Why Are Advisors Still Making the Same Mistakes?

Surveys show many advisors still don’t communicate well with women. Here’s how to keep them as clients.

Gretchen Halpin
Gretchen Halpin

Let’s start by considering the following scenarios:

• A married couple, Jane and Bill, have $2 million in total retirement savings under management by their financial advisor, Jim. With their time horizon shortening, they invite Jim over for a discussion on reallocating assets. After Jim arrives and greets his clients, he asks Jane to make him a cup of coffee. When she returns to the table where Jim and her husband are seated, she realizes that they have finished the reallocation discussion and are talking sports. Jane gives Jim his coffee and listens to the rest of the conversation. But from that point on, she avoids all appointments with Jim.

• Aliyah, an entrepreneur in her mid-fifties, is considering Eric, CFP, to manage her growing company’s profit-sharing plan. After scheduling a meeting with Eric, Aliyah asks him several questions about his investment philosophy, how he is compensated, and whether he has other clients in situations similar to hers. His answers are vague and jargon-laden. She notices that not once in the interview does Eric ask any informed questions about Aliyah, her business, her employees, or her goals.

• Maria receives a call at her law office from her financial advisor, who wants to discuss “some underperformance issues” in her portfolio. James, another partner in her firm, referred her to her current financial advisor. She decides to chat with James, and realizes that her portfolio’s performance over the past year has surpassed the performance of his portfolio. Afterward, she begins a search for a different financial advisor.

Not Attuned to Women

Based on these examples, you may be thinking, “What kind of dim-witted advisors are these?” Or, you may be cringing because one or more of these stories is too close to home. The fact is these scenarios were among the results from surveys of women investors by New York Life Investments in 2020 and Fidelity in 2021. One key lesson from both surveys is that many advisors still are not attuned to working with women, including those over 50. They continue to inaccurately judge women’s knowledge or interest in finances and investing.

Women in the United States currently control some $14 trillion in wealth and are expected to inherit another $28.7 trillion over the next four decades. That means financial advisors can hardly afford to be sending the wrong signals to a demographic so vital to the ongoing health of their businesses. And yet, both the New York Life and Fidelity studies point to many ways that women investors, including those who are in their peak earning years, are still being misunderstood, ignored, and made the victims of ineffective communication by their financial advisors.

In New York Life’s multi-year survey of women clients, over half of respondents said that their financial advisor was “incapable of connecting with them on a personal level by taking time to understand their specific needs.” Forty percent said that financial advisors treat women differently and frequently ignore or dismiss their comments. And 62% said that their financial advisor did not understand their unique needs. All this might tend to feed into the longstanding cultural assumptions that finance and investing is “a men’s club,” and that women just aren’t best suited for success in the financial markets. Yes, sadly, this still happens today.

What’s interesting, though, is that the Fidelity survey of 1,200 male and 1,200 female investors concluded that on average, women’s portfolios outperformed their male counterparts by about 40 basis points per year over ten years. And some studies have placed the outperformance even higher: 0.94–1.2% per year. Contrary to the tired stereotype of women being “too emotional” for investing, Fidelity research suggests that women are more likely to maintain a rational approach. They tend to stick to a buy-and-hold strategy that aligns with their established plan. By contrast, male investors are more likely to make frequent changes in their portfolios, either reacting to market fluctuations or out of the conviction that they can outperform the market. This may contribute to the better performance of women’s portfolios.

While there is some truth to the assertion that women are more conservative investors than men, it requires a closer look. It turns out that women tend to be more reluctant than men to invest until they are satisfied that they have all the necessary information. But once they do, they are more likely than men to carry through on their plans. In fact, women are statistically better savers than men. According to the Fidelity survey, 67% of women earning $50,000 or more annually and who contribute to a workplace retirement plan say they are also investing outside their retirement plans. This percentage is up from 44% just four years ago.

