On average, women financial advisors make just 58 cents for every dollar made by their male peers. That’s a significant wage gap, and it’s even higher than the national average (which lies somewhere around 80 percent). One reason for the gap is that men in the industry tend to work at larger, more lucrative companies than women. But why?
Similarly, women only make up about 30 percent of the industry (and even fewer take up executive roles). “Why are there so few women in this industry? Why does that red carpet get rolled up for women? Are women taking themselves out? Or was the industry perceived as unfriendly?” asked Kim Dellarocca, Director and Head of Practice Management at Pershing.
Dellarocca and her team set out to find the answer to these questions in Pershing’s latest report, “The 30% Solution: Growing Your Business By Winning And Keeping Women Advisors” and its previous one, “Women are Not a Niche Market.” She hopes the research will help the industry usher in more women, and ensure they are treated fairly.
And attracting and retaining women and diverse talent is critical for the survival of the industry, Dellarocca reasoned. The financial advisory space is expecting a talent shortage of 237,000 new advisors in the coming decade. It needs to look beyond the status quo to fill those seats – and in order to do that, the industry is going to have to change.
The Consumer Connection
Historically, wealth management was largely in the male domain – and the industry still reflects that today, with many advisors focusing on male clients. According to Pershing’s research, this is a turnoff for female clients, who give advisors and firms lower satisfaction scores than male clients on every performance measurement. The report continues, “Married women are often considered mere appendages to their husbands. It should come as no surprise, then, that more than 70% of married women fire their financial professionals within one year of their husbands’ deaths.”
“One of the questions I get asked all the time, as part of Practice Management, is ‘how can I grow my business?’” Dellarocca explained. “And one area we saw that financial advisors are ignoring – not with mal-intent – is women.”
As a growing segment of business owners, and a group that controls more and more of the spending decisions and wealth in the US, women represent a bigger slice of the pie for advisors as well, she continued. And when financial advisors lose them as clients, they likely lose their children too. “So eventually that advisor loses twice,” she explained.
Women investors are a growing opportunity for financial advisors. And according to the research, there’s also a connection between women investors and women advisors.
“We got involved with this issue from the consumer perspective. And we found that women often want to be served by women financial advisors,” she continued. In fact the majority of them do. “Seventy percent of women overall would like to work with a woman planner, and the vast majority of women business owners agree,” the report says.
Dellarocca continued, “There’s a big need to hire more women and train men better on how to work with women.”
Challenges and Solutions
Based on Pershing’s research, the financial advisor industry will need to evolve in order to attract and retain more women – which it sees as vital to meeting the needs of the oncoming wave of new female clients as well as to stem the attrition taking place across the industry.
That means undergoing systemic change, Dellarocca continued. “As an industry, we haven’t done enough to attract and retain women. Sections of this industry, like so many industries, were built when society had a different model – where men worked and women stayed home, not where both work and do double duty at home, with women often doing more than double duty. That old model worked for someone who could be available anytime and anywhere.”
That led to the development of a kind of male code built into the industry. “For example, men can self-promote in a way that does not come across as political. We have to look at the model we are asking women to work within.”
The second issue, she continued, is the way women make career choices based on the image of the industry. “Some women just aren’t playing big. There is a view that this isn’t a field that supports work life balance, and we see women taking themselves out before they go in.”
“We want women to go for it, because we are seen as an industry that is going to go for it,” she added. “Then women can step into it more.”
Pershing’s report advises firms to first conduct an “honest self-assessment,” benchmarking their current situation with women advisors and women clients. They should look at their recruitment success rates and identify weaknesses, then examine their culture to find out what women think of the firm. “The most important takeaway from the study is to ask rather than assume, a lesson that can be applied to women advisors and clients alike,” the report says.
Next, Pershing recommends launching affinity networks or peer groups for smaller firms. Then coordinate with external groups and conferences. Sponsoring combined client and advisor events for women can help parties connect with one another. The report also suggests coaching programs and building work-life flexibility into company culture. Firms should also ensure women are getting adequate on-the-job training in challenging roles. Finally, firms should aim to integrate diversity throughout their firm, tracking metrics to ensure women and other minority advisors are being retained beyond the entry level.
Dellarocca said, “As an industry, we need more financial advisors and we need to replenish the ones who are leaving over the next ten years. We have to create a model that works for how our culture and consumers have evolved – a more diverse workforce is a way to create a better client experience.”
By making a few changes in the way women are treated (both clients and advisors), the financial advisor firms, and the industry at large, would benefit.