In 1925, psychology pioneer Sigmund Freud famously (and cluelessly) asked, “What does a woman want?”  As the percentage of wealth controlled by women both in America and globally steadily increases, brokerage firms scramble to answer a new question, “What does a woman investor want?”   

Women as a group are far less satisfied than men with the performance of financial professionals.  A 2010 study found that women were more dissatisfied with the financial services industry than any other industry that affected their daily lives.  Many women in that survey reported being treated with disrespect and condescension and being given poor advice specifically because of their gender.  A study conducted a year later showed that the situation had not improved: women rated financial professionals and their firms lower than men did in every single category.  

The Wrong Attitude Can Lead to Lost Business and FINRA Complaints

Speaking to a woman customer in a condescending manner or focusing on her husband can lose business.  More than 70% of married women fire their financial professionals within one year of their husbands’ deaths.  Similarly, divorcees are likely to leave the advisor that the couple used during marriage.   

What may even more important concern is that the wrong attitude increases the risk of a FINRA customer complaint from an unhappy female client.  In our experience, a divorcee’s or widow’s next stop after firing “her husband’s advisor” will often be a securities lawyer’s office.  We have also found that even in intact marriages, it is often the wife who pushes her husband to seek legal advice after an investment loss, telling us that she never trusted their advisor.

The 2011 survey mentioned above shows that women investors often identified what could turn out to be compliance issues as the source of their dissatisfaction.  For example, only 57% of the women surveyed agreed with the statement that their advisors “clearly articulated downside risks of investments.”  When an investment loses value, inadequate risk warnings (whether actual or perceived) can come back to haunt the advisor.  In additions, women reported significantly lower satisfaction than men in other compliance-related issues, including:

  • clarity of communications, 
  • educating me as an investor, 
  • addressing my concerns promptly, 
  • educating me on what products I am buying, and 
  • being transparent about fees and charges.

Each one of those could lead to a separate claim in a customer complaint.

Why Can’t a Woman [Investor] be More Like a Man?

That hit song from the musical comedy My Fair Lady should be turned around when it comes to gender-based investment behavior.  Evidence shows that women are generally more successful investors than their male counterparts. 

Multiple studies have shown that women are more cautious investors, tending to (1) do more research before making an initial buy, (2) save or invest a larger percentage of their income, (3) seek more diversification, (4) trade less frequently and (5) hold their investments longer.  In short, they do everything right.  Good investment habits serve women well in both good times and bad.  For example, during the 2008 financial meltdown, women's median account values declined by 13%, compared with 16% for men.

While it may be an oversimplification, men tend to be overconfident investors, while women tend to underestimate their own knowledge and investment abilities.  As a result, while women may be more “difficult” customers, asking more questions and demanding more information from their financial advisors, they generally achieve better annual returns than men.

What should an Advisor Do?

Before getting into a discussion of what to do, let’s look at a case study of what not to do.

A husband and wife had exactly the same education, held the same professional license, had virtually identical investment experience and even held the same job at different companies.  They maintained individual investment accounts with the same financial advisor, who was also the husband’s golf buddy.  The advisor recommended a complex derivative product for the wife’s account, but she complained that the product just didn’t make sense to her.  The financial advisor left it to the husband to explain the product to her.  She ended up emailing the advisor that she didn’t understand the product, but if they both thought she should buy it, she would.  Less than a year later the product had lost substantial value and that email figured prominently in the FINRA claim we filed on her behalf. 

The financial advisor in our case violated every one of the following common sense rules for advising his woman investor:

1. Don’t Generalize.  Having spent this entire article making generalizations, now I will tell you not to generalize.  While women investors are usually more cautious in making investment decisions, they are not all conservative investors.  What may be a suitable investment for a retired widow is not necessarily a good fit for a young professional and vice versa.  Listen first, then advise your client based on her individual investment needs and risk tolerance.  In the example above, the advisor unwisely forced the wife into buying a product that she didn’t understand and didn’t want.  He tried to make her fit the product, rather than finding an investment that would fit her comfort level. 

2. One Married Couple = Two Clients.  Whether a married woman has her own account or whether she maintains a joint account with her husband, she is your customer and you owe her the same duty that you owe to her husband.  Unless you want to find yourself trying to explain to an arbitration panel why you never had a direct conversation with your female client (or worse yet, never even met her), insist that both spouses attend at least some of your meetings, ask the wife about her own financial needs and concerns and periodically review the account with her.  In the case study, the advisor ignored the wife’s attempts to tell him that she did not want to purchase a complex product that she did not understand and that mistake led to a customer complaint.

3. Educate and Explain.  Be prepared to provide information both before and after the sale.  In addition to looking to their financial advisors to educate them before they buy, women also are more likely to consult with their financial advisor when an investment did not perform as expected.  Accurate, complete information is required in both situations.  In the example, the advisor couldn’t explain the derivative product to the wife because the product didn’t make sense, as unfortunately became clear a few months later.

The bottom line is that women investors will make you work harder to earn their business, but they can also help you to develop skills that will make you better at your job.  And once you earn a woman investor’s trust, she could be your customer for life.

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