Women set for massive wealth transfer

The advice industry will change with technology and demographics, says National Bank VP.

Jess Morgan 8 March, 2017 | 6:00PM
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Because of longer life expectancies and advances in the workplace, women in North America are controlling an ever-growing share of wealth. According to a report by the BMO Wealth Institute, women in the United States currently control US$14 trillion – more than half the country's personal wealth -- and that figure is expected to grow to US$22 trillion by 2020. In Canada, women already control $1.1 trillion of the financial wealth and make up 43% of Canadians with $500,000 or more in investable assets.

These trends are due to continue, with women employed at a rate of 62% and one-third of wives outearning their husbands. Yet according to a 2015 report from Strategy Marketing, a financial services consultancy, 73% of women feel dissatisfied with the service they receive from the advice industry.

In studies exploring women's relationships with the financial industry, a typical scenario shows a married couple meeting with their advisor, who directs most of his answers to the husband and focuses largely on how specific products in the couple's portfolio are performing. The wife, who would prefer to frame the discussion in terms of achieving milestones, such as retirement or the cost of their children's education, ends up feeling disrespected and ignored.

At Morningstar's recent Executive Forum on the future of financial advice, panellist Martin Lavigne, president of National Bank Financial, opined that as some aspects of advice, such as product selection, become automated, advisors would be able to offer a more holistic view of their clients' finances. This trend, he added, would attract more women to work as advisors.

Lavigne's colleague Angela d'Angelo, vice-president of development and client experience at National Bank Financial, agrees that there will still be a place for face-to-face advice even as financial technology (fintech) becomes more widespread and sophisticated. "There's a huge place for advice because there are certain things that automation can't decipher yet, with regards to perceiving how someone might feel about what's being discussed," she says.

According to D'Angelo, when the husband is no longer in the picture, the advisor often has trouble maintaining the relationship. "90% of women will have to make financial decisions alone at some point in their lives, because they outlive their spouse and because they inherit from their parents," she says. But according to the Strategy Marketing report, 80% of Canadian widows switch financial advisors within a year of their husband's death.

Above all, D'Angelo says female clients want advisors who understand them. "That takes different shapes and forms," she says, "but being understood means being listened to and being asked the right questions."

In that respect, D'Angelo agrees that female advisors are well-equipped to understand the needs of female clients, particularly the need to offer a more personal perspective on investing. "They'll usually approach an investor with the impact the return on their portfolio can have on their lifestyle," she says, "as opposed to the return itself."

However, that's not to say female advisors don't achieve strong returns for their clients. D'Angelo says she has personally seen a lot of growth for female advisors in terms of assets. "They can handle their own, and they do take off," she says.

With #BeBoldForChange as the theme of International Women's Day 2017, D'Angelo says the most necessary change for the financial industry is not just to participate in efforts at fostering diversity, but to prioritize them. She cites a report from McKinsey & Company showing that companies with more women at the top are 15% more likely to reach the top quartile in their industry in terms of financial performance. This likelihood increases to 35% if they prioritize ethnic diversity as well. "Those two reasons alone make it right," D'Angelo says. "Those different approaches are good for the firm, good for the employees and overall excellent for the experience of your clients."

But the "great wealth transfer" may be the most important reason to boost diversity in the industry now. "Over $1 trillion of financial assets in Canada will be controlled by women," D'Angelo says, "and 67% of those assets will probably be controlled by women over the next 10 years."

At National Bank Financial, D'Angelo says diversity efforts will focus on three pillars: attraction, retention and development. As the company is still in the process of putting its diversity framework together, she reveals only that there are "pretty exciting things coming up."

Integrating women further into the investing world isn't limited to the client-advisor relationship. A number of investment products focusing on women have hit the market, most notably the SPDR SSGA Gender Diversity Index ETF, which trades under the symbol SHE and tracks a cap-weighted index of companies with high proportions of women in their C-suites and boards, returning 11.8% since its March 2016 inception. In Canada, the BMO Women in Leadership Fund invests with a similar mandate and is marketed to investors looking to "actively participate in driving social change while also seeking financial returns."

For her part, D'Angelo believes it's a "big mistake" to develop niche investment products based on gender. "Based on my research, I really think that some things will come and go," she says. "There's probably a case for it for some women who prioritize that type of investing, based on their value systems. But as a whole, I don't see that as a huge strategy going forward."

For that matter, she adds, women aren't as interested in female-focused products as their creators might hope. "In my own focus group over the last couple of years, women don't want anything different. They want the same. They just have different ways of wanting to get there."

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About Author

Jess Morgan

Jess Morgan  Jess Morgan is the associate editor of Morningstar Canada’s website. She began her career as a television producer and freelance writer, often making appearances on TV and radio as a commentator on politics and culture. She holds a BA in communications from the University of Winnipeg and a diploma in Creative Communications from Red River College.

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