Why Many Women Don’t Know They Want to be Financial Advisors
Women just don’t want to be financial advisors, it seems. But research shows it might be because they don't have all the facts -- or the "facts" they have are actually inaccurate.
As women increase their personal wealth and increasingly become clients of financial advisors, there may be a shortage of female advisors to serve them because, according to a study by the CFP Board, women generally don’t want to be advisors or aren’t familiar with the benefits of a career in wealth management. Recently commentators have revisited this study to try to explain why this trend seems to persist.
A big part of the problem in recruiting female advisors is an industry-wide failure to properly educate women on what financial advisory careers actually involve, insists Kathleen McQuiggan, the CFP Board's special advisor on gender diversity.
The board’s research, which probed public opinion on the industry, showed that many women outside of wealth management picture financial planning as a profession that relies heavily on cold-calling potential clients. They don’t realize FAs help clients improve all aspects of their financial lives, McQuiggan recently told FA-IQ.
Only 22% of women versus 53% of men from the 1729 non-industry respondents report being “very familiar” with a financial planner’s role, the CFP Board study ‘Making More Room for Women in the Financial Planning Profession’ reveals. Women outsiders to the industry also say they view financial planning careers as focused on investment and mathematical expertise -- traditionally seen as "masculine" spheres -- rather than communicative ability, relationships, and holistic advice -- areas in which women commonly excel, the study claims.
The study claimed this "lack of attraction [to financial planning] is likely taking place in the early phases of career decision-making" for women. "All else being equal, women simply are less knowledgeable about financial planning" than men, said the study. "If they don’t know these opportunities exist, they certainly cannot pursue them."
Negative perceptions about advisor pay structures also appear to deter potential women FAs from financial planning as a profession.
Financial advisors are traditionally paid based on the amount of assets under management they have or by commission. But relying on either model can create a barrier to entrance for women advisors, Ariane Hegewisch, program director of the Institute for Women’s Policy Research, tells FA-IQ.
For many women the possibility of not receiving enough income until developing a substantial clientele roster is a challenge, the study notes, especially since it takes time before new FAs gain access to the most profitable clients, Hegewisch says.
And sometimes more nefarious means of keeping juicy clients from women advisors can come into play, some sources claim. For instance, the Institute for Women’s Policy Research has heard of many cases where an unofficial network is put in place at some firms in a bid to keep the best clients from female advisors, she says. Such tactics could be used when a senior FA retires and their clients are redistributed to other advisors at the firm, for example.
Exclusion from client redistribution directly impacts the amount of assets on which an FA can advise. But both McQuiggan and Hegewisch say action can be taken to ease the more pronounced effect such practices may have on women advisors. For instance, some firms have tried to combat potential exclusion by rotating new leads to include women FAs. Yet new methods for outmaneuvering equitable client distribution policies are continually being created, so firms have a responsibility to stay one step ahead, they say.
And to make the industry more attractive to women during the recruitment process, firms should diversify recruitment procedures and actively fight workplace inequalities, McQuiggan says.
There are many different paths to enter the advisory profession and firms need to reach women through channels other than traditional recruiting, she adds. One way is to partner with universities and professional networks to market roles to prospective female candidates.
Cultural biases – real or perceived – against female advisors also apparently dissuade women from pursuing a career as an advisor and hurt recruitment, the CFP Board claims. Almost half (48%) of non-industry male study respondents said office culture in financial firms makes women financial planners feel welcome and respected, but only 29% of women respondents agreed. An unwelcoming culture can be a significant detractor for firms seeking women advisors, McQuiggan says.
Career progression is also a problem, according to the CFP Board. Industry-wide there are many women who appear to be queued for senior management roles, yet very few ultimately move into those positions, Hegewisch claims. Creating a female-friendly firm culture can be difficult without any women in leadership roles, she says, and potential women advisors “can’t be what they can’t see” in the advisory space, McQuiggan maintains.
Even after entering senior management positions, women FAs may be dismissed faster than their male counterparts, Hegewisch says. The termination imbalance stems from women in leadership positions being held to higher standards than male counterparts, she argues.
Next time … Women FAs are fired at a faster rate than their male counterparts, study says ...
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