Rachel L. Sheedy, CFP®, is the manager of the Financial Planning Knowledge Center for the CFP Board Center for Financial Planning.
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Many financial planning firms seeking to broaden the diversity of their adviser workforce are looking at gender as one of the key pillars of their strategy. Today, only 23 percent of CERTIFIED FINANCIAL PLANNER™ professionals are women. Yet a July 2020 survey by McKinsey & Company found that in the coming years, an increasing number of women will hold the majority of a household’s wealth and act as the sole financial decision maker.
A recent study commissioned by Certified Financial Planner Board of Standards Inc. (CFP Board) underscores the need for firms to work toward recruiting more women and supporting them as they pursue CFP® certification. The Aite Group study, “Building a Diverse Practice: The Value of CFP® Certification to Female Advisers,” looked at the adviser-, practice-, and service-level characteristics of female CFP® professionals—and the depth and scope of the services they offer—as compared to women without CFP® certification and male CFP® professionals.
The study concludes that by hiring more female CFP® professionals and encouraging more female advisers to pursue CFP® certification, firms not only help build a more sustainable and diverse financial planner workforce but also position themselves to better compete in today’s financial advisory space.
Boomer, Millennial Women Are Key Financial Decision Makers
On average, women have longer lifespans than men and are more likely to end up controlling large amounts of assets as the surviving spouse. Yet, according to a July 2020 report by McKinsey & Company, 70 percent of women leave their advisers within one year of a spouse’s death. This trend has the potential to accelerate in the coming years. By 2030, female baby boomers are set to control a majority of the $30 trillion in financial assets held by their generation. What’s more, as compared to older generations, millennial women are more likely to manage their finances alone, without the involvement of a spouse or partner.
While women looking for a financial adviser don’t always search specifically for a female adviser, according to the McKinsey & Company report, they do want to work with someone with whom they have a personal connection. It stands to reason, then, that having the option of a female adviser could help these baby boomers and millennials—and women writ large—better manage their assets.
In fact, an August 2020 Merrill Lynch study found that female investors who choose to work with female advisers report higher levels of confidence in their financial knowledge and decision making. According to that study, 30 percent of women working with a female adviser say they’re very knowledgeable about financial products and services, while only 15 percent of women with a male financial adviser report the same. Additionally, 35 percent of women with a female adviser state that they are very comfortable making financial decisions, compared to 16 percent of women working with a male adviser.
What the trends and data make clear is that who manages a family’s assets is changing, and more women are making significant financial decisions on their own. Firms that undertake efforts to increase the number of female advisers available are likely to appeal more to female clients, perhaps most specifically boomers and millennials. It is therefore important for firms to ensure they have female advisers available for any client who prefers to work with a female adviser.
CFP® Certification Builds Confidence
The Aite Group survey revealed that CFP® certification can make female advisers more confident in their own skills, thus helping them build greater trust, credibility, and stronger relationships with their clients. Ninety percent of female CFP® professionals surveyed report a desire to pursue the credential to enhance their knowledge of personal finance, as compared to 73 percent of male CFP® professionals surveyed. Meanwhile, 88 percent say they sought the designation to feel more confident in their capabilities as a financial adviser, compared to 68 percent of their male counterparts. Women are also more likely to recommend the credential to their peers and express that the requirements were worth the time and financial investment.
As the certification builds an individual’s confidence in their skills, the well-recognized credential also helps female CFP® professionals demonstrate their credibility in front of clients who may be more accustomed to seeing and working with male advisers. Sixty-five percent of female CFP® professionals report that they are very satisfied in their confidence with clients (versus 51 percent for male CFP® professionals), and 74 percent say that they’re very satisfied with client trust in them (compared to 53 percent for male CFP® professionals). This confidence spills over into the leadership roles that CFP® professionals take on in their career. Twenty-four percent of female CFP® professionals are a firm partner or owner, while 9 percent of other female advisers report the same.
What’s more, female CFP® professionals are on average more satisfied with their careers than female advisers who choose not to pursue certification. Fifty-three percent of those female CFP® professionals surveyed report strong satisfaction with their career, compared to 35 percent of other female financial advisers.
Female CFP® Professionals Provide Holistic and Comprehensive Advice
According to the Aite Group survey, one area in which female CFP® professionals stand out from other female financial advisers and male CFP® professionals is their focus on holistic planning and delivering comprehensive, written financial plans for their clients. At the same time, we’re also seeing the focus of the business of financial planning shifting in this direction. That supportive, holistic mindset is characteristic of the type of advice more clients are looking for when they search for an adviser, giving those firms with a greater number of female advisers a competitive advantage.
A total of 34 percent of female CFP® professionals report that they provide clients either a six-goal or comprehensive plan, compared to 23 percent of male CFP® professionals and 18 percent of female financial advisers. They are also more likely to provide retirement advice, which is key for baby boomers and those approaching retirement age. Aite Group’s survey reveals that female CFP® professionals give out retirement advice to 80 percent of their clients, compared to 73 percent for male CFP® professionals and 66 percent for other female financial advisers.
The ability to deliver comprehensive financial planning advice with a focus on retirement does not detract from investment management, however. Female CFP® professionals are more likely than their male counterparts to report that investment management is as important a service as financial planning; though men are more likely to say investment management is more important.
These factors bode well for those firms actively working to increase the number of female advisers on staff. Female investors often focus more on their overarching life goals than simply outperforming the market, and also tend to be more concerned with outliving their assets and the ability to cover healthcare expenses in retirement. Female clients, it stands to reason, would do well working with an adviser who understands their unique situation and financial goals, who then develops a plan that addresses myriad financial topics.
Given the public desire for comprehensive financial plans, hiring and retaining female CFP® professionals could help firms better compete for new clients by leveraging the strength of these advisers when it comes to producing robust financial plans. Such an effort also supports those firms looking to encourage more advisers to adopt a financial planning model. Female CFP® professionals are uniquely qualified to help firms gain a competitive edge by transitioning firms from being investment- or product-oriented to providing clients a more robust, holistic plan that aligns with their short- and long-term goals.
Recommendations for Firms
The Aite Group study and others that have looked at the role of women in the financial planning space highlight both the value for firms in recruiting and retaining more diverse candidates, as well as the need to encourage advisers and provide the opportunity to seek CFP® certification. No matter how you look at it, building an adviser workforce that reflects the population it serves is extremely important for ensuring the future of the financial planning profession, and attracting more women into the profession creates a talent pipeline, so Americans will receive the financial advice they need now and for decades to come.
Therefore, firms that hire financial advisers should make a plan to attract, develop, and retain female advisers and continue recruitment efforts that increase the representation of women among their staff. Growing the number of female financial planners is critical for retaining baby boomer client assets and attracting new female millennial clients. Not only that, as evidenced by the Aite Group study, growing the female financial planner workforce can also help firms set themselves apart from digital providers and other competitors. The adoption of holistic financial planning among female CFP® professionals with more of their clients has the potential to build stronger adviser-client relationships.
However, delivering the financial advice that the U.S. public needs means more than actively working to hire female financial advisers. It also requires that firms encourage those professionals to consider CFP® certification and then offer support—be it financial, coaching, or time set aside for studying—to those pursuing the designation.
Financial planning is a rewarding career opportunity, and the profession as a whole would benefit from increasing the number of women in its ranks. More than that, the CFP® designation is a must-have in growing the skill, confidence, and satisfaction of female advisers. Firms willing to implement plans that recruit candidates who are more representative of the U.S. population, and give them the support and resources they need to pursue CFP® certification, can benefit not only their own practice but enhance the strength of the profession and public confidence in financial advisers.