What really matters to women investors

Transcription

1 january 2014 What really matters to women investors Exploring advisor relationships with and the Silent Generation. INVESTED. TOGETHER.

2 Certainly a great deal has been written about women and investing in recent years especially about women Baby Boomers. We chose to study the generations that bracket the Boomers (, ages 32 to 47 and the Silent Generation, ages 67 to 80), curious to see if broader distinctions exist between these age groups. We also wanted to identify any gaps that may exist between women investors and their advisors, so we conducted two separate surveys: one with advisors and the other with and Silent Generation women who work with an advisor. Finally, we felt the timing of our surveys might reveal new insights, given the strong performance of the capital markets in recent years. One of our most interesting findings contradicts a commonly cited 2008 study by Allianz Life Insurance that said 70% of women investors would fire their advisor within one year of a spouse s death. A large majority (78% and 93% Silent Generation) of women investors told us they would stay with their current advisor if their spouse were to die. What s more, the death of a spouse or partner was the top reason respondents said they would look to their advisor for support and advice. We also uncovered several areas where advisors could likely strengthen their relationships with female clients in areas such as estate, retirement and general financial planning. Learn as much as possible about their need for security and engage them in very clear language they can understand. What s on the minds of women investors? As you might expect, there is no shortage of financial concerns for the women who participated in our survey. Women in both groups have a range of financial concerns, regardless of age, but their top issues focused on retirement and health: The number one concern was healthcare in retirement (93% and 76% Silent Generation). That was followed by long-term care (88% and 77% Silent Generation) and the third most popular concern was maintaining their current lifestyle in retirement (88% and 68% Silent Generation). As many women in the Silent Generation move further into retirement, we may assume they re becoming more comfortable and about healthcare as they gain more experience with their healthcare providers and the systems at both the federal and state levels. They also likely have a better understanding of what it costs to maintain their lifestyle in retirement. That real life experience can be reassuring and we believe women could learn a few things from the experiences of the Silent Generation, who said they feel pretty good about their financial situation and their advisory relationships. Like many investors, women fear the uncertainty of the future, and this is where financial advisors can help. Whether this involves understanding the suitability of longterm care insurance or setting aside the necessary funds to self-insure, women investors want to learn as much as they can about these topics. Since women investors look to their financial advisors for precisely this kind of guidance and planning, we believe this is a real opportunity for advisors to listen to women s concerns, learn as much as possible about their need for security and begin to engage them in very clear language they can understand. Russell Investments // Women and investing p / 2

3 Question for women investors: To what degree, if at all, are each of the following a financial concern for you personally? Exhibit 1 Having enough money for health care expenses in retirement 59% 34% 93% 35% 41% 76% Having enough money to pay for home care or a nursing home 46% 42% 88% 33% 44% 77% Having to reduce your lifestyle or spending in retirement because of a decline in assets 35% 52% 88% 19% 49% 68% Having to provide financial support to your children as they get established in their adult lives** 25% 56% 81% 8% 34% 42% Knowing how to manage your investments if you live longer than your spouse/partner 28% 52% 81% 19% 41% 60% Being able to leave a meaningful bequest to your children** 25% 51% 76% 15% 46% 62% Being a burden on your family as you age 31% 42% 73% 28% 39% 67% Protecting yourself from scams and fraud 33% 37% 69% 30% 40% 70% Having enough money to help parents or other older relatives in their retirement 19% 49% 67% Major concern Minor concern Net: concern ** Among those with children Russell Investments // Women and investing p / 3

