As seen in Barron’s: Wealthy Women: How Firms are Positioning to Capture a Huge Market
EMPATHY IS A BIG DEAL at Luma Wealth Advisors. It’s a key component in hiring decisions. It’s used to help determine compensation and bonuses. There’s even a peer-awarded “empathy trophy,” given monthly to the member of the 32-person team who demonstrates that she or he really understands and values others’ feelings.
“We can build technical talent over time,” says Heather Ettinger, CEO of the $110 million-asset Cleveland firm, “but first and foremost, we look for teammates with like-minded values and life experience.”
Luma, created in 2017 as a division of Fairport Wealth, targets wealthy female clients, from widows and divorcees to breadwinners and business owners, each with a net worth between $2 million and $25 million. And that, Ettinger says, helps to explain the emphasis on empathy. Research has shown that female wealth management clients weigh empathy heavily when choosing an advisor.
In weaving empathy into its culture and service offering, Luma is positioned to capitalize on a wave of women-controlled wealth.
Since 2014, total wealth controlled by U.S. women has risen to $22 trillion from $14 trillion, according to a study by New York Life Investments. Women stand to inherit another $28.7 trillion over the next four decades, the report adds. But by all accounts, the industry has been slow to pivot to the wealthy-women market. As of 2015, just 38% of women worked with financial advisors, according to Putnam Investments.
“Women are very much underserved by financial services,” says Eileen O’Connor, CEO of $885 million-asset Hemington Wealth Management, in Falls Church, Va. “I think there’s tremendous opportunity.”
As the wealth management industry pivots slowly to address this market, firms like Luma and Hemington are demonstrating the keys to success. Leaders at those firms and many others say gender diversity in the senior ranks, an emphasis on empathy for and education of clients, as well as goals-based investing are among the factors helping them attract and serve women successfully.
Many of the more visibly successful firms targeting wealthy women are relatively new. Hemington was founded in 2013, four years before Luma. But O’Connor, Ettinger and others agree that even established, traditional firms can grow their female clientele by understanding what women value and updating their service model accordingly. “One hundred percent you can retrofit,” Ettinger says. “Any firm could be better.”
That doesn’t mean merely launching a “women’s initiative,” O’Connor says. Women are half the population, not a niche market. And don’t think about adding the color pink to your marketing materials, she advises: “A lot of firms do it, and it’s about as painful a thing to observe as you can imagine.”
‘They get to a certain level of success and get stuck’
Women are more interested in substance, such as whether a wealth management firm has a gender-diverse team, with women in key roles. Even if a female client chooses to work with a male advisor, she needs to feel that the firm embraces and benefits from diverse perspectives, O’Connor says. “It’s really the kiss of death if you have all-male leadership and female service people, or if all the senior advisors are male and the junior advisors are female,” she says.
Adding senior women to a team is easier said than done, especially for male-dominated firms. But while the hiring market may be competitive, plenty of women are looking for better opportunities. Female advisors O’Connor recruits often have stories similar to her own. “They get to a certain level of success and get stuck,” she says. “The negotiations for equity don’t go well, or they get excluded from an all-male leadership team.”
Along with status and compensation, flexibility is a key arrow in the recruiting quiver. Many women advisors are juggling career, child care and elder care, so flexible work schedules are extremely attractive, O’Connor says.
During the pandemic, working from home became normalized. “Now that everyone sees it can work, there will be a lot more of it in the future. Even though the workload is the same as before, working from home will be very appealing to working moms,” she says.
And once you have a prominently positioned woman on the team, recruiting becomes a little easier.
Embrace of client education
Female wealth management clients do not demonstrate a clear preference for male or female advisors, unless they experience divorce or the loss of a spouse, according to research from the Family Wealth Advisors Council, a network of independent, fee-only advisory firms. In those cases, their preference shifts to working with other women.
More important than the gender of the advisor, it appears, is that the advisor has the right characteristics. One is a willingness to educate and empower clients, according to Adrianna Stasiuk, an advisor and managing director with Aaron Wealth Advisors, a $575 million AUM firm in Chicago, where more than 40% of the clientele are professional women and matriarchal heads of families.
“Traditionally, women have mostly spent their lives putting other people first,” Stasiuk says, “and they haven’t necessarily taken the time to educate themselves on financial matters.”
Advisors agree that women are often more willing than men to admit to knowledge gaps and seek education. Luma has catered to that need, in spades. So far this year, for example, it has hosted 15 women-focused educational programs—in person at the start of the year and later virtually—with subjects ranging from investing to entrepreneurship.
