Advisor Marjorie Fox uses DFA: “But Dimensional Fund Advisors is rarely mentioned in the press,” she says. “So, clients were suspicious about how we chose Dimensional and wanted to know what exactly is Dimensional?”

Why women just aren't buying what financial advisors are selling

Slick and smooth won't win trust, Spectrum study shows, and improving results are too little, too late

May 3, 2011 — 1:46 PM UTC by Lisa Shidler

4 Comments

RIABiz recently ran a column about the philosophy behind advisor’s DIY approach to serving women. In Dorie Rosenband’s tough questions about being a woman broker led her to become an RIA, Rosenband writes about how difficult it is for a wirehouse world hampered by a long history of sexism to serve women well.

A new survey by the Spectrem Group offers a disturbing window into how little women trust their financial advisors – and how clueless the advisors are about that lack of trust.

An overwhelming majority (98%) of women with a net worth of $100,000 to $25 million say that trustworthiness is the most important factor in choosing an advisor, according to a group of recent surveys. See: How to market to women: Don’t.

Part of Spectrem’s analysis is from 997 millionaire households whose net worth is between $1 and $5 million. A separate study was conducted at the same time with 516 households with $5 to $25 million in net worth. Other data comes from a Mass Affluent Study, a survey of 1,511 investors with $100,000 to $1 million, which was collected last fall. Spectrem released partial interviews of some of the participants.

These studies all highlight the increasing skepticism that women feel toward advisors, but the analysis doesn’t include step-by-step solutions for advisors to turn things around. Some advisors have made significant changes to gain the trust of women … but the Spectrem study shows the long road they still need to travel.

Women trust advisors even less than before …

It’s no surprise that women are somewhat leery of advisors, but the recent market meltdown has damaged advisors’ tremendously reputations in the eyes of women. Con artists like Bernie Madoff are still fresh in the minds of many women.

“You just have to take care of yourself,” one woman who was interviewed says. “I know I need to watch what they’re doing.”

That attitude was crystal clear to advisor Marjorie Fox, with Fox Joss and Yankee LLC, an RIA in Reston, Va., that manages $310 million in assets.
Even though she felt she spent incredible amounts of time explaining her investment process to women, she learned recently that she simply needed to do more.

“The women coming to me are very concerned post-Madoff about trustworthiness. They’re most concerned that anyone they work with is honest and will preserve their capital,” she says.

Women want more facts

Women’s skepticism will only rise unless they’re giving concrete evidence that the advisor is investing their funds legitimately.

“I need the same amount of information that I receive from a doctor,” says one woman surveyed in the Spectrem study. “Why is he recommending this investment? Is it best for me or for him?”

In fact, Fox says that when her clients – women and some men too – had a hard time learning about a fund they were invested in, they become even more suspicious.

For instance, one of the investments that Fox’s firm has its affluent clients invest in is Dimensional Fund Advisors.

“But Dimensional Fund Advisors is rarely mentioned in the press,” Fox says. “So, clients were suspicious about how we chose Dimensional and wanted to know what exactly is Dimensional?” See: Dimensional Fund Advisors still has low RIA acceptance rate and stunning growth.

That led to the three partners sitting down and spending more time individually and in small groups with all clients patiently explaining their investment choices and showing them impartial reports about the funds.

“We learned in the bear market that despite what we thought we’d done right, the clients didn’t understand what they were invested in. It really forced us to do a lot more to build their trust.”

See: Hellish memories: Advisors recall rock bottom, March 9, 2009.

Don’t be a salesman

As much as some advisors in the RIA space strive not to push product, women still perceive advisors as not much different from a used car salesman.

“I feel like he is always trying to sell me the next new thing,” says one woman from the Spectrem report.

“I’m not going to call him back if he is only trying to sell me something,” says another woman from the report.

Because advisor Ted Feight, a solo-practitioner fee-only RIA who runs Creative Financial Design in Lansing, Mich., knows that women are on edge about product sales, he will steer clear of anything that could even be perceived as a type of product pitch.

“The most important thing we can do is gain women’s trust,” Feight says.

Feight, who runs a small shop with just more than 60 clients managing about $15 million in assets, says he takes time to explain his process to clients and prospects. “You have to be sincere,” he says. “You can’t fake it. A women will know it if you fake it.”

For instance, when he works with widows, he spends time helping them with basic financial skills such as helping them balance their checkbooks and pay their bills.

Don’t be pushy

Women are growing skeptical of advisors who want them to make frequent changes.

“I don’t want to change what I am doing,” says one woman in the focus group. “Why is he always pushing?”

Even though advisors may simply be offering women additional products, it’s critical that advisors recognize that women are simply different from men, says Pamela N. Danziger, president of Unity Marketing, a boutique firm in Lancaster County, Pa.