4 Use financial planning to help make better decisions, raising the potential to consolidate assets. Women are taking on more responsibility for investing than their partners. Women are getting more involved in the investment process. As we can see in Exhibit 2, over half of the respondents (52% and 63% Silent Generation) share the responsibility for managing their household s savings and investments and nearly one third (29%) and one quarter (24%) Silent Generation have more responsibility than their partners. This finding is closely supported by our advisor survey that said, on average, half the households they serve are led by women decision-makers. Whether they are leading or sharing responsibility, women have an active role in the management of their households finances. To that point, over half (56%) of advisors believe that their female clients have a longer-term perspective when it comes to planning versus only 5% who say male clients take a longer-term view (see Exhibit 3). What s more, over 60% of women in both age groups (61% and 63% Silent Generation) say retirement investing is their main objective, whether they are saving for retirement or trying to maintain their lifestyle in retirement. The good news is that many advisors already recognize that women take a longer-term view to planning, so this should be a very easy and welcome conversation for both parties to have. Question for women investors: How would you describe who in your household is most responsible for managing your household s savings and investments? (Among those who are married or living with a partner. On a scale of 1 to 9 with 1, you have all the responsibility and with 9, your spouse or partner has all the responsibility.) Exhibit 2 63% 52% 29% 24% 19% 14% 1 3 Have more responsibility than spouse/partner 4 6 It's exactly 50/ Spouse/partner has more responsibility Russell Investments // Women and investing p / 4

5 Question for advisors: Which clients tend to have a longer-range perspective in planning? Exhibit 3 56% 37% 29% 5% Female clients Both genders are the same Male clients Women investors seem to value planning more than many advisors may realize. Women don t need a budget, but they could use a plan. This is an area where many advisors may be missing an opportunity to really add value and make meaningful contributions to their relationships with women investors. If you look at Exhibit 4 you can see that nearly three quarters (74%) of advisors say they frequently help develop budgets for their female clients. This may be a wasted effort, however. As Exhibit 5 shows, large majorities of women investors (77% and 81% Silent Generation) said they were perfectly comfortable developing budget guidelines and managing their finances day-to-day. So there is clearly a gap in understanding here. Given that time is a rare commodity, we believe advisors should at the very least discuss what their female clients really want and need in this area, if not shift their attention to other areas that might add more value. Advisors seem to recognize the importance of creating a financial plan. Yet they don t believe their clients value it. When asked to assess the importance to clients of 12 functions that advisors provide to female clients (see Exhibit 6), advisors ranked preparing a formal financial plan in 10th place. At Russell, we believe advisors should provide every client male or female with a financial plan, an investment policy statement and a social security optimization strategy for couples and individuals. Only with these pieces in place can clients begin to understand how their portfolio and other potential sources of income can work together to meet their overall investment objectives. Russell Investments // Women and investing p / 5

6 Question for advisors: Please indicate your level of agreement with the following I frequently help my clients develop specific budgets and guidelines for their ongoing spending. Exhibit 4 48% 26% 20% 6% Strongly agree Somewhat agree Somewhat disagree Strongly disagree Question for women investors: How comfortable do you personally feel about doing the following? Exhibit 5 Paying basic bills, like the phone or electric bill 89% 8% 97% 88% 9% 97% Developing budgeting guidelines to manage your finances day-to-day 41% 36% 77% 48% 33% 81% Communicating your financial situation and needs to your financial advisor 27% 44% 72% 46% 39% 86% Tracking or checking-on the performance of your investments 20% 31% 50% 31% 31% 61% Developing an investment strategy to manage your finances for the long-term 7% 20% 28% 15% 28% 43% Extremely comfortable Very comfortable Net: comfortable Russell Investments // Women and investing p / 6

