Women investors are becoming a significant factor in the retail investment industry, and if financial advisors and financial planers want their businesses to thrive in the long run, they must understand what women want when it comes to matters relating to their investments.
Consider the following: Women now control about a third of all financial assets in North America and $1.1 trillion in financial wealth in Canada alone, according to recent research from Investor Economics Inc. Yet, according to a recent Boston Consulting Group study, 73% of women report being “unhappy” with the service levels they received from the financial services sector. In contrast, a Bank of America Merrill Lynch study showed that 90% of men say the financial services sector serves them well.
Furthermore, it is estimated that 80% of women in Canada switch financial advisors within a year of their husband’s death. And for these women, their overwhelming response as to why they switched financial advisors is that they don’t feel respected. As women are becoming a powerful force in money decisions, those who ignore women do so at their own peril, as highlighted in an extensive StrategyMarketing.ca report.
Specifically, women investors are different than their male counterparts and have unique traits that financial professionals need well be aware of, including the following:
- Women are less tolerant of jargon such as basis points or alpha. They want you to talk “with” them, not “at” them. They also want you to listen to their concerns, be part of the conversation and engaged. Basically, they want information, not a sales pitch.
- Women focus on risk and value wealth preservation seven times more than they value upside gains. Discussions about risk should be a major focus with female clients, as they would rather keep large amounts of money in bank accounts than risk losing it through riskier investments.
- Women view themselves and the net present value of their future earnings as their greatest assets .Therefore, using a lifestyle approach through advisor coaching on how to get a pay raise is more important for some women than market returns, savings rates and asset allocation.
- Women are goal-oriented and look for long-term security. In particular, they want to know how they can send their kids to college, how they can afford their homes and how they can retire well. They are not as interested in many traditional metrics such as how portfolios did against the market.
- Women want to have a fair return and a positive impact through their investment decisions. They have embraced environmental, social and governance (ESG) investing and want ESG investments with a fair return.
There are various reasons why financial planners and financial advisors should embrace women investors now. Simple demographics show that baby boomer men are beginning to die at an unprecedented rate. Canadian men die five to seven years before their wives and four times as many women were widowed in 2013 as men. This shows that huge amounts of wealth will be left to their widows in the near future. Financial planners or financial advisors will need to take the time now to build a relationship with the future widow.
In addition to their growing numbers and the size of their wealth, women investors can be outstanding clients as they are extremely loyal. They seek advice more than men by a rate of 46% to 34%, according to research by Bank of New York Mellon and its subsidiary Pershing LLC Women clients will likely stay with you longer than men and are much more likely than men to refer you to their friends and family as women have reported making 26 lifetime referrals, on average vs 11 for men, according to the book How to Give Financial Advice to Women by Kathleen Burns Kingsbury.
The status quo is changing and women are gaining more power and wealth. Thus, financial planners and financial advisors need to understand what women want and how they can adjust their approach and service offering to embrace women investors. Those who don’t will not retain or attract these growing number of affluent women investors who represent more than 50% of the population.