RIABiz recently ran a column about the philosophy behind advisor’s DIY approach to serving women. In Dorie Rosenband’s tough questions about being a woman broker led her to become an RIA, Rosenband writes about how difficult it is for a wirehouse world hampered by a long history of sexism to serve women well.
A new survey by the Spectrem Group offers a disturbing window into how little women trust their financial advisors – and how clueless the advisors are about that lack of trust.
An overwhelming majority (98%) of women with a net worth of $100,000 to $25 million say that trustworthiness is the most important factor in choosing an advisor, according to a group of recent surveys. See: How to market to women: Don’t.
Part of Spectrem’s analysis is from 997 millionaire households whose net worth is between $1 and $5 million. A separate study was conducted at the same time with 516 households with $5 to $25 million in net worth. Other data comes from a Mass Affluent Study, a survey of 1,511 investors with $100,000 to $1 million, which was collected last fall. Spectrem released partial interviews of some of the participants.
These studies all highlight the increasing skepticism that women feel toward advisors, but the analysis doesn’t include step-by-step solutions for advisors to turn things around. Some advisors have made significant changes to gain the trust of women … but the Spectrem study shows the long road they still need to travel.
Women trust advisors even less than before …
It’s no surprise that women are somewhat leery of advisors, but the recent market meltdown has damaged advisors’ tremendously reputations in the eyes of women. Con artists like Bernie Madoff are still fresh in the minds of many women.
“You just have to take care of yourself,” one woman who was interviewed says. “I know I need to watch what they’re doing.”
That attitude was crystal clear to advisor Marjorie Fox, with Fox Joss and Yankee LLC, an RIA in Reston, Va., that manages $310 million in assets.
Even though she felt she spent incredible amounts of time explaining her investment process to women, she learned recently that she simply needed to do more.
“The women coming to me are very concerned post-Madoff about trustworthiness. They’re most concerned that anyone they work with is honest and will preserve their capital,” she says.
Women want more facts
Women’s skepticism will only rise unless they’re giving concrete evidence that the advisor is investing their funds legitimately.
“I need the same amount of information that I receive from a doctor,” says one woman surveyed in the Spectrem study. “Why is he recommending this investment? Is it best for me or for him?”
In fact, Fox says that when her clients – women and some men too – had a hard time learning about a fund they were invested in, they become even more suspicious.
For instance, one of the investments that Fox’s firm has its affluent clients invest in is Dimensional Fund Advisors.
“But Dimensional Fund Advisors is rarely mentioned in the press,” Fox says. “So, clients were suspicious about how we chose Dimensional and wanted to know what exactly is Dimensional?” See: Dimensional Fund Advisors still has low RIA acceptance rate and stunning growth.
That led to the three partners sitting down and spending more time individually and in small groups with all clients patiently explaining their investment choices and showing them impartial reports about the funds.
“We learned in the bear market that despite what we thought we’d done right, the clients didn’t understand what they were invested in. It really forced us to do a lot more to build their trust.”
Don’t be a salesman
As much as some advisors in the RIA space strive not to push product, women still perceive advisors as not much different from a used car salesman.
“I feel like he is always trying to sell me the next new thing,” says one woman from the Spectrem report.
“I’m not going to call him back if he is only trying to sell me something,” says another woman from the report.
Because advisor Ted Feight, a solo-practitioner fee-only RIA who runs Creative Financial Design in Lansing, Mich., knows that women are on edge about product sales, he will steer clear of anything that could even be perceived as a type of product pitch.
“The most important thing we can do is gain women’s trust,” Feight says.
Feight, who runs a small shop with just more than 60 clients managing about $15 million in assets, says he takes time to explain his process to clients and prospects. “You have to be sincere,” he says. “You can’t fake it. A women will know it if you fake it.”
For instance, when he works with widows, he spends time helping them with basic financial skills such as helping them balance their checkbooks and pay their bills.
Don’t be pushy
Women are growing skeptical of advisors who want them to make frequent changes.
“I don’t want to change what I am doing,” says one woman in the focus group. “Why is he always pushing?”
Even though advisors may simply be offering women additional products, it’s critical that advisors recognize that women are simply different from men, says Pamela N. Danziger, president of Unity Marketing, a boutique firm in Lancaster County, Pa.
“Men and women have totally different points of view,” she says. “If you don’t recognize the differences you can be up a creek.”
For example, she points out that women make more of their financial decisions based on their values – which is different from how men make financial decisions. A woman wants to know that her portfolio is doing well so she can afford to pay for her children or grandchildren’s college education.
“Women are concerned with the facts and figures but they want to know how it relates to their values,” she says.
Stop talking about your track record
An advisor’s track record isn’t as important to women as other factors and time spent talking about his performance could easily lead women to jump to the conclusion that he’s most interested in his own bottom line.
“Everyone is out for himself,” says one woman in the Spectrem interviews. “He may act like he cares about me, but he really just wants to make as much money for himself as he can.”
“So many advisors tout the track record,” says Tom Wynn, director of affluent research for Spectrem. “But having good basic customer service will carry you more than having an outstanding track record.”