7 In uncertain times, build trust and offer solutions, appealing to emotional as well as financial needs. Most women would stay with their financial advisor if their spouse/partner were to die. Large majorities (78% and 93% Silent Generation) of women investors said they would stay with their financial advisor upon the death of a spouse or partner. This is a dramatic contrast to the 2008 study by Allianz Life Insurance that said 70% of women investors would fire their advisor within one year of a spouse s death. This leads us to two observations. The first is that we can t overlook the different economic environments of today versus The fact is the equity markets have enjoyed an incredible run since the Credit Crisis and Great Recession that were gripping the world back then. As of this writing, the broad-based Russell 3000 Index reached an all-time closing high of on October 22, So while advisors clearly deserve kudos on a job well done, we must also acknowledge that a rising tide lifts all boats, and vice versa. If the markets suffer a sharp pullback from here, client retention levels could likely suffer. The second is that it s also possible that since 2008, advisors have come to understand they need to fully engage all their clients and have done a good job strengthening relationships with women investors. In either case, we know women turn to their advisors for support for many reasons (Exhibit 6), but the most pressing are: the death of a spouse (90% and 92% Silent Generation); retiring from a primary occupation (88% and 73% Silent Generation); and the need for significant medical or long-term care (84% and 73% Silent Generation). Most advisors know this, and in uncertain times they try to build trust, offer solutions and cement client satisfaction. Experienced advisors also realize that market drops and increased volatility can provide opportunities to field questions, have supportive conversations and provide a voice of reason to clients in need. Question for women investors: At what points in your life have you needed or do you imagine you would need or want advice and support from your financial advisor? Exhibit 6 If/when you become a widow or your partner passes away* 57% 33% 7% 3% 61% 31% 6% 2% If/when you (or your spouse/partner) retire(d) from your primary occupation If/when you (or your spouse/partner) require(d) significant medical care or long-term care 50% 38% 9% 3% 44% 29% 14% 13% 42% 42% 12% 5% 32% 41% 21% 6% If/when you got divorced* 42% 37% 12% 8% 33% 26% 19% 22% As you prepared to send your child(ren) to college** 32% 43% 16% 9% 11% 21% 18% 50% A great deal of support Some support A little support No support * Among those who are married or living with a partner ** Among those with children Russell Investments // Women and investing p / 7

8 Women see others as more. Help women understand what s happening in their portfolios and how it relates to reaching their goals. Our survey uncovered a number of unexpected findings around women s knowledge and comfort level when it comes to investing and to some extent the role others play in the process. While we know from an earlier question that most women share the responsibility for investing equally with their partners, we also see that a noticeable percentage judge the investment knowledge of their spouse or partner to be higher than their own. For example, only 7% of women and 8% Silent Generation women consider themselves very when it comes to selecting and managing investments. On the other hand, 20% of women and 28% of Silent Generation women see their partners as more about investments. Even more interesting, and we think counter-intuitive, this observation is even stronger among women. Question for women investors: How do you consider yourself when it comes to selecting and managing investments for your household? Exhibit 7a Very 7% 9% Very 20% 28% Moderately 42% 57% Moderately 41% 42% A little 29% 43% A little 30% 19% Not at all 9% 6% Not at all 9% 11% How would you say your spouse or partner is when it comes to selecting and managing investments for your household? Exhibit 7b Very ledgeable 7% 9% Very 20% 28% oderately ledgeable 42% 57% Moderately 41% 42% A little ledgeable 29% 43% A little 30% 19% Not at all 9% ledgeable 6% Not at all 9% 11% Russell Investments // Women and investing p / 8

9 Understand what really matters to your female clients. It s as simple as asking probing questions and listening to the answers. Active listening is the most important quality women look for in a financial advisor. It s clear that both generations appreciate being heard by their advisors. Exhibit 8 shows a solid majority of women investors (86% and 87% Silent Generation) said active listening is the most important quality for an advisor to have if they want to have an excellent and lasting working relationship. That was followed by personal service (83% and 81% Silent Generation) and encouraging women to take part in major investment discussions (83% and 77% Silent Generation). Advisors are right in line with the top two qualities that women are seeking from their advisors (see Exhibit 9). Nearly all advisors (95%) said active listening was most important to their female clients and 94% said providing personal service was the second-most important quality. Communication is the key here. And once again we note the importance of investing time in broad retirement planning, investment policy development and ongoing reviews to continue building these important relationships. As you ll see in the satisfaction and referral levels, your continued attention to this audience can pay huge dividends. Question for women investors: If you wanted to have an excellent and lasting working relationship with your financial advisor, how important would it be that he/she do each of the following? Exhibit 8 Shows that s/he is actively listening to your input and concerns 44% 42% 86% 46% 41% 87% Provides personal service that makes you think you are not just a number to them 41% 42% 83% 39% 43% 81% Encourages you to take part in the major discussions about your investments* 38% 44% 83% 34% 43% 77% Adapts his/her explanations to the level of investment knowledge you have 37% 45% 82% 39% 44% 83% Communicates how his/her recommendations are tied to the guidance or concerns you told him/her 34% 47% 82% 34% 46% 80% Explains how decisions may affect you (and your spouse/partner) differently in the future 36% 44% 80% 33% 37% 70% Extremely important Very important Net: Important * Among those who are married or living with a partner Russell Investments // Women and investing p / 9

