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Merrill Lynch Study: FAs Fall Short Advising Women

By Garrett Keyes April 25, 2018

Women are becoming wealthier but many advisors don’t know how to best provide them financial advice.

Women will control $22 trillion dollars of wealth in the United States by 2020, a collaborative Merrill Lynch and Age Wave study reveals – and they want to be more involved in the investment process. More than 40% of women over 18 years old wish they had invested more money so they could feel financially secure today, the study asserts.

For many FAs, the difficulty in servicing women clients stems from fundamental communication issues and the advisor’s failure to provide women with investment education, experts say.

Some women feel they are not well-versed enough to make investment decisions, Katharine Perry, financial consultant of Fort Pitt Capital Group, a firm with $2.4 billion in assets under management, says. FAs need to position themselves as “knowledge bases” and provide educational resources so women can learn more about investment management.

One method of bridging the investment knowledge gap is through educational events held especially for women, Heather Evans, wealth management advisor at Merrill Lynch, says.

She says it is important FAs use educational events to teach women investment management, because “there are more women than men that lack investment knowledge” – and that can hinder any relationship formed with an FA.

Beyond investments, women feel equally confident handling financial tasks like paying bills, budgeting, and paying off debt. But only 52% of women are confident managing investments in comparison to 68% of men, the study shows.

If advisors educate women and make them “comfortable [with] investment as a tool for generating wealth,” they will form closer relationships with their FAs and “make sound decisions,” Evans says.

Advisors must also change how they position the investment process to female clients. Instead of explaining portfolio management in terms of asset allocation, advisors need to explain that investing is about “how [women] want to live [their] lives and what they want [their] legacies to be,” Adrienne Penta, senior vice president of Brown Brothers Harriman and executive director of the firm’s Center for Women & Wealth, says.

Penta also says FAs often fail to communicate with women because of unconscious biases which cause them to view women’s investment decision-making differently.

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Advisors need to be more “intentional” about engaging with women clients, says Penta, explaining that when heterosexual couples come to a financial advisor many FAs focus their attention on the male partner, not helping female clients understand the investment process or trying to establish a relationship with them.

Unconscious bias can be particularly detrimental because “there are plenty of households where women control the finances,” Perry says. It is important to “not be presumptive when working with couples,” since it can lead to one party feeling excluded.

With trillions of dollars going to women in the coming few years, women clients present FAs with a significant business opportunity, says Penta.

If advisors work to educate women investors and overcome unconscious biases, they can gain and keep women clients while helping women towards financial wellness. “It is good for everyone,” Evans says.