Diverse workforces key for private banks to unlock female clients' true potential

Financial services institutions have gone through several iterations of trying to adapt strategies for how to sell to women but to date they have fallen short of their aims.

When a client engages a wealth management adviser, they take it for granted they will receive appropriate financial advice. But as in personal relationships, far more goes on in the unconscious communication. Just like a good marriage, the financial advice relationship needs to act as a psychological container that can hold the financial anxiety experienced by clients. Making financial decisions to secure one’s financial future can be very daunting, so much so that that many people avoid it altogether. These days, few can argue how personal investment decisions, as well as the usual suitability evaluation and portfolio recommendations, have a psychological component and are influenced by feelings.

However, what we do not think enough about is how the history of financial services affect how clients feel and that this may depend on personal characteristics we do not rationally take into account to determine the suitability of our recommendations. One of those characteristics is gender. According to rational economic theory, gender (of the adviser and their client), does not contribute to differences in the investment decisions made by clients or to the recommendations that advisers make to their clients.

Diversity attracts more business

Yet they do, and female clients feel that. Women feel they are being exposed to a certain culture, a culture that underpins the design of the financial services industry and the creation of its language and products. They feel that, just as they feel it when it is assumed they know less than their male counterparts, undermining their confidence rather than help boost it. Women also feel it when we try to trick them by offering pink fluffy solutions that talk down to them and create a feeling of being patronised.

In my research, I find that the gender combination of advisers and investors make a big difference to female investors. They invest more, feel more confident and knowledgeable, empowered if you like, when they have a female adviser. I find that wealthy women invest 11 per cent more if their adviser is a woman instead of a man. That 11 per cent translates into some really healthy revenue for banks and some good potential returns in women’s portfolios. It is not that male advisers give worse advice, not at all. But they do not offer the role model that investing is for women. A female adviser does that, she makes it accessible and it is therefore easier to trust her. The female adviser understands what it is like to earn less. That is important in a male-dominated domain with colossal gender inequalities in pay and career progression.

Women actively seek out female advisers. In my research I find that the demand exceeds the supply by 40 percentage points. And male clients don’t seem to mind what gender their adviser is. This means that banks need to turn their current 10-20 per cent female advisers into 80 per cent female advisers to become successful with their largest growth market, female consumers. Women control up to 80 per cent of consumer spending globally and these women are picky. They want to do business with companies that hire senior women, who value and live diversity. 

To be successful at retaining women, managers need to value them throughout their lifecycle. From their early careers, as mothers or carers and as they reach menopause and go through other life changes.

Managers need to understand and take an interest in women’s circumstances at home to help her feel less guilty about everything she has to balance and organise. Most working mothers do not have the same support at home as working fathers do. They often end up feeling guilty and apologetic about being a parent, that they are not able to go for last minute drinks or client dinners. But this is exactly what their female clients like, they understand their struggles and are impressed with their success.

This creates a trusting bond between clients and advisers, a deep-rooted bond that is pivotal for long term, mutually beneficial relationships. A relationship within which it feels safe to educate underinvested women that their real risk is not investing her hard-earnt cash. Women investing more is a ‘win win win’. The bank increases its revenue, the woman increases her portfolio returns and the gender inequality in income during retirement is also addressed.

To be clear, there is nothing wrong with male advisers, their recommendations are just as good. It is just that women prefer to work with women or at least an organisation that offers role models and hires, promotes and celebrates women.

There is an important message here. To increase success with female clients and generate more revenues, financial services need to recruit and retain more women in pivotal client facing roles. We need to refocus the gender debate to one which centres around opportunities instead of one which focuses on gender as a problem that needs solving.

Ylva Baeckström is a lecturer in finance at King’s Business School, King’s College London