Women strengthen the RIA industry
No matter where you turn, a current topic of discussion among RIAs is the impact women can have on the industry. The impact of women, however dissimilar they may seem, could be deeply integrated with other notable trends. The industry is on the cusp of the biggest wealth transfer in the nation’s history, and at the same time, the profession is rapidly aging. Cerulli Associates has reported that nearly two of every five advisors will transition into retirement within the next ten years, and RIA firms are struggling to line up replacements for the people who guided our industry through tremendous growth.
Could it be that they’re looking for the wrong people and the wrong skill-sets? The RIA industry has long been a male-dominated field, so it’s easy to excuse the tendency for firm owners and investment veterans to think about hiring other men as they look for ways to fill the ranks. Although women make up just under 51 percent of the population, they account for just 15.7 percent of financial advisors, Cerulli says.
That’s particularly surprising when you consider the educational achievements of women as a group. Women have outpaced men in receiving bachelor’s degrees since 1982, and they began earning more master’s degrees than their male counterparts since 1987. Add in the projections that women will control about two-thirds of wealth by 2030, and it becomes clear that increasing the share of female advisors would benefit the industry as a whole.
Yet there’s an even bigger reason it makes sense to increase the number of women in the industry. Over the past couple of decades, the RIA industry has been undergoing a shift from a field focused on short-term sales to one emphasizing long-term client relationships. That shift has been accelerated by the recent focus on the fiduciary role. There’s always danger in generalizing, but traditionally, men have been more comfortable in aggressive sales roles, while women have been more interested in building relationships and helping others meet goals. As a consequence, fewer women have been attracted to financial advising because of the perception that an advisor’s primary job is to sell.
If firms instead begin to emphasize that an RIA’s main role is to — well, advise — those firms may find it easier to attract top-quality female candidates. By emphasizing that an advisor’s job is to help clients meet household needs, fund their children’s education, and enjoy a secure retirement, they’ll tap into people who enjoy goals-based planning. In turn, that will appeal to the growing number of prospective female clients, and should reduce client turnover, as expectations shift from making a quick killing in the market to taking a longer-term focus.
In other words, bringing more women into RIA roles should strengthen the industry, enhance the long-term viability of RIA firms, and improve the image of advisors as a whole. Firms can support this trend by focusing their recruiting activities on the skills areas where female candidates are likely to be stronger, and by encouraging the women who now work as advisors to become more visible in the community.
At the same time, female RIAs need to adopt more confident postures, rather than defer to their male counterparts. Firms can support this by increasing training activities and encouraging female team members to network and develop mentor-mentee relationships with one another. They should also be encouraged to speak to younger women in colleges, schools, and youth organizations to build an interest in financial careers.
The aging of the RIA industry may be a crisis, but stepping up efforts to bring more women into the profession may be an effective way to transform that crisis into an opportunity for greater success in the future.