10 Question for advisors: How important do you think it is to your female clients that you do each of the following? Exhibit 9 Show that you are actively listening to their input and concerns 65% 30% 95% Provide personal service that makes them think they are not just a number to you 62% 33% 94% Adapt your explanations to the level of investment knowledge they have Communicate how the recommendations you make are tied to the guidance or concerns they told you Encourage them to take part in the major discussions about their investments 50% 43% 94% 45% 45% 90% 38% 47% 85% Discuss their health and longevity and its effect on their finances Establish at least a small personal connection with their life beyond just the business part of it Explain how decisions may affect them differently than their spouse/partner in the future Help resolve differences of opinion on investment questions with their spouse or partner Prepare a formal financial plan for them 36% 47% 83% 34% 45% 79% 25% 45% 70% 17% 48% 65% 20% 40% 60% Discuss current events and how they may affect them (& spouse/partner) 16% 41% 57% Encourage them to involve trusted friends in their conversations with you 8% 27% 34% Extremely important Very important Net: Important Russell Investments // Women and investing p / 10

11 Most women are highly satisfied with their financial advisors, often recommending them. For Silent Generation clients, consider creating a service model that responds to her evolving needs in healthcare, wellbeing, and living situations. Participants in our survey are generally very happy with the relationships they have with their financial advisors. So much so that a majority of women investors (54% Gen X and 64% Silent Generation) said they have recommended their advisors to a friend or family member. For women in both generations, satisfaction in each area is significantly related to overall satisfaction with their advisors (Exhibit 10). In both cases, we believe the satisfaction drivers hold useful clues to creating more engaged and satisfied clients, and potentially bridging the perception gap we saw in Exhibit 7 (knowledge about investments). For women, the strongest drivers of overall satisfaction with their advisors are communicating how their recommendations are tied to their concerns, adapting explanations to their level of knowledge, and explaining how decisions may affect them differently in the future. In other words, the advisor needs to provide advice that the client perceives is tailored to meet her specific wants and needs. More than that, the client needs to understand how she can benefit from advice and recommendations. In the case of Silent Generation women, providing personal service and establishing a personal connection outside the business relationship rank as the strongest drivers. While the advisor shouldn t look past the importance of tailored advice, the source of client satisfaction with this generation moves instead to what we might think of as the little things. For example: remembering birthdays; writing personal notes; tracking the life events of the client s children are very important. Advisors may want to consider creating a service model that responds to her evolving needs in healthcare, wellbeing, and living situations. A few points worth considering: Two out of three women in both generations work with one advisor, but roughly 25% have two advisors. Nearly half of the Silent Generation women have less than 75% of their assets with their primary advisor. Finally, no more than one in three advisors know everything about their female clients financial goals. It all adds up to an opportunity for advisors who really listen to their clients, avoid financial jargon and provide tailored advice that can address her concerns. We believe this kind of approach can strengthen relationships, empower your clients and may often lead to a referral. This is one of the highest compliments an advisor can receive and indicates a high level of trust and satisfaction on the part of the referring client. Russell Investments // Women and investing p / 11

