Russell’s recently released report “What Really Matters to Women Investors” goes a long way toward debunking any perception that women lack loyalty to their financial advisors. An earlier industry study found that 70 percent of women investors would fire their advisors within a year if their spouses were to die. In contrast, a separate study released by Russell in January 2014 finds that a sweeping majority of women indicate they would stick with their current advisor in such a scenario.
Russell surveyed more than 300 financial advisors and more than 900 women investors working with financial advisors, focusing on two generations of women: Gen X (ages 32 to 47) and the Silent Generation (ages 67 to 80). Results show that 78% of Gen X women and 93% of Silent Generation women would stay loyal to their advisors if they became widowed.
While the research shows that women investors have a propensity toward loyalty to their financial advisors, it also emphasizes the need for advisors to earn this loyalty by aligning their professional capabilities with specific financial planning needs and service approaches. Not surprisingly, advisors can deepen loyalties within their client base by catering to specific values that rank highest in priority among women investors in these two age brackets. Russell’s study provides fresh insight into the priorities and service needs of these women investors.
Both advisors and women investors can benefit by better understanding each others’ capabilities, preferences and needs. Undoubtedly, women are an attractive target client segment for financial advisors given their growing economic power. But beyond this, they can be great clients, because they are predisposed to take a longer-term perspective, are assuming greater responsibility for investing decisions and value tailored advice and guidance from a financial advisor. What’s more, it is clear that when they feel they are being heard and are on track to their investment goals, they are loyal clients who will often actively refer their advisors to family and friends.
It’s worth noting that the improved economic climate since 2008 may play a role in the shifting results of such research. But it’s also possible that advisors have been appealing more to the needs of their female clients as more women have taken on the responsibility of investing.
More than half of women surveyed (52% of Gen X and 63% of Silent Generation) share the responsibility for managing the financial aspects of a household (savings and investments). In marriages and partnerships in which one person bears the brunt of the financial responsibility, that person is usually a woman, according to the study. Nearly one third (29%) of Gen X women and a quarter (24%) of Silent Generation women have more financial responsibility than a spouse or partner. Less than a quarter of women (19% of Gen X and 14% of Silent Generation) say their partner has more responsibility.
Advisors should focus less on budgeting, more on long-term planning
While 74% of advisors say they help develop spending guidelines and budgets for their clients, many women indicate this is not a primary need. Some 77% of Gen X women and 81% of Silent Generation women say they’re comfortable managing their own day-to-day finances.
The same research suggests that women investors are inclined to focus on long-term financial planning issues, such as healthcare, long-term care, and maintaining their lifestyle during retirement. Among advisors surveyed, 56% believe their female clients have a longer-term perspective when it comes to financial planning, while only 5% say male clients take a longer-term view.
Advisors would do well to build up active listening skills
For women investors, constructive communication ranks as the most essential characteristic in the advisory relationship. Some 86% of Gen X women and 87% of Silent Generation women say it’s important that advisors show they are actively listening.
Many women also cite clear communication as vital to such working relationships. A large majority (82% of Gen X and 83% of Silent Generation) of women say it’s important that an advisor adapts explanations to their level of investment knowledge. These women also appreciate advisors who encourage them to take an active interest in their investments. Some 80% of Gen X women and 70% of Silent Generation women want an advisor who explains how decisions might affect them and a partner differently in the future.
Clearly, listening skills and the ability to consider client input are especially essential for advisors interested in cultivating a lasting relationship with women investors.
High responsibility with a confidence gap
Despite the balance of financial management in households, women also acknowledge a lack of confidence when it comes to knowledge of investments and the investment process. More than half (52%) of Gen X women and more than a third (35%) of Silent Generation women indicate they have little or no knowledge about investments.
Since the vast majority of women will find themselves managing financial matters on their own during their lifetimes, women investors represent an opportunity for advisors who can help them build their knowledge, develop strong financial plans and increase their confidence.
Advisor must nurture client relationships
Relationships are important to women. A large percentage of women surveyed (83% of Gen X and 81% of Silent Generation) want an advisor who provides a personal level of service. Personalized notes and birthday reminders, for example, are great ways to make a client feel valued.
Advisors would also benefit from remembering milestones and details about their clients’ family lives. This is important not only to building a relationship but also for the purpose of tailoring financial planning advice.
Download the full research report here.