The importance of getting women into financial planning feels like it should go without saying. And in our research for this article, we were happy to learn that we are trending in the right direction. Unfortunately, we’re not quite there yet as a society, since as of 2022, the Bureau of Labor Statistics reports only a third of financial advisors are women. Until that percentage is closer to 50%, we are happy to illustrate the many benefits of more women in the industry.
Alicia’s Experience
One of my earliest experiences when I first decided to get into financial planning was participating in the Financial Planning Association’s Externship Program in the summer of 2020. It was a program started by Hannah Moore during COVID in response to so many students losing their internship opportunities because of the pandemic. Hannah put together a varied and diverse group of speakers that both inspired and directed my future path in financial planning.
The externship program was such a huge success that she has continued to offer it each summer. In 2022, nearly 42% of the externships participants were women. Compared with the 31% of financial advisors who are women (BLS) and the 24% of Certified Financial Planner (CFP) professionals who are women (CFP Board), I feel like the externship is showing not only where the industry is headed, but also the fact that the Externship is actively reaching out to women and minorities and trying to pull them into the industry.
Making More Room for Women in the Financial Planning Profession
The CFP Board’s Women’s Initiative wrote a white paper titled Making More Room for Women in the Financial Planning Profession. The paper found that “Women who are outsiders to the profession do not see financial planning as primarily about:
Communication
Relationships
Holistic Advice
Instead they see it as about investment and mathematical expertise.” This finding, in addition to many more included in the paper, mirrors my own experience.
There can be a high mysterious wall that women have to climb to get into this industry, but once you are over that wall you find that there are plenty of room and opportunities to grow and succeed. Women, and many men, are there offering their time and experience as mentors, teachers, collaborators and supporters. I have been welcomed, encouraged and supported by those I met in the externship, students and professors at Kansas State and by everyone at Walkner Condon.
CFP Board certificant data makes one thing clear: “the issue of the low number of women CFP® professionals is primarily a problem of attraction, and not one of retention. Once women achieve their CFP® certification, the rate of relinquishment is extremely low. In this regard, financial planning seems to differ from science, technology, engineering and math (STEM) careers where many women leave their jobs in their mid-thirties after a few years of experience on the job.”
Women Serving Women
As we get more women into the industry I think it will allow us to better serve all clients, but women especially as clients are often underserved by male advisors. It’s estimated that over 80% of widows change their financial advisors after the death of their spouse. In many cases, the advisor had a relationship with the deceased spouse and never fully involved the female half in the financial-planning and investing processes. As Blair duQuesnay, CFA pointed out in a recent blog post: “The husband’s adviser often does not listen to their concerns, is condescending in his answers, and uses confusing jargon.”
Even if the male advisor makes every attempt to involve the woman in the financial planning process, she may not want to engage for a variety of reasons. According to a 2019 global UBS study, many women learn the costs of failing to take an active role in their financial affairs only after their marriages end: “Some widows and divorcees were disappointed to discover hidden debt and inadequate savings that compromised their lifestyle. With the wisdom of hindsight, 98% of US women urge other women to take a more active role in their finances.”
Given that 90% of married women will end up needing to manage their own finances at some point due to divorce or widowhood, it’s important that advisors take the initiative to educate their clients and encourage both spouses to engage in financial planning discussions.
Polly’s Perspective
Female financial advisors can offer a unique perspective into our clients’ personal experiences, which extends into their finances. For instance, planning weddings, raising a family, negotiating raises, unique health concerns, caring for elders, and long-term care for ourselves, these are all things that women can have a much different view on than men.
Whether it’s an objective topic (e.g., women tend to live longer, making it much more important to plan for a longer retirement) or a subjective one (e.g. understanding the emotional burden that comes with facing some financial decisions) female advisors can provide a greater support system for their clients.
Of course not all clients seek an advisor who shares one of these unique perspectives, but some, especially women, might find this to be essential. When we know women will be in charge of a large percentage of the transfer of wealth from the baby boomer generation [Morgan Stanley], a focus should be placed on promoting the diversity of the industry to ensure more clients’ needs will be met in a more holistic manner.
The Importance of Mentorship
This is a shameless pitch, but I want to mention the personal fulfillment that this industry can provide. I’ve heard Alicia say before, financial planning, if done right, is a helping profession. As advisors, we get the opportunity to work with clients, develop relationships, and build trust. It can be a truly special role.
According to Her Money, more people are seeking professional financial advice, creating greater opportunities for more women to enter the field. In order to share this opportunity with other women, we need to take into account how those newer to the financial services profession are mentored.
I’m extremely lucky to share an office with a team of advisors whom I see as my mentors. However, not all women in this field may find themselves as fortunate. Women who are mentored by other women tend to have a more positive experience [FORBES], since they may have shared experiences, form deeper connections, and develop more long-term satisfaction in their professional lives. Growing that female base can help progress the industry.
Financial Literacy
It feels like common sense at this point, but the more diverse an industry, the more future generations are able to see themselves in similar roles. I think that idea impacts the topic of women in financial planning in two ways. The first being an increase in the number of women actually filling those professional roles, which I previously discussed. The second is more at the individual level – empowering women to take the driver’s seat in their personal financial lives, and then passing that knowledge on to future generations.
Financial illiteracy among women is a problem. This 2023 study examines the negative productivity and financial impact that it can have on individuals and society as a whole. We need to acknowledge that a better financial education often starts at home. Since women make up the majority of caregiver roles in this country, that presents a big opportunity to share financial knowledge starting at a young age.
Conclusion
When more women are filling the roles of financial professionals, they are in turn able to reach more and more women. That can be through their families, friend groups, professional connections, or even through parasocial relationships. Expanding these networks weaves a larger web of women who are better set up to face financial challenges – which again comes back to the health of our society as a whole. And we all know how stressful finances can be.
None of this means that male advisors cannot exhibit the attributes we’ve discussed, but each client’s situation is unique, and adding more diversity to the pool of financial advisors only puts us in a better position to serve our clients, which is something that we are proud to be a part of.
You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.