O’Connor and company offer to meet offspring separately, go through an Investing and Finance 101 presentation, field questions for those who are new to 401(k)s and other employee benefits, and, if they have investment accounts, review a performance statement.
“We know that if you do help a mother that is appreciated, but if you help her child, it’s worth 10 times more,” O’Connor says.
‘Women have to understand why they’re doing stuff’
So much has been made of the premise that men and women often communicate very differently. At ODI Financial, a $60 million-asset advisory firm in Lynbrook, N.Y., new clients are guided through a series of questions designed to help clarify their goals. Men’s responses to each question often last all of five seconds, while a female client might give 30-minute answers, says CEO Mark Dorfman. ODI specializes in serving clients in the entertainment industry, and nearly half of those approximately 100 clients are women.
The industry in general is built on a masculine communication approach, Ettinger says, and tends to rush through the getting-to-know-you phase of relationships to get to the let’s-build-a-portfolio phase. “What our industry fails at is quickly running to the technical deliverables,” she says.
Luma’s discovery process, on the other hand, examines six dimensions of clients’ lives: relationships, career, health, spirituality, community, and play. As a result, getting started with a new client can take two to three times as long, but firms that treat discovery simply as a box to check won’t do well with women, Ettinger predicts.
If Luma’s advisors collect lots of context about clients’ situations and goals, they also dispense advice in a similar way. Ettinger and her team make the education relevant by using anecdotes to tie concepts to real-life outcomes. In her experience, “Women have to understand why they’re doing stuff,” she says.
In the New York Life Investments survey, respondents cited empathy as the top attribute they sought in a financial advisor. Empathy means “getting” what’s really important to clients, as well as where they are in life. But it also means taking actions that show you care.
During the pandemic, the Luma team has been calling clients who might be feeling isolated, just to offer companionship. “We’ve called and talked for 30 minutes or an hour about dogs, about books, about family members,” says Kristen Lucas, chief marketing officer at Luma.
Many of ODI’s entertainment-industry clients have lost earnings this year because of Covid-related restrictions on large gatherings. In response, the team has not only helped clients with budgeting but provided emotional support, as well.
“We’ve been acting as therapists and giving good feedback,” says Julian Schubach, a partner with the firm. “That will only further cement our relationships.”
Goals-based investing
Women are more likely than men to see investing as a means to an end, rather than a competition with market indexes, according to O’Connor. “They don’t care about maximizing return for the sake of maximizing return,” she says. “Everything is tied to a goal.”
Indeed, a recent McKinsey study found that women are more concerned than men about meeting their financial goals. For instance, they are 10 percentage points more likely to say they’re concerned about outliving their assets.
As a result, Hemington relies heavily on passive investments and avoids stock picking. The firm uses a “be the market versus beat the market” approach, O’Connor says, and takes only as much risk as is required to reach a goal. “This approach means you never have to say you are sorry for being wrong,” she says.
Women also tend to be more interested in ESG investing. More than half (56%) of women focus at least partially on making a positive impact with their investments, compared with 45% of men, according to a 2017 Morgan Stanley study. At Hemington, 25% of clients now express interest in ESG investments, compared with just 5% five years ago, a trend O’Connor explains by pointing to improving performance and proliferating product choices. “The demand has always been there,” she says. “Now the supply has exploded.”
‘The best thing advisors can do is create connection’
One of the most valuable services advisors can offer women is a sense of community. “Women feel alone, and this (pandemic) situation has amplified that,” Lucas says. “The best thing advisors can do is create connection.”
Luma regularly sponsors events for female entrepreneurs. “We invite women-owned business leaders to a Q&A with a featured business owner, and no one is trying to sell to them,” Lucas says. “Then all these women connect with one another.” Referrals are a byproduct of fostering community, says Stasiuk, whose firm regularly hosts educational events focusing on topics important to women. They have “been a great way to meet my clients’ friends and professional colleagues,” she says.
As wealth management firms widen their focus to include more women, they are enhancing their value to men as well, Lucas argues. By normalizing respectful education, for example, they’re providing a service many men have been too proud to ask for. “Women are driving the change that men and women in the next generations are going to demand,” she says.
The most forward-thinking firms will be careful not to replicate one of the biggest shortcomings of the male-dominated model: Ignoring the non-breadwinner. “If she has the lead career and he’s staying home and raising the kids,” Lucas says, “we will never make him feel the way we’ve been made to feel as women for the past 100 years.”
