Why the Finance Industry Needs to Earn Women's Trust

Today, women hold more economic power than ever before.

This is an exciting and unprecedented shift.

But to fully embrace it and the opportunity it brings, women must become better money managers.

Increasing women’s collective financial prowess is crucial to their lives as individuals, as family members and as stewards of wealth for society.

The Facts About Females and Finance

In the United States:

• women are increasingly out-earning men – 28% of women in heterosexual marriages currently out-earn their husbands and by 2028 the average American woman is expected to out-earn the average American man.
• women are behind 85% of all consumer purchases including influencing purchases in categories traditionally thought to be controlled by men (for example, consumer electronics and cars); and
• women exercise decision-making influence over $11.2 trillion of investable assets (representing 39% of the total investable assets in the United States).

The Confidence Gap

Despite this growing trend, there is a disconnect between women and money.

Recent research from The Center for Talent Innovation found that, “American women, despite being among the most financially literate women in the world, are 44 percent less likely than American men to consider themselves knowledgeable.”

Women’s need for support in securing their long-term financial well-being is particularly pressing given the specific challenges faced – on average, women live longer than men, they are more likely to spend time out of the workplace, and often fill the role of care-giver.

Consequently, it is imperative that the finance industry helps women to close the confidence gap. But, in order to do so, the finance industry must also close the trust gap.

The Advisor-Client Trust Gap

It’s unsurprising that given the financial adviser community’s primary experience is working with men that there will be challenges as women increasingly assume the role of the client. Per Nelli Oster of Blackrock, “women’s different approach can lead to misunderstandings and strain in the adviser-client relationship.”

Indeed, in some circumstances women even admit to feeling denigrated and dismissed by financial advisers.

The Center for Talent Innovation believes that “without financial advisers, women might be more likely to under-invest than men.” For retirement purposes, and especially given women’s specific circumstances, under-investment can be disastrous.

Meeting Women Where They Are

With respect to individual adviser-client relationships, women generally look for professional support that attends to their needs in a holistic manner: “[W]omen usually want to be educated, and not just about products and fee structures, but also about financial planning skills and investing in general.”

Oster recommends that advisers improve their knowledge with respect to the issues that are more likely to affect women. These factors impact both what women need in order to build wealth, as well as their motivations for doing so.

Advisers must also recognize women’s most precious commodity – time. Women breadwinners still assume a disproportionate amount of childcare and housework. Advisers who are sensitive to this “are 69 percent more likely than advisers who are not to forge a satisfactory and enduring relationship”

Despite less than optimal experiences with the male-dominated adviser community, the Certified Financial Planner (CFP) Board, which is working to increase the proportion of female financial planners, found that women do not have an aversion to working with men.

That said, this preference may be impacted by the dearth of supply – given just 31 percent of financial advisers are women. If the number of women in the industry increases, the desire to access advice via a female professional may also increase as it becomes more the norm.

A Feminine Approach to Finance

Women financial planners surveyed by the CFP Board believe that “financial planning requires strong communication and listening skills, and a holistic approach to clients’ financial circumstances.”

These skills, alongside collaboration, transparency and empathy, are “feminine attributes” and are generally accepted to come more naturally to women. These are therefore likely to be attributes sought by women from their advisers and from the industry as a whole.

Whitney Johnson, in the Harvard Business Review, posited that women’s aversion to investing is based on the fear that “it will bankrupt their femininity.”

Given its current gender bias, the financial industry has been built on more “masculine traits” such as hierarchy, control, competition, and a zero-sum definition “winning.”

With the shift in economic power towards women, the financial industry must shift to embrace the values of the new wealth holders. This means creating new approaches to education, communication, financial planning and products that fulfill the ways in which women wish to understand, manage and express their wealth.

Money and Meaning

The Center for Talent Innovation, found that while women, like men, clearly want to see positive returns on their investments, “once these priorities are met, women look to wealth to provide a larger basket of goods, not just for themselves and their families, but also for society at large.” 88 percent of women surveyed were keen to invest in organizations that promoted social well-being.

This is not surprising given women have been shown to be be more charitable than men at every income level.

There are many opportunities for women to drive positive impact through their investments both in terms of their traditional portfolios, as well as through angel investments in social entrepreneurs.

Certainly, angel investment groups have been doing a fantastic job in helping women philanthropists become successful early stage investors.

However, there is more to do to help a broader segment of society ensure that their investment portfolios are aligned to their values. It’s currently not particularly easy for the average investor to direct their 401(K) or IRA towards investments that are socially responsible.

A Call to Action: Lean In to Women

There’s no doubt that women need to learn the language of money in order to step into the role of money manager.

Given women are generally more comfortable than men to admit ignorance and ask for help with respect to their finances, it seems reasonable to assume that if women truly understand the imperative their appetite for information and professional support will be high.

However, this shift must also be fully embraced by the financial industry which must adapt to women rather than exclusively asking women to adapt themselves.

The industry must develop the skills that women value in relationships, embed more feminine values within the cultures of the financial institutions themselves, and create the products that allow women to align money and values.

This is an enormous opportunity for all of us.