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Women Investors Want An Investment Advisor They Can Trust by Ellen Roseman

Ellen RosemanThis article is an excerpt from Canadian MoneySaver's Women in Finance Edition. If you're not currently a member, you can view all the articles, including all past issues of the magazine since 2001 by subscribing here.

 

The 2018 Boston Marathon was run in the worst conditions in decades, with horizontal rain and freezing temperatures. The winning times for both men and women were the slowest since the 1970s and the midrace dropout rate soared.

But finishing rates varied significantly by gender. For men, the dropout rate was up almost 80 per cent from 2017. For women, it was up only about 12 per cent.

Overall, 5 per cent of men dropped out, versus just 3.8 percent of women. The trend was true at the elite level, too.

In an April 20 article about the 2018 Boston race, New York Times reporter Lindsay Crouse interviewed a running expert about women’s ability to recalibrate their behaviour and expectations based on circumstances.

“Among the athletes I’ve coached, I think I’ve had more women where when it’s bad, they can blow up, but they’ll still finish the race, whereas men drop out,” said elite distance coach Steve Magness.

“Women generally seem better able to adjust their goals in the moment, whereas men will see their race as more black or white, succeed or fail, and if it’s fail, why keep going?”

The marathon analogy appeals to Judy Paradi and Paulette Filion, who consult with financial advisors on how to understand women’s needs. As partners in Toronto-based Strategy Marketing, they talk about how women differ in making financial decisions – and that is what makes them excellent clients.

“Women appreciate everything you do for them as a financial advisor and are far less likely to abandon the plan you built together when the markets are down,” they wrote in a July 2018 blog post.

“For men, achieving the best rate of return is usually a prime motivator and how they judge success when they invest. As a result, they will often leave their advisor if they don’t feel like they are winning – that is, accumulating more.”

But for women with assets who are looking for valuable financial advice, investing is more than a rate of return. They want to have a trusting relationship with their advisor.

Historically, the male-focused approach to investing has worked. So, the financial community recognizes and rewards investment prowess.

Advisors focus on becoming licensed as portfolio managers and earning educational credits to become experts in asset allocation, portfolio optimization and risk management—but with little thought to relationship building.

Performance is important to women too, “but they assume that managing money well is a ‘given’ for all licensed financial advisors.”

So, now it’s 2019 and the markets are down. Has anything changed in terms of women’s satisfaction with financial advisors?

“We’ve seen a lot of outreach to women,” Paradi says. “Financial institutions started speaking to women, saying ‘we want your business. Come to us.’ But this is a superficial approach and when women go, they find the same old, same old disconnect.

“Women never felt welcome in that world. No one tried to demystify investing for them.”

Here is their advice to women who hold mainly low-risk deposits because they fear venturing into stocks, bonds and pooled products such as mutual funds and exchange-traded funds.

Just get started. Begin your accumulation, even if only with $500 or $5,000. That will help you learn.

Be engaged. If you hire an advisor, give the person a list of parameters that are important to you.

Get an agreement in writing setting out the terms of your relationship.

Paradi and Filion back up their arguments with survey results that show Canadian women’s growing financial power.

Nearly half of women say they and their partner have separate investment accounts. Just over half say they manage their own investments, even if they have an account with a partner.

Three-quarters of women who have a financial advisor say their advisor is a man. But 90 per cent of women say they don’t care if their advisor is a man or a woman, as long as they can develop a relationship with them.

Women want to have a connection beyond the rate of return, say Paradi and Filion. They advise women to talk to their advisors and tell them they want certain things. Here’s their list, which you can adapt and revise at will:

1)  Please don’t use jargon, explain things in plain language. I am interested in your point of view.

2)  It’s important to me that this relationship is a partnership where we discuss everything and make plans together.

3)  Tell me about how we’re doing in terms of the goals that are important to me – such as having enough income in retirement to pay for all my fixed expenses (say $5,000 a month).

4)  Meet with me in person regularly, say quarterly or twice a year, at a location that is mutually convenient.

5)  In our meetings, I want to review where I stand against the plan we develop together. How much are we up (or down)? What fees have I paid? What taxes are owing? What risks did we take? What changes (if any) will we make to my portfolio in coming months?

6)  Once a year, let’s review where we are in terms of my overall plan and discuss changes as appropriate.

7)  I want to learn more about investing. Can you suggest any topical seminars I can attend?

8)  What else can I expect from you beyond investing my money appropriately, helping me meet my goals and acting in my best interest?

“If you can’t have this conversation with a new financial advisor you’re considering, then that person may not be right for you,” they say.

“Remember, it’s your money and the financial advisor will earn a good living from managing your money. You have a right to expect a relationship and communications that make sense for you.”

Ellen Roseman, Toronto Star business columnist, investing for beginners instructor at University of Toronto continuing studies, board chair at FAIR Canada, an investor advocacy group. @ellenroseman on Twitter.

 

Lana Sanichar

A big thank you to Ellen Roseman for her wonderful contribution and insights to the magazine! The full special edition on Women in Finance is available to all members. If you're not currently a member, be sure to subscribe here and you'll also receive all past issues of the magazine since 2001. 

 

 

Thank you for joining us!

 

 

 

Lana
President - Canadian MoneySaver Magazine