serving clients who are women. Among them, that by creating marketing initiatives “designated as being women-focused” or by “focusing on the special financial challenges that women face,” financial professionals often overlook the individual financial needs of clients who just happen to be female.
Let me offer another area where financial professionals miss out on all too frequently. Some advisors ignore their women clients altogether. Chances are that women, as part of a couple, already constitute about 50% of a financial professional’s business. And while a financial professional may be working to meet a female client’s needs, he often does so only through her husband. In our recent study, “Women Are Not a Niche Market. They are a Significant Business Opportunity,” we found that even though wives, as part of a married couple, may be clients of an investment advisor – and may have assets separate from those they share with their husbands – many are not invited to face-to-face meetings with the professionals who manage their family’s assets.
Ms. Kueng rightly calls out financial professionals for poor messaging. A complete absence of messaging or, for that matter, communication of any kind, can have an equally toxic effect on the advisor-client relationship. Indeed, according to Financial Advisor Magazine. “The Emerging Profile of Women Investors,” it is estimated that 70% of married women fire their financial professionals within one year of their husband’s deaths. Women who go through a divorce are also very likely to leave their husbands' advisors, a significant business risk for financial professionals when today's divorce rate hovers at 50%, according to the 2009 CDC figures. There is no reason why the wife should not remain with the current investment professional if there is an advisory relationship she considers worth preserving.
In researching the relationships that women investors have with their advisors, we identified several moves that financial professionals can make to better serve their women clients. Ms. Kueng writes that women react negatively to being stereotyped and that they “want their individuality, not their gender to be the focus” of the relationship. While this is absolutely true, financial professionals should also understand that even taking into account individual circumstances, women and men often take different approaches to investing. Financial research routinely shows that, as a group, women tend to prefer lower levels of investment risk than their male counterparts. In a study by the Sullivan Trust, the percentage of women who describe their investment style as “somewhat aggressive” was less than half that of men (13 percent versus 28 percent). Yet, roughly one in seven single, married, partnered or divorced women describe themselves as “somewhat aggressive” investors. The lesson here is not to assume that women investors will avoid or embrace risk, but to understand how specific circumstances and life experiences can impact the way all clients -- especially women -- view money and investing.
According to a study from the Boston Consulting Group, “Leveling the Playing Field: Upgrading the Wealth Management Experience for Women,” the amount of wealth controlled by women is expected to grow at an average annual rate of 8% from year-end 2009 to 2014 and their influence in long-term financial decisions is only going to increase. Knowing this, we encourage financial professionals to strengthen their relationships with women who are existing clients by focusing on their needs as individual investors, not simply as partners in a marriage. We also suggest that advisors become outstanding listeners and teachers and gain a deep understanding of women’s unique investment requirements, goals and concerns. Such steps can go a long way in redefining and improving relationships with individuals who, collectively, control roughly two-thirds of annual spending in the United States today.
Head of Global Marketing
Pershing, a BNY Mellon Company
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