In wealth management, better gender representation is better business

Last year, more than half a million people took part in a survey conducted by the University of Cambridge that explored psychological differences between the genders. One of the long-standing psychological theories that it proved is the Empathising-Systemising theory of gender differences. Essentially: on average, women score higher on tests of empathy, and men score higher on tests of systemising, also known as the inclination to analyse.

No matter the gender, a good financial adviser is one who can empathise with their clients. Advisers who take the time to listen, understand long-term goals, and tailor advice to clients’ individual needs are those who will build strong relationships with clients and have a high retention rate. As we well know, women make excellent financial advisers, just look at Forbes Top Women Wealth Advisors 2019.

Yet while women make excellent financial advisors, women’s financial risk is increasing. The Chartered Insurance Institute (CII) also recently examined the rising levels of financial risk facing women in the UK. The conclusions are dismal. Women today are “less likely to accumulate wealth over the course of their lifetime than previous generations.”

It states that while women live longer than men, they are saving less. This is due to pay inequality and career breaks to care for families, children, and parents. Women in the UK face a significant pension deficit compared to men. By the age of 65, the average woman’s peak pension wealth is £35,700, one fifth of an average man. Longer life expectancy means the average cost for women entering a care home at age 65 is £132,000. Again, this is nearly double the same cost for a man.

These two issues create one difficult question for the wealth management industry: is it at risk of failing women?

Where does the problem originate from?

This issue is not unique to wealth management. The entire financial industry faces this same issue.

Representation is a huge factor in the entire financial industry – both from a client and an advisor perspective. Only seven percent of investment funds in the UK have a woman as the named manager or co-manager. This issue goes to the heart of a wealth management practice – down to the bottom line. A study by Ernst & Young found that 73 percent of female wealth management clients in the UK felt wealth managers misunderstood their goals and could not empathise with them. This has serious repercussions for client retention and acquisition.

Why? Because the number of financially powerful women is rising rapidly. There are many more to come from younger generations – especially with the coming wealth transfer.

This is a demographic that wealth management firms need to think seriously about. Currently, wealth managers are ostracising half their future potential client base. To attract these investors, wealth managers must change how they are perceived.

True representation, real empathy

If we aren’t seeing proper representation within the industry, how can we expect that services will be tailored to address the unique needs and circumstances of women? And how can we expect firms to appear welcoming and inclusive to potential clients?

Firms must make a concerted effort to hire financial advisers that clients can relate to. This requires a diverse culture. This not only means hiring more women, but also hiring advisers who are younger and come from different backgrounds – culturally and economically. This must go beyond gender-washing or tokenisation to deliver real value; this way wealth management firms can change how they are currently perceived by women and how they understand the needs of their female clients.

Having female advisers in a firm helps to integrate a greater understanding of the unique needs women have in trying to maximise their wealth. Financial advisors are already experts at delivering personal engagement. By improving upon their knowledge of women’s unique priorities, advisers will develop deeper relationships and increase trust.

To tailor these services to women, they must be built on empathy. For an increasingly younger and more tech-savvy demographic, this must also manifest as digital empathy. If a firm can translate its ability to deliver truly personal services into a digital environment, they will see massive benefits when it comes to onboarding women. This is done, as the EY study discusses, by improving micro-segmentation capabilities that in turn create more tailored client experiences that acknowledge women’s formal and informal goals, as well as their “soft preferences.”

Firms can augment this by employing behavioural science functions to design individual client experiences. This is done by harnessing client data. This data is used to inform the digital experience and improve digital empathy. It is gathered at all points – from how many times a client logs in to the platform, to what they view and the information they offer up. Data needs to be used to map out the client’s journey, ensuring that the adviser can anticipate needs and effectively service the client.

Digitising services opens opportunities to create empathetic relationships with clients in more ways than just data collection and analysis. Advisers can free up valuable time through automation and spend this time building their clients’ portfolios. It also means they can scale up to service more clients, without negatively impacting quality of service.

Balancing this digital empathy with face-to-face empathy is a winning combination for the next generation of investors.

Future-proofing the bottom line with representation and digital empathy

Digital platforms allow advisers to help clients navigate through turbulent times early. This further establishes trust – achieved through pattern recognition and prescriptive analytics, along with enhanced early warning indicators through automated monitoring of client data and alerts.

Implementing these changes will benefit all clients but will have the most immediate and profound impact on a firm’s female clients. This is because women can feel seen, heard and represented when it comes to making some of the most important financial decisions in their lives. This feeling can then be augmented into the everyday interactions through digital services.

This is how the industry can turn around the female experience: empowering our female clients within businesses and within the client base. The positive effects this has on the bottom line will quickly become obvious.