Some advisors bring biases, communication styles and ways of discussing money that can influence clients’ financial decisions and outcomes, potentially widening the gender wealth gap.filadendron/iStockPhoto / Getty Images
Daniel Richards, associate professor in the School of Administrative Studies at York University, has spent a lot of time thinking about why female clients are still underserved in financial advice.
He and his fellow researcher, Ariane Agunsoye, senior lecturer in economics at Goldsmiths, University of London, wrote a paper identifying four main approaches advisors take when serving female clients. (The paper is set to be published in the academic journal Critical Perspectives on Accounting.)
Their findings? On paper, advisors appear to have their female clients’ best interests at heart. But despite their best efforts, many are still missing the mark.
“[Advisors] are doing their best – they’re all coming from a well-intentioned point of view,” Prof. Richards says. “But I think making gendered assumptions is very bad in financial advice.”
Some advisors bring biases, communication styles and ways of discussing money that can influence clients’ financial decisions and outcomes, potentially widening the gender wealth gap.
“I’m not convinced people really have this figured out yet,” says Sybil Verch, senior wealth advisor and portfolio manager with the Wealthy Life Group at Raymond James Ltd., in Victoria. “It’s still a problem and it needs addressing.”
She says unconscious biases may be getting in the way. “It’s our beliefs that were formed from outdated thinking that we just haven’t changed – and we need to change them.”
Study identifies four main approaches
Prof. Richards’ research views financial advice as a social interaction, not just a technical exercise, with advisors’ assumptions, communication styles and ways of discussing money having a big impact on clients’ financial decisions.
Four main financial planning approaches for serving women were identified in the research, which was based on interviews with 30 independent financial advisors in the U.K.
The uniform approach: Advisors treated every client exactly the same way, focusing on numbers and disregarding a client’s gender altogether.
“While this approach is well-intentioned, it ignores the underlying gendered issues that exist in personal finance,” Prof. Richards says.
The adaptive approach: Advisors share raw performance metrics with men while sharing “soft” financial facts with women. This approach is divisive and perpetuates gender stereotypes, Prof. Richards says.
The evidence-based approach: In this approach, advisors believe that financial behaviour is socially learned rather than biological. They spend a lot of time educating clients, coaching and building financial independence.
However, because this approach takes time and can be expensive, it tends to appeal to wealthier clients with deeper pockets, leaving lower-income clients unable to pay for these services.
The disruptive approach: This was the approach the researchers felt was the most promising. Disruptive advisors were less formal in client meetings, used simpler terminology and took a behavioural approach to understanding clients as individuals and not just on gender. They also tried to serve a broader range of clients.
Abandon the gender lens altogether
Ms. Verch says she doesn’t believe there’s a single right approach for providing financial advice to women.
“Stop trying to create one,” she says. “Women are all individuals with different backgrounds, strengths and weaknesses – you can’t treat them all the same way.”
It annoys her when women are portrayed as emotional, risk-averse, less confident about investing and less knowledgeable about financial concepts.
Regardless of the client’s gender, she says advisors need to ask specific questions to understand their mindset, knowledge base and preferred communication style. After this process, they can tailor advice in a personalized way.
“Abandon the gender lens altogether,” she says.
Prof. Richards says advisors need to delve into exactly what a client needs early on in the relationship – a foray that will help them avoid reinforcing factors that contribute to the gender wage gap. They should avoid making assumptions about a client’s risk tolerance and financial literacy based on gender.
“The profession itself can help make financial outcomes more equitable,” he says. “[Advisors] can try to address some of these issues and that really comes from thinking critically about how they deliver financial advice.”
He believes advisors should ask themselves: “Is there something that I’m doing in the way I deliver financial advice that reinforces these gender norms?”