Though female investors express less interest in handling their portfolios themselves, they are also more reluctant to pay for the advice they do receive, according to a new study.
Barely half (51%) of female respondents agree that they are willing to pay for financial advice, compared with 58% among males, according to the latest Cerulli Edge—U.S. Retail Investor Edition.
Cerulli notes that much of this difference is accounted for in the undecided segment, with 27% of females unsure whether they are willing to pay for these services, while only 21% of males take this position.
One of the more notable differences between investors on a gender basis is the desire to be actively involved in day-to-day management of their portfolios. Cerulli found that only 4 in 10 female respondents (41%) voice an interest in this depth of engagement in their financial affairs, compared with nearly 6 in 10 males (57%). This result is even more pronounced at each end of the spectrum, the report notes, with 25% of males surveyed selecting “Strongly Agree” to wanting day-to-day involvement compared with just 15% of females.
When reviewing the results in aggregate, Cerulli observes that a recurrent theme emerges around a tendency for females to have a degree of discomfort with the intricacies of financial advice. Females express lower interest levels in taking an active role in their portfolios but are also more reluctant to pay for advice to guide them through these topics.
“This provides both a challenge and an opportunity to providers in the advice segment,” explains Scott Smith, director of advice relationships at Cerulli. “As regulators are consistently elevating the role of transparency and disclosure in client relationships, investors are more likely to ask questions about advice fees and commission charges.”
Combat the Skepticism!
With such a relatively high percentage of advisor-reliant female investors already concerned with their fee relationships, it will be crucial for providers to creatively combat the skepticism, and clearly and concisely express the value of their services, the report notes.
To better serve them, providers must seek opportunities to alter this dynamic, according to Cerulli. More recently, provider firms have begun to actively reposition themselves to recognize that—to serve female clients more effectively—they should not start by default from a perspective of modifying existing offerings to serve female investors.
Instead, platforms should be designed to serve clients equally regardless of gender and offerings could be developed separately with distinct end-investor markets in mind. And the first step in pursuit of this parity is better understanding the high-level preferences of investors when viewed through the lens of gender, the report explains.
Moreover, as the industry edges toward a greater emphasis on planning-based fiduciary relationships, the benefits of employing trusted advisors are becoming more material, Cerulli emphasizes.
Rather than simply recommending the “best” stocks or funds, advisors are increasingly adopting process-based planning, which creates an implementation timeline. “By dividing this timeline into tangible milestones, advisors are better poised to communicate the value of each step, rather than trying to assess an ambiguous ‘wealth management’ fee,” the report states.
“When connecting their remuneration to specific responsibilities and outcomes, advisors could reduce the potential skepticism among female investors and create millions of mutually beneficial client relationships,” Smith emphasizes.
ESG Interest
On a separate but related topic, Cerulli’s research also found that there are substantially different levels of interest in environmental, social, and governance (ESG) investing based on investors’ gender. According to the firm’s findings, female investors express higher overall interest in ESG themes, but not with the enthusiasm of their male counterparts.
For example, when asked if they would prefer to invest in firms that aim to “have a positive social or environmental impact,” 52% of females indicate interest, compared with 44% of male respondents.
But a review based on age cohorts offers a different take. Here, Cerulli found that, within the age 40 to 49 segment, interest from males outpaced that of females 63% to 53%, with the difference almost entirely attributable to males who express a high level of agreement with the statement—approximately 23% of men “strongly agreed” versus only 14% of women.
These results underscore much of the reluctance when advisors consider the possibility of adding social and environmental considerations to their portfolio construction process, the firm observes. “Unless advisors specifically build their practice’s value proposition around the core principles of sustainable investing, a prospective client’s perspective can be from any point along the agreement continuum and could present a potential point of contention if the views of the advisor and prospect are at odds,” the report states.
As such, it notes that advisors ultimately must balance the benefit of a portfolio truly customized versus the time and effort required to implement and maintain it.
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