12 Question for women investors: How satisfied are you with your advisor s current performance in each of these areas? Exhibit 10 Shows that s/he is actively listening to your input and concerns 41% 41% 82% 50% 42% 93% Adapts his/her explanations to the level of investment knowledge you have 35% 42% 78% 41% 51% 93% Strong relationship to overall satisfaction () Provides personal service that makes you think you are not just a number to them 38% 39% 77% 46% 46% 92% Strong relationship to overall satisfaction () Encourages you to take part in the major discussions about your investments* Communicates how his/her recommendeations are tied to the guidance or concerns you told him/her 37% 40% 77% 43% 49% 92% 34% 42% 76% 42% 45% 87% Discusses current events, like market volatility or changes to government policy, and how they may affect you (and your spouse/partner) 33% 42% 76% 37% 50% 87% Establishes at least a small personal connection with your life beyond just the business part of it 37% 39% 76% 34% 49% 83% Helps you and your spouse/partner resolve differences of opinion about investment decisions* 31% 42% 73% 27% 46% 73% Prepares a formal financial plan for you 31% 38% 69% 44% 38% 82% Explains how decisions may affect you (and your spouse/partner) differently in the future 30% 38% 68% 33% 47% 79% Encourages you to involve trusted friends in your conversations with him or her 27% 41% 68% 19% 40% 60% Discusses your and your spouse's health and longevity and its effect on your finances 28% 39% 67% 30% 45% 75% Extremely satisfied Very satisfied Net: Satisfied * Among those who are married or living with a partner Russell Investments // Women and investing p / 12

13 If you have questions or would like to learn more about this study, call For media inquiries, please call Moving forward Most women are happy with the relationship they have with their financial advisor. But like any worthwhile relationship, you have to work at it. In the case of women, only a quarter say their financial advisor knows everything about their financial goals and concerns, so there is room for improvement here. Our research indicates that those advisors who invest the time and energy into building strong relationships with women investors could potentially see their loyalty rewarded in the form of consolidated assets and new referrals. Methodology In March 2013, Russell Investments hired Mathew Greenwald & Associates to conduct two surveys on women and investing. Both surveys focused on women investors in two age groups: (ages 32 to 47) and the Silent Generation (ages 67 to 80). One survey queried advisors about their relationships with women investors in these groups and the other sought out the woman investor s point of view for each generation. Throughout this report, we ve woven together a mix of advisor and investor results to tell this story. The advisor survey includes the results of 343 respondents, while the women investor survey includes 901 individuals (501 and 400 Silent Generation). In order to qualify for the study, women investors were required to have at least $100,000 in investable assets () or $500,000 in investable assets (Silent Generation); work with a professional financial advisor; and meet the age requirements mentioned above. For advisors to participate, they were required to be employed as an independent financial advisor, planner, or RIA, or work for a wirehouse or national firm, regional broker dealer, or independent broker dealer for 3 years or longer. They also needed to generate at least 75% of their business from the sale of individual products and services and earn at least $100,000 in personal income from the sale of financial products and services. Survey participants were paid a nominal fee for their participation. Russell Investments // Women and investing p / 13

14 The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness cannot be guaranteed. The information, analysis and opinions expressed herein result from surveys of persons outside Russell Investments and may not represent the opinion of Russell Investments, its affiliates or subsidiaries. This report is provided for general information only and is not intended to provide specific advice or recommendations for any individual or entity. Russell 3000 Index: measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. Please note, advisors surveyed do not necessarily use Russell products. The Russell logo is a trademark and service mark of Russell Investments. This material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from Russell Investments. It is delivered on an as is basis without warranty. Russell Investments is a trade name and registered trademark of Frank Russell Company, a Washington USA corporation, which operates through subsidiaries worldwide and is part of London Stock Exchange Group. Russell Financial Services, Inc., member FINRA, part of Russell Investments. Copyright Russell Investments All rights reserved. First used November 2013 rfs Russell Investments // Women and investing p / 14