How Financial Services are Failing Women
Why Generational Shifts Mean Advisors Must Tailor Their Advice or Risk Losing Their Business
The coming Great Wealth Transfer will see women control more money than they ever have, with estimates showing they will control at least $30 trillion by 2030, as a result of their longer life expectances. The male-dominated financial services industry has failed to support and engage women meaningfully, and there is a need to shift how advice is framed and delivered to women. Almost 40% of women say that financial advisors are patronizing, and approximately 30% say financial advisors are less likely to listen to investing ideas from them. They want advisors who listen to them, but 40% still feel ignored by their financial advisor. The next wave of growth in wealth management is women, however until there are more in wealth management, the industry needs to understand the differences between men and women to tailor messages more effectively.
Why now?
Beyond the coming Great Wealth Transfer, we are in the midst of major demographic shifts that are shaping men and women—creating divergent paths. By 2030, women are going to be majority breadwinners in the United States for the first time in history. Women are:
Attending college at higher rates than before
Buying houses at higher rates than before
Outliving men, meaning they need to save more for retirement than men
Spending more money in retirement on healthcare than men
Paying more for everyday goods, products and services, such as deodorant, haircuts, and dry cleaning, simply because they’re “for women” — known as the “Pink Tax”
Focusing on friendships over dating and marriage, with nearly 50% of women saying being married was not too or not at all important for a fulfilling life, compared with 39% of men—up from 31% and 28% in 2019 according to Pew
More likely than men to adjust their career to take on more caregiving responsibilities—such as raising children or caring for elderly family members
How Women Relate to Money Differently Than Men
Beyond the numbers, women are emotionally tied to money in a different way than men. They are more conservative when it comes to investing. They get more attached to the things they own, as evidenced by female investment managers earning higher investment returns than men because they trade less. Conversely, they are more charitable, especially high net worth women, giving away a larger percentage of their wealth as their income rises. Despite this fact, extensive research reveals that financial advisors perceive female clients as having less control over their investments compared to male clients—with over 25% of advisors adjusting their advice based on gender. And this isn’t limited to male advisors, with both male and females advisors being prone to recommending lower-risk portfolios to women—regardless of their actual profile.
How can financial advisers better serve women?
About 90% of women are going to be responsible at some point in their lives for their finances, yet the majority of advisors say they make up no more than 30% of their client base. Over 80% expect that number to grow in the next five years, however this will be dependent on understanding the differences between the genders when it comes to their emotional attachments to money. Given how many women feel patronized or ignored by their financial advisors, advisors must shift their approach to advising them, both in terms of content and frequency. The top reason advisors said they’d been fired by their female clients was lack of timely communication, so it's important advisors ask for how and when their clients want to be contacted.
Women want to be spoken to in a different language than men, that’s comfortable to them. As Cary Carbonaro—a certified financial planner and the author of the new book "Women and Wealth,"—explains, male advisers routinely talk about beating the S&P 500 by using sports analogies. She emphasizes that women are not concerned with beating the market, they care about whether they are going to be okay, whether they will run out of money, and whether their children are going to be okay. Approximately 65% worry they will outlive their retirement savings. They contemplate each financial decision more, whether it's going on vacation or buying a second home, because the stakes are higher for them. Their financial journeys often include career breaks, caregiving responsibilities, and longer life expectancy. They need confidence that their advisors can tailor plans for these differences.
The Takeaway
The key is not dumbing it down, but framing the conversation in terms of life goals, rather than dollars and cents and jargon. Research indicates that women are asking for long-term planning aligned with their life goals, jargonless communication that builds trust, and a partnership that reflects their values and priorities. Advisors need to understand the social dynamics that also present challenges for women breadwinners, and how they might relate to their friends who are not the primary breadwinners in their family. Advisors must tailor strategies to reflect life stages and advisors will likely turn to new technology-powered financial tailoring platforms to ensure objectivity—like our goals-based permanent life insurance tailoring technology at Optifino. And finally, advisory firms need to diversify their advisory teams, specifically recruiting more women and listening to their perspectives on how to improve.
Incredibly valuable information. Thank you for the work put into this and sharing it