Q&A: Schwab Center for Financial Research on Women's Investing Needs

The financial industry is facing one of the largest demographic shifts in its history: the rising financial power of women.

© (Getty Images) High angle portrait of female businesswoman counting finances using calculator in small shop, copy space

Close to 70% of affluent investable assets in the U.S. are owned by baby-boomer households, which are those where the chief breadwinners are ages 56 to 74. In two-thirds of these households, there’s a female partner present but not actively involved in financial decisions, according to a July report by McKinsey & Company.

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But since women tend to outlive men, millions of women will take control of these funds, putting U.S. women on track to hold a large chunk of the $30 trillion in assets baby boomers will posses by 2030.

This seismic shift could be cataclysmic for financial advisors who are ill-prepared. Research has found that 70% of women switch financial advisors soon after their spouse dies to find an advisor that better suits their needs.

For women, financial planning is often more about achieving financial goals and mitigating risk than generating high returns. Female investors also tend to have lower confidence in their ability to make financial decisions. And women seek more guidance. They value having a personal connection with their advisor more highly than male investors do. This can make working with female clients a rewarding and lucrative business for advisors who can learn how to best attract, engage and retain female clients

We spoke with Kathy Jones, senior vice president and chief fixed income strategist for the Schwab Center for Financial Research. During her three decades of senior-level experience in financial services, Jones has helped many advisors understand how to better communicate with female clients. She spoke about meeting the needs of female investors at the Schwab IMPACT 2020 conference.

Here are edited excerpts from that interview.

Why is it so important for the financial industry and financial advisors to better serve women investors?

Over 50% of personal wealth is controlled by women, yet we find that women have been underserved and underrepresented within the financial services industry for far too long.

Prior to 1974, a woman could not even apply for credit on her own without a male co-signer. So for decades, the primary clients have been men. Now, more women than ever are starting businesses or are the primary financial providers of their households, thus stepping into the chief financial officer role. Yet they don’t always feel supported or empowered. That needs to change.

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The financial industry’s failure to meet the needs of women investors has been a hot topic for a decade, but that hasn’t moved the needle much. Why are firms and advisors still struggling to meet the needs of women investors?

The needle may not have moved much, but it does seem to have moved slightly. More women are becoming financial advisors and working toward their certified financial planner designations. Women’s networks and affinity groups at companies are having meetings and learning about employee stock purchasing plans and budgeting with strong engagement. We need to celebrate those wins.

Change takes time, and it is a slow process. Its impact takes even longer to see in the data. The financial services industry has had a focus on investment performance or a portfolio’s returns against a stated benchmark. However, we’ve seen through research that women tend to want to focus on how their investments or financial plan helps improve their quality of life or how it will get them closer to a values-based goal. That type of paradigm shift takes time to penetrate across a whole industry.

What gaps still need to be addressed when it comes to women investors?

The research still shows that women tend to feel less confident and less knowledgeable when it comes to investing. We need to listen to the reasons why women tend to feel this way and also identify ways we can educate and communicate with women that resonate with them.

The gaps affecting women investors have been well documented. It’s the implementation that will lead to changing the narrative that really needs to be addressed by the industry.

Where do advisors or their firms commonly go wrong when trying to serve women investors?

Unconscious gender bias and making assumptions about a female investor can lead to trouble and seriously jeopardize a client relationship, especially when it comes to women. Making assumptions about her wealth, her knowledge of investing or the goals she may or may not have are missteps many advisors make.

To assume a woman is married or wishes to be, or to assume a woman inherited her wealth instead of earning it, can be a harmful mistake. Investing and financial planning are tools that can help open up life choices, and that message tends to resonate more meaningfully with women.

How can advisors better serve women investors? How can they push their firms to do the same?

Research has shown that progress can be made when we reach the individual, understand their unique needs and values and create collaborative spaces for open and honest conversations about what is important. While technology allows for efficiencies and automation, we also need to be mindful that relationships and trust are at the heart of our industry.

What do you think (or hope) the financial industry looks like in 2030?

Our hope is that the financial services industry better represents the clients we serve. Given what we know about our workforce demographics, it is fundamental to the future of our client base to evolve in that same way. We are not optimizing for success as an industry if each firm, no matter the size, isn’t striving toward a diverse and inclusive workforce.

Firms and employees need to ask, “What more can I be doing to help that pipeline and connect with those underserved by our industry?” That could include internships, mentorship, financial literacy in the community. Every step is an important one to get to that next level of conversation by 2030. We all need to do our part.

Copyright 2020 U.S. News & World Report

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