Improving Communication

Clearly, we still have a long way to go in dispelling the cultural assumptions about women and investing. But there is hope. Diane Bourdo and Hallie Kraus of The Humphreys Group, a San Francisco-based advisory firm, uncover myths about women and investing in their book, “Rewriting the Rules, Telling Truths About Women and Money.“ But the larger question for a financial advisor is: Are you communicating in ways that connect with your female clients?

Here are some suggestions on improving your communications with this increasingly important financial planning demographic.

1. Talk to a woman, not at or around her.

As in the first scenario above, too many conversations with clients who are husband and wife focus on the husband and fail to adequately value the woman’s perspectives or concerns. If you want to earn and build on the loyalty of a woman client — married or not — you need to talk about what concerns her in terms that she understands (more on this later).

2. Women are more likely to be concerned about how their decisions will affect others who are important to them.

In other words, it’s not enough to tell a woman, “Fund A will grow at X% long term, which is better than Fund B.” She will probably want to know how that growth will help her meet her goals and benefit the people for whom she feels responsible.

Based on the second example above, you should be prepared to spend more time learning about her objectives, priorities and plans, and less time “selling” her on a particular course of action. Women (like many men) don’t want to be sold; they want to be understood. Once that solid feeling of mutual understanding is in place, you’ve built a foundation for mutually beneficial work.

3. Don’t assume that women aren’t interested or skilled in investing.

As the third example emphasizes, women who commit to an investment strategy are usually better than their male counterparts at sticking to the plan for the long term. Their portfolio performance proves it. But that doesn’t mean that they want to listen to complex analysis or insider jargon. Instead, start with a clear explanation of how a plan of action aligns with a woman’s most important priorities. How will it: help her care for an aging parent? keep her financially secure if her spouse dies? ensure that her grandchildren can enroll at the college of their choice? She will retain the details she needs and take appropriate action more readily.

When it comes down to it, successful communication with women investors mostly comes down to the same good principles we’ve all heard before. Listen more than you talk, ask informed questions, and seek to understand the person you’re communicating with.

Sources

1. R. J. Shook, “Women Feel Ignored by Advisors, Study Says,” Forbes.com, August 7, 2020.
2. Tom Halloran, “How Women Investors Have Proven Misconceptions Wrong,” US News & World Report (online), April 23, 2020.
3. Ellen Sheng, “How Financial Wellness Is Different for Women,” New York Life Investments, March 22, 2021.
4. Fidelity Investments, “2021 Women and Investing Study,” July 2021.
5. Kate Dore, “Women Investors Are Still Outperforming Men, Study Finds,” CNBC.com, October 11, 2021.
6. Kathleen Nolan, “5 Ways to Better Connect with Female Investors,” Kiplinger.com, November 16, 2017.
7. Max Chen, “How Financial Advisors Can Strengthen Relationships with Women Investors,” ETFtrends.com, March 10, 2020.

Gretchen Halpin is co-founder of Beyond AUM, a growth, marketing and technology agency that specializes in serving financial advisory firms. A strategic visionary with over 25 years of leadership and marketing experience, including a history of starting and growing successful companies, Halpin pioneers the strategy and growth initiatives that drive success across every aspect of business while ensuring that decisions are aligned with her clients’ overall mission.

Latest news

BofA: Recession May Force Fed Rate Cut in 2023

A slowdown in rate hikes would tamp down 10-year Treasury yields and some of the volatility that has plagued investors this year, BofA says.

DOL Reverses Trump on ESG Investments in Retirement Plans

The rule makes it easier for plans to offer socially responsible investments, but traditional financial factors must be considered.

SEC Charges Goldman Didn’t Follow ESG Policies

The SEC fined Goldman Sachs Asset Management $4 million for not following ESG policies and procedures.

Hedge Fund Challenges Envestnet

The hedge fund has criticized the board for ballooning costs and authorizing rich paydays for management and board members.

Older investors Still Seeking Guidance From Advisors

A survey of investors 50 and over who consult advisors on wealth management shows what’s top of mind.

Cancer Diagnoses Lag After Screenings Fall During Pandemic

Although Americans are getting back to a normal way of life, they still appear to be avoiding the healthcare system, new research finds.