Strategy
The Women’s Economy - Part Two: Growing Need For More Female Financial Advisors

The number of female financial advisors has decreased, yet women with wealth often look for female advisors, writes Dr Lilli Friedland of Executive Advisors in a guest feature for Family Wealth Report.
This is the second installment of a two-part feature by Dr Lilli Friedland, president at Executive Advisors, looking at the advent of the "women's economy" in wealth management. View the first part here.
Over the last few
years, gender has become increasingly important in the financial
advising
world. The number of female financial advisors has decreased, yet
women with
wealth often look for female advisors. And this new focus is now
intertwined
with the advent of the “female economy.”
Affluent women use
advisors and are more loyal to them than their male counterparts.
The greater
the woman’s wealth, the more she comes to depend on and trust the
advisor. As such, many of the world’s largest
and most reputable financial institutions are increasing their
focus on the
needs of this changing client demographic.
Current status of female financial advisors
During the height of
the financial boom, many financial services firms accelerated
their hiring of
young women. However, during the financial crisis, five times as
many female
advisors as male advisors were laid off. Young female financial
advisors were
most affected. Currently, there
are 9.6 per cent more men working in finance than 10 years ago,
but 2.6 per
cent fewer women.
The majority of women
in financial services do not earn as much nor progress as quickly
in their
careers as their male counterparts. Catalyst conducted a study of
graduates
from elite MBA programs around the world and found that women
continue to lag
men at every career stage, beginning with their first
professional position.
Additionally, biases
and misperceptions still exist towards women in finance, which
reduce a woman’s
likelihood to receive a promotion. Most commonly, managers
incorrectly believe
that it is harder for women than men to balance work and
family
obligations.
Bottom line impact
Feeling secure and
fulfilled about a defined career path in the financial services
industry
materially impacts an individual woman’s earnings. However,
between 2000 and
2007, the pay gap between men and women in the financial services
industry
continued to widen. In the general economy, women’s pay parity to
men is 80
cents on the dollar, but in finance it is 60 cents on the dollar.
It comes as
no surprise, therefore, that many of the largest investment banks
and asset
management firms have found it difficult to attract and retain
top female
financial advisors.
Recent research has
shown that a firm’s inability to retain female advisors
negatively impacts the
company. According to JPMorgan, for every woman who leaves the
firm at the
three-year analyst level, the company loses $250,000 of income. A
firm’s
inability to retain its female financiers also negatively impacts
staff morale,
and thus, overall productivity. As such, many of the top
financial institutions
are now focusing their resources on recruiting, developing,
promoting, and
retaining women in order to financially benefit the firm.
Companies with a
higher percentage of women in senior management roles have
substantially better
firm performance.
Employee surveys
indicate that enriching talent development programs are the
primary reason that
employees remain with their employers. Compensation alone is not
sufficient to
retain top talent in the financial services industry. High
performing financial
institutions understand this well and distinguish themselves from
their peer
firms by advancing their talent and leadership development
efforts.
However, women have a
higher bar to overcome in talent development. In many instances,
women have to
overcome unspoken judgments about their personal lives, as well
as gender
biases, in order to receive job offers or promotions.
Interestingly, 50 per
cent of women in finance believe gender biases exist, while only
28 per cent of
men in finance believe the same thing.
In order to attract
and retain top female talent, many of the top financial
institutions are
establishing programs aimed at targeting and empowering
high-potential women.
Typically, these programs encompass talent and skills
development, mentorship,
sponsorship and networking.
Formal mentorship
programs teach employees the informal customs of the company’s
culture. Mentors
provide valuable advice, feedback and evaluations. However,
women’s mentors
tend to have less organizational clout than those of their male
counterparts.
Studies show that mentors cannot actively advocate for female
financial
advisors at senior levels as frequently or with a similar impact
as those of
their male counterparts. Moreover, mentorship does not provide
equivalent
career benefits to women as it does to men.
