The Financial Services Industry’s Untapped Market

by: Sylvia Ann Hewlett & Andrea Turner Moffitt

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What is the cost to an industry that misses the lessons of leadership diversity and ignores inclusive behaviors? In the case of the financial services industry, the penalty could be more than $5 trillion in the U.S. alone.

Earlier research from the Center for Talent Innovation (CTI) proved the logical link between innovation and diversity — that gaining market share and expanding into new markets hinges on two key elements: An inherently diverse workforce that, because it “matches the market,” is better attuned to the unmet needs of potential consumers and consequently is better able to create appropriate solutions; and leaders who appreciate the advantages conferred by a diverse workforce, actively endorse the ideas their diverse teams propose, and promote a cadre of managers who also embody inclusive behaviors.

Conversely, companies that fail to develop inclusive cultures risk missing out on innovative ideas that allow them to effectively tap into new markets.

According to new research from CTI, the financial services industry is a good example of an industry that risks missing trillions of dollars in potential business in the U.S. simply because its professionals don’t embody the behaviors needed and its firms haven’t built the cultures required to tap into the female market.

Women create, control, and influence an enormous amount of wealth around the world. In the United States alone, women exercise decision-making power over $11.2 trillion, a whopping 39% of the nation’s investable assets. Yet this robust — and growing — market is startlingly untapped and misunderstood by the financial services industry.

We sampled women in the United States, United Kingdom, India, China, Hong Kong, and Singapore with personal income of at least $100,000 or investable assets of $500,000 or more, and our research indicated that more than half (53%) of women surveyed do not have financial advisors. In the U.S., 47% of female wealth creators and an astounding 75% of women under 40 report not having an advisor. The numbers are as stubbornly high even in the upper end of the market. This unmanaged purse represents a massive missed opportunity for wealth management firms, one that in the U.S. alone may amount to more than $5 trillion in assets left on the table. In America, even among women who do have an advisor, 44% say they do not feel understood by that advisor. This is an astounding market failure.

Like all investors, women seek good portfolio performance but they also look for an advisor relationship grounded in communication and trust,” explains Shelley O’Connor, head of field management for Morgan Stanley Wealth Management. “They want their advisor to include them in the investing process and to make it clear how their investments align with their interests and life goals.”

Women do not necessarily prefer a female advisor, but they do expect their advisor to demonstrate gender smarts and exhibit inclusive behaviors. Advisors who create a safe space for questions and candid answers are 56% more likely than advisors who don’t to forge a satisfactory relationship (56% versus 36%). And advisors who are sensitive to women’s time constraints and manage details women do not have time to attend to are 69% more likely than advisors who aren’t to forge a satisfactory and enduring relationship (61% versus 36%).

Women differ from men in how they perceive wealth. They see wealth as a source of financial security and independence, just as men do. But once these priorities are met, women look to leverage their wealth to provide a larger basket of goods for themselves, their families, and, importantly, for society at large. Fully 90% of women in the global sample say making a positive impact on society is important. U.S. women are 27% more likely than men to want to invest in organizations that promote social well-being. “Women want money not so much for what it can buy, but rather for what it can do,” observes former Goldman Sachs partner Jacki Zehner, who is CEO of Women Moving Millions, a network of philanthropists dedicated to improving the lives of girls and women worldwide.

The financial services industry is essentially a relationship business — yet the CTI report shows a disturbing habit of getting the relationship with female clients wrong. We can see how inclusive behaviors play out in the critical relationship between advisor and client where female clients in particular are more satisfied when they feel understood, heard, and managed effectively.

Significantly, advisors with “gender smarts” — female and male advisors who understand how women’s insight, perspective, and experience differ from men — are more likely to exhibit these trust-winning and inclusive behaviors. These behaviors engender long-term client relationships.

While gender smarts unlock the female market in financial services, other industries may require other keys like cultural fluency or LGBT awareness to open opportunities in a changing marketplace. In any industry, firms can embrace transformation and respond to an increasingly powerful market demographic — by creating a diverse workforce to match and by promoting inclusive leaders that value diverse perspectives.

First, build an inclusive culture. Market-grabbing innovations result from the combination of a speak-up culture, where those with insight into the burgeoning market feel empowered to share their ideas and senior management with the ability to give those ideas the backing they need. Schwab recognizes the benefits of a diverse and inclusive culture and established its Women’s Advisory Council to cultivate women in the registered investment advisor industry and support them as they rise to leadership and client-facing positions. According to Natalie Straub, managing director of Client Experience, Advisor Services, at Schwab Institutional, having women in these positions not only promotes diversity but allows other advisors to better “understand what they can do to tailor their approach toward female clients.” Leaders who embrace diversity and behave inclusively create the kind of culture wherein female advisors and employees come forward with solutions to drive engagement with the female market.

Second, give diverse talent the visibility, support, and leadership development they need to succeed. Give rising diverse talent the visibility, support, advocacy, and leadership development they need to succeed in the business. Goldman Sachs sows the seeds of sponsorship through regularly scheduled get-togethers where the firm’s senior leadership, top female wealth advisors, and female advisors newer to the business compare notes, swap stories, and make connections.

Finally, create a differentiated client experience. Forge a deeper understanding of a highly nuanced marketplace and craft strategies accordingly. U.S. Trust Managing Director Judy Slotkin and her colleagues are working on a “boot camp” for advisors that will arm them with a more comprehensive understanding and passion for tapping into the female investor market. Through its Women’s Advisory Council, Schwab is also working with advisors to help them understand and respond to the rising opportunity the female investor represents.

What’s happening in the financial services industry is a cautionary tale which all other industries can benefit from. Without a clear understanding of the diverse needs in your market, leaders who value diverse perspectives — and a workforce to match — you’re likely losing out on big opportunities.

About the Authors

Sylvia Ann Hewlett is Chairman and CEO of the Center for Talent Innovation. She is the author of 11 books, including Executive Presence. Follow her on Twitter at @sahewlett.


Andrea Turner Moffitt is a senior vice president at the Center for Talent Innovation and managing director at Hewlett Consulting Partners. She is coauthor of the CTI report “Power of the Purse: Financial Services.” Turner Moffitt has worked globally with Citibank and the IFC with a focus on emerging markets, and she was formerly an investment banker at Robertson Stephens.

Article source: http://feeds.harvardbusiness.org/~r/harvardbusiness/~3/fnFaaPUmiLU/

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