Women make up half the population of the U.S., are more likely to earn college degrees, and are directly responsible for raising the country’s median family income. Yet they still face deep economic disadvantages.
While women generally live longer than men, they only have half the retirement savings. They are also vulnerable to financial volatility—less likely than men to have a robust savings account, women suffer almost double the financial damage following a divorce. A recent analysis by the financial planning firm LearnVest found that a mere 27 percent of its female clients feel financially self-assured.
But when women seek out financial planning assistance, most will find themselves sitting down with a man. Even though some industry veterans indicate women prefer to be advised by women, financial planning remains one of the most male-dominated industries in America.
Women comprise at most 35 percent of financial planners—and some estimates put that number as low as 16 percent. The barriers for women joining the field and those already working in it are mighty: Women earn significantly less than their male peers. They face discrimination from their colleagues. And then, of course, there’s plain old sexism.
The boy’s club mentality
Kate Dore, who runs the personal finance site Cashville Skyline and is a candidate for certified financial planner certification, recalled an industry event she attended earlier this year.
“I walked into this room, and it’s basically a bunch of older men wearing suits, and I’m the only woman there, and someone calls me ‘sweetie’ in front of the entire room,” she said. “It’s certainly not the worst word someone can use. But it certainly infantilizes you and makes you not feel welcome and makes you feel not like an equal.”
“I’ve heard tons of stories of female financial planners being asked whose assistant they are at financial planning conferences, things like that,” she added.
Annalee Leonard, a 29-year veteran of the finance industry and founder of Mainstay Financial Group, said she has long witnessed sexism in the industry as well—from boys’ club-style professional events (think steakhouses and cigar bars) to more explicit exclusion. “If you go to some of these [industry] meetings … guys will get together and kind of share what’s going on,” she said. “But if a woman [comes] in, the conversation changes immediately. It’s almost like, ‘This is over your head’ or a ‘This is guy talk’ type thing.”
From microaggressions to major pay gaps
It’s not just a cultural of discrimination that makes financial planning less than welcoming to women. Women in this field earn 55.6 percent of their male peers’ incomes, making it the biggest gender wage gap in the United States. That translates to an average $760 less per week.
The scarcity of women in leadership and mentorship positions in the industry contributes to the gap. As in any field, the presence of powerful women who can advocate for junior advisers helps the younger women with career advancement. When those women mentors don’t exist, young women may struggle to navigate the male-dominated waters of the profession
Part of the reason it’s difficult for women to rise to leadership roles may have to do with something called “affinity bias.” The industry is largely comprised of white men, and they tend to refer work to other white men. As Fortune puts it: “When a financial adviser retires or leaves the firm, he will often pass down his most lucrative accounts to other colleagues on his team.”
Women advisers have also alleged that their employers give more lucrative accounts to their male colleagues, which sets them up for future success and puts the women at a disadvantage.
In 2002, American Express Financial Advisors settled a $31 million lawsuit brought by 4,000 women who sued the company for such discriminatory practices. The court required that American Express adapt a gender-neutral model for distributing clients, one that adjusted for advisers’ management abilities regardless of the size of their accounts. Though the case would seem a victory in the war against discrimination, the pay gap persists more than 15 years later.
Women also face tougher scrutiny. A working paper published by the National Bureau of Economic Research found that women advisers are punished more harshly for misconduct, such as fraud or misrepresenting information, than their male colleagues. Wells Fargo—which has been plagued by scandals related to fraud and predatory sales tactics during the past two years—is particularly aggressive in its bias toward punishing women. But it’s not the only one.
Referring to the financial planning industry as a whole, the authors wrote: “Following an incidence of misconduct, female advisers are 20 percent more likely to lose their jobs and 30 percent less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses.” The authors also found that the more men there are in executive and ownership positions at a brokerage branch, the more “severely” women advisers are punished.
To add insult to injury: “Relative to women, men are three times as likely to engage in misconduct, are twice as likely to be repeat offenders, and engage in misconduct that is 20 percent costlier.”