A 2008 Catalyst survey
of more than 4,000 full-time MBA graduates show that women are
paid $4,600 less
on average in their first post-MBA job, occupy lower-level
management
positions, and have significantly less career satisfaction than
their male
counterparts with the same education. Having a mentor raised a
man’s salary in
his first post-MBA job by $9,260, whereas having a mentor raised
a woman’s
salary in her first post-MBA job by only $661.
Most male and female
financial advisors find their career mentors on their own by
tapping into their
personal networks. Men’s mentors tend to be more senior than
women’s, which may
help explain why they receive more promotions and higher
compensation. A study
conducted in 2010 shows that women who found their mentors
through formal
programs received more promotions than women who found their
mentors on their
own, by a ratio of almost three to two. Interviews of the women
in the
aforementioned studies reveal that mentorship helps promote
better
self-understanding and helps women identify ways that they may
need to improve
in order to rise in leadership.
Best practices: sponsorship
Of the corporate
programs instituted, those which incorporate sponsorships are
most effective.
Sponsors are powerful individuals who use their own political and
relationship
capital to advance high potential employees. Most notably,
sponsors increase
access to promotions and developmental assignments for the
financial advisors
whom they support. Having a sponsor bestows career benefits of
anything from
22-30 per cent, depending on what is being requested (e.g., pay
raise or
assignment), and whether a male or female employee is making the
request.
For years, high
potential female financial advisors have been over-mentored and
under-sponsored
compared to their male peers. Financial advisors who have
sponsors – regardless
of gender – report higher satisfaction with their career
advancement, are more
likely to take on “stretch assignments,” and are more likely to
request
compensation increases than their peers without sponsors.
Unfortunately, many
female financial advisors tend to underestimate the critical role
that
sponsorship can play in their advancement throughout their career
and across
their industry. Even those women who realize the critical role of
relationship
capital may fail to effectively cultivate it, because they are
concerned that
they will appear self-serving or are fearful that they will be
turned down.
Some of this
reluctance is justified in that sponsorship often involves older,
married males
spending one-on-one time with younger, unmarried females and can
be
misconstrued as sexual interest. As a result, female financial
advisors have
not been advancing at or staying with their firms. Studies reveal
that female
financial advisors are more satisfied with mentorship, but need
sponsorship
more than any other program element. Without sponsorship,
high-performing,
young female financial advisors are likely to be overlooked for
promotions,
regardless of competence.
Effective sponsorship
is only part of a comprehensive program that includes training
and development,
performance evaluation and succession planning. For sponsorship
programs to be
effective, companies must hold their sponsors accountable.
Research shows that
those female financial advisors who are fortunate enough to have
sponsors are
more successful in advancing their career trajectories and are
more loyal to
their employers than those who do not have sponsors.
Many leading financial
institutions have purposefully implemented talent development
programs for
their female financial advisors. Deloitte was the Catalyst’s 2010
award winner
for achieving a tremendous milestone: 1,000 female partners,
principals &
directors. Currently, 36 per cent of Deloitte senior managers are
women, up
from 23 per cent in the mid-1990s.
Another method
employed by financial services firms to retain top female
financial advisors
involves deliberately staying connected with their advisors when
they take a
leave of absence with/without pay for family events (e.g.
maternity/paternity
leave). Many of the most successful firms continue to invite
their
advisors-on-leave to company activities as well as provide
continuing education
courses and other resources as needed. As a result, these firms
engender strong
loyalty and very positive morale when their financial advisors
return to work.
Goldman Sachs reported
that more than half of the alumni of their “Returnship” program
hold full-time
positions at the firm after taking temporary leaves of absence.
JPMorgan’s
informal program that targets and connects high potential female
employees with
sponsors contributed to women holding 23 per cent of senior-level
roles and 54
per cent of mid-level manager positions at the firm. And
recently, Deutsche
Bank initiated the Atlas program in which 30 female managing
directors are
sponsored by members of the executive committee and meet with the
CEO every
year.
Attracting and
retaining top female financial advisors requires involvement and
support from
the top down. When done thoughtfully and with sponsorship, not
only do the
individual women flourish, but so too does the institution’s
financial
performance.