Advisor risks arise from women’s financial attitudes

It’s important to accommodate female clients when providing financial advice — though it could come at a cost

Advisor risks arise from women’s financial attitudes

As women are set to become more influential decision makers and owners of significant wealth in the coming years, it’s more crucial than ever for financial advisors to accommodate their female clients — while considering what they may be risking or giving up in the process.

That’s the assertion of Barbara Stewart, CFA, in a new blog post published by the CFA Institute. Based on a decade spent researching over 800 accomplished women, Stewart said she uncovered some key findings.

“Most women downplay their accomplishments or knowledge when asked,” she said, noting how even financially educated and capable female professionals often sell themselves short as they describe their own skills. “When it comes to women and financial aptitude, actions speak louder than words.”

She also noted that, when it comes to talking and learning about investing ideas, nearly all women she interviewed prefer to hear stories about people rather than see charts and graphs.

For advisors whose business models have been built around discussing investments using numbers, Stewart said, turning to stories that hit closer to home may feel like a career risk. Similarly, they may have to delicately shift their conversational styles from focusing solely on men — who may have considered themselves the primary authorities on financial decisions — to including the women in the room.

“We need to make our female clients feel important, but without making our male clients feel less so,” she said.

Stewart also noted how, in 2013, she polled 100 intelligent women around the world and found at least half had put some portion of their potential retirement funds in causes and concerns they cared about, rather than traditional longer-term asset classes. A quarter of the participants, she added, said they were investing “a sizeable portion” of their wealth in a business directly related to their personal cause.

“Women want to take action and do something about today’s issues,” Stewart said, citing health, children’s welfare, gender equality, and other forms of social justice.

For advisors serving female clients, recommending investments that align with their advocacies may be easier said than done. Aside from possibly earning less from commissions, they may also be held back by firm policies against selling outside products that may be a better fit. Nevertheless, Stewart urged firms and advisors to make applying ESG screens simple in order to allow female investors to put their capital behind causes that are personally meaningful to them.

Finally, Stewart said that women are not risk-averse, but risk-aware. “She might take more time to make an investment decision, but that’s because she does her homework,” she said, adding that women will take calculated risks after they have satisfied their need for details.

The difficulty for advisors, though, comes from the fact that risk tolerance is discussed in the context of enduring short-term market volatility. But there’s another risk that gets less attention: failing to meet one’s longer-term objectives.

“If clients don’t take enough risk or if they take too much risk, we end up with an unhappy client,” Stewart stressed. “Make risk a much broader conversation.”


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