Women may also be turned off by jobs they perceive as high-pressure sales slogs. According to Leonard (whose firm is comprised of all female advisers), a commission-based ecosystem is a difficult one to thrive in if you value your clients as more than just potential buyers of financial products. Leonard believes that many women avoid or eventually leave the industry altogether if they don’t find alternatives to sales-based business models—such as a fee-based approach where planners charge by the hour for their services—a point that’s supported by a report from the Certified Financial Planners Board’s Women’s Initiative.
The authors of the report write: “For women in the Financial Advisor Community, misperceptions about the nature of financial planning strongly affect their interest in becoming financial planners. For instance, among [those] who strongly agree that financial planning requires strong sales skills, only 33 percent are interested in becoming financial planners. Yet among those who strongly agree that financial planning is primarily about building long-term relationships, interest in becoming a financial planner rises to 45 percent.”
But it’s not just women who are averse to long-held industry standards. Leonard said she’s consulted a growing number of men who also dislike the traditional sales model and want a more nuanced relationship with their clients. She also noted that some of her most valuable mentors have been men and said she believes there are many men in the industry who support diversity, inclusion, and equality.
Closing the gender gap in financial planning is an increasingly important topic for the industry. But it’s only one aspect of a larger inclusiveness problem. People of color are woefully underrepresented in the field as well. Only 6 percent of personal financial advisers are black, 7.1 percent are Latino, and 7.7 percent are Asian.
The era of the woman
Sheer demand may force advisory firms and industry organizations to get with the times. Ameriprise Financial found that 96 percent of women now play some role in their household’s financial decision-making, and baby boomer women are especially committed to understanding their financial circumstances.
At a recent industry conference, financial firms looking to recruit female clients were advised to acknowledge the priorities of women who may value financial well-being over aggressive wealth building. One industry expert at the conference also observed that women are often more comfortable working with female advisers—a dynamic Leonard said she has witnessed throughout her own career.
“They know you’re going to take the time to teach them, and they know you’re going to hold their hand if they need hand-holding. Some do,” Leonard said of her female clients. “And if you can’t do that for them, you’re going to lose them.”
Establishing this relationship, even if a woman first comes to a financial planner’s office with her husband, is crucial both for her financial well-being and for the financial planning industry’s. A widely cited statistic in the industry holds that 70 percent of women will leave their financial planner within a year of their spouse dying, yet women hold nearly 40 percent of investable assets, making widowed women a remarkably underserved population. An Edward Jones study identified that a top way to keep these women on as clients was—surprise!—to treat them as equals to their husbands in financial planning conversations, well before anyone dies.
While it’s a little demoralizing to realize that treating women the same as their husbands is a novel concept in the profession, there’s reason to be optimistic about gender equality in the financial advisement industry.
Since the CFP Board released its Women’s Initiative findings in 2014, it has made efforts to attract and retain more female financial planners. The organization currently runs an outreach program focused on introducing women to the profession as well as its WIN-to-WIN mentorship program.
Both Leonard and Dore said the dearth of role models for young women who want to become financial planners perpetuates the field’s gender gap. Dore, who is 33, said finding a female mentor was pivotal for her. “When you come into an industry having all these things stacked against you, having a mentor is huge,” she said. She plans to take her certified financial planner exam in May and looks forward to helping other women as her career advances.
Dore also noted that the rise of remote and virtual work has paved the way for women to create more flexible practices that don’t necessarily require grueling office hours and face time with a firm’s good old boys’ network. For example, Simply Paraplanner blends elements of financial planning with the flexibility of independent contracting. Paraplanners are not certified planners but can work with firms and clients to manage tasks such as opening accounts and organizing financial plans. This type of work can serve as a gateway into the field, and provide the experience hours needed for financial planner certification.
Leonard said she is often asked to speak at conferences and industry events, a sign of the changing times. “Ten years ago, you wouldn’t have seen a woman on the stage,” she said. She added that she does see more women in leadership roles in recent years, and she does what she can to help newcomers as well. “I’ll share any of my knowledge with anyone who wants to listen and will do whatever I can to make them a better adviser,” she said.
When Dore enrolled in a certified financial planner program in January, she was delighted to see the diversity among her classmates. “It definitely wasn’t 50-50, but there were more women than I was expecting, and more people of color than I was expecting, too,” she said.