“Men and women have totally different points of view,” she says. “If you don’t recognize the differences you can be up a creek.”

For example, she points out that women make more of their financial decisions based on their values – which is different from how men make financial decisions. A woman wants to know that her portfolio is doing well so she can afford to pay for her children or grandchildren’s college education.

“Women are concerned with the facts and figures but they want to know how it relates to their values,” she says.

Stop talking about your track record

An advisor’s track record isn’t as important to women as other factors and time spent talking about his performance could easily lead women to jump to the conclusion that he’s most interested in his own bottom line.

“Everyone is out for himself,” says one woman in the Spectrem interviews. “He may act like he cares about me, but he really just wants to make as much money for himself as he can.”

“So many advisors tout the track record,” says Tom Wynn, director of affluent research for Spectrem. “But having good basic customer service will carry you more than having an outstanding track record.”



Share your thoughts and opinions with the author or other readers.

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Paula @ AffordAnything.org said:

May 10, 2011 — 4:54 PM UTC

Too many advisor try to push products, and all people are weary of being “sold too” — but perhaps women are more weary of it, since they probably receive more offers and deal with more pushy salespeople. An advisor should do what his/her job title states: advise. That means not pushing a product or a particular investment, but instead make the primary mission to listen to the client and understand her needs.

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Lisa Shidler said:

May 5, 2011 — 3:56 PM UTC

Charles, thanks for your insightful comments. Unfortunately, you’re right it seems that many advisors do push the sales and it leads women to be skeptical. As a reporter who speaks to dozens of advisors on a weekly basis I will tell you, I feel optimistic. The advisors I speak with are seem quite concerned with all of their clients issues and make it a point not to push sales. But unfortunately, as a female investor I’ve first-hand experienced concerns with my own “advisor.” I always felt that he was trying to push product and he calls like clockwork at the same time each year. He doesn’t call when the market was falling apart to see how we’re doing. Basically, from my perspective it seems he’s only calling to see if we have more assets to roll into an IRA, etc..
So, I think that there are clearly great advisors out there, but unfortunately a lot of women investors encounter advisors who don’t appear to be trust-worthy. What happens then is ultimately women do more research and will find a better advisor the next time.

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Yvette said:

May 3, 2011 — 9:00 PM UTC

Great article! Most research shows that women are more conservative investors. They do more research, compare more advisors before choosing one, and make few trades. Thanks for the added insight about women focusing more on trust and less on performance history when compared to men.

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Charles H. Green said:

May 3, 2011 — 6:32 PM UTC

This article rings completely true.

As someone who works in the “trust business” (I’m co-author of The Trusted Advisor, author of Trust-based Selling, founder of Trusted Advisor Associates), there are three businesses that ought be perfect territory for trustworthy salespeople: accountants, pharmaceutical reps, and financial planners. Unfortunately, only the accountants come close to fulfilling that potential.

The usual culprits are identified by author Shidler: a tendency to sell, and an inclination to think that trust is about credentials and data.

Of all the above-cited businesses, perhaps the most intangible of all is financial planning. This makes it an extremely emotional purchase for men and women alike—women just have less hesitation about admitting the emotional nature of the buying process.

What the women Shidler speaks are demanding is not data per se, but the clear sense that the data is being provided on-demand, without bias, in an open and transparent manner. Instead, they are given the impression by too many planners that the data is being carefully meted out, with an eye to how it will make them look. This just fosters more suspicion.

The good planners know the paradox of trust: if you simply serve your client by helping them make a decision that is best or them—and not focus on selling them a product or service—then you will earn their trust. If you earn their trust, they will buy your services and place their assets with you. But only if—paradoxically—you are prepared to serve their interests at the expense of your own.

Talking about your track record is a waste of time. Would you want a blind date to talk about their last 17 dates? It’s the same with the financial business; a client wants to hear you talk about their life, not someone else’s. Yet planners persist in bragging about their success with strangers. No wonder women don’t buy it.

Far too few people in the financial business are willing to make this simple trade-off—do right by the client and the client will do right by you. They are far too inclined to follow another rule—do unto others before they do unto you. I have watched far too many funds wholesalers as they approach planners—the pitch is always “look how much commission you can make on this product.” Too many planners then put clients into inappropriate funds—which manage to make the managers well-paid, at the expense of clients.

It’s ironic that companies like Dimensional—which actually encourage the kind of open thinking I’m talking about—don’t get enough press. But understandable, because the sellers don’t make as much off the sale.

Until advisors figure out that to be trusted, they must be trustworthy, Ms. Shidler will have to keep writing the same sad article.


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