Julie Jason: Does trust motivate a change in advisers?
Women are a challenge for the financial services industry. Firms are trying to understand them better so financial advisers (mostly men) can improve on how to engage them as clients. (According to a new study from J.D. Power, only 16 percent of advisers are women.)
It’s always interesting to see things from the other perspective — namely, what women are thinking about when they interact with financial advisers.
A new report just released by Spectrem Group provides some insights, focusing especially on widows and divorced women. George Walper, president of Spectrem Group, explained: “There is a lot of incorrect information in the media about women and advisers, especially if and when they switch advisers. That’s what prompted us to do the research.”
What does the research tell us? First of all, most widows (80 percent) and divorcees (75 percent) surveyed had financial advisers, according to the study of women with at least $500,000 of net worth, not including their primary residence.
About one out of two widows surveyed did not switch after widowhood. The main reason? Trust (93 percent said, “I trust this adviser” when asked why they chose to stay with the same adviser).
That rationale (trust) is not surprising. What about women going through divorce? I’d expect that few would stay with the adviser they used when married, and indeed, only 32 percent of those surveyed did. For those who stayed, what was the motivation? Forty-six percent were happy with returns and stayed with the adviser even though their exes also stayed with the same adviser. Twenty-seven percent stayed because the divorcee’s relationship was stronger than her husband’s, enough so that he switched advisers.
Of those who left, four out of 10 “did not want” to use the same adviser after the divorce. Another 21 percent “did not trust the adviser after (the) divorce.”
If you think about it, isn’t trust the foundational belief that moves one to stay, flee or find a new adviser?
That poses another question: How did the survey respondents conclude they could trust their financial adviser?
Definitions tell the story. Both widows (82 percent) and divorcees (86 percent) defined trust as “looking out for my best interests.” From my perspective as a lawyer and money manager, that standard of care is limited to a fiduciary under the law, which leaves out all the advisers who don’t conduct business as fiduciaries. Is that distinction being lost? Probably, because here are the other survey responses defining trust:
More than one out of two women said, “Proactive in calling me and telling me important things that pertain to my investments.” Four out of 10 said, “No mistakes in the work they perform for me.” Four in 10 said, “Charging fees that reflect the value they provide me.” One of four said, “Admitting when they are wrong.”
Now, I find this most interesting in the context of trust: “Only 50 percent of widows (said) their spouse made certain they were financially secure for life at the time of their husband’s death.” That leaves one out of two who did not. Was their trust misplaced?
In my view, what we all need to face is this: Generally, women do outlive men (according to the Centers for Disease Control and Prevention), and a large number of marriages end in divorce (approximately 40 percent, according to Spectrem). That means that a “couple” will dissolve at some point, either through death or divorce. A woman who survives will need to decide how to make sound financial decisions and what role an adviser can or should play.
When I spoke with Walper, he summed it up this way: “It’s very important for the woman investor to be involved with investment decisions before a life event occurs.”
This is the challenge he lays out to advisers: “Look at the uniquely different needs of each person in the relationship years before anything happens.”
My advice to women: Avoid the regret of waiting until something happens. Get involved now — right now. If you want my opinion on how to do that, ask me (readers@juliejason.com).
If you live near or travel to my home territory of Fairfield County, join me for a class I’m teaching on the subject of transitional times and life-changing events in women’s lives, at Norwalk Community College on July 24 at 6:30 p.m. To register, visit norwalk.edu/extended-studies/#registration and search FIN D5014.