The financial-services industry is failing you, and this time we can't blame it on exorbitant sales commissions, high-frequency trading, or the lack of a uniform fiduciary standard. It's something else entirely -- namely, the lack of female financial planners. One recent study showed that several barriers to entry are turning women away from the financial planning profession, which is a disservice to all investors.
Studies show that women are generally better investors than men -- including a famous study (link opens PDF) by a pair of University of California professors. For one, women tend to exhibit more self-control and not jump in and out of the stock market, a practice that eats away at investment returns. Further, women are generally more focused on comprehensive financial planning, rather than investment returns alone. These findings suggest that Christina makes a better financial planner than Christopher.
Good luck finding her
A female financial-planning professional may be more likely not only to provide you with stock recommendations, but also to help you decide which Social Security claiming option is best for you, how to prepare an estate plan, how to craft your long-term care strategy, and more. You'd think the financial-planning profession would be a natural magnet for women, as studies suggest that women are generally more empathetic and collaborative than men. But, sadly, that's not the case.
Few women actually participate in this industry. Although females make up 51% of the U.S. population and graduate college at a higher rate than men, women represent only 23% of all certified financial planners, or CFPs. The requirements to obtain the CFP designation include rigorous academic courses, a comprehensive board exam, at least three years of professional experience, a bachelor's degree, and high standards of ethics.
Professional fields like law and medicine have gained more gender parity. Yet the percentage of female CFPs hasn't budged in the past decade. And it's not as if this isn't a growing field. The Bureau of Labor Statistics projects that the personal financial advising industry will grow by 27% from 2012 to 2022 -- much faster than the average for all occupations.
Hurdles preventing women from entering the field
So why don't more women get into this line of work? That's something the Certified Financial Planner Board of Standards wants to find out. Last year, the CFP Board announced an initiative to increase the number of women entering the profession. As part of its initiative, the CFP Board formed a Women's Initiative Advisory Panel to help identify the challenges women face when entering the financial planning field and craft solutions for addressing this gender gap.
Five primary obstacles the CFP Board recently found include:
- Lack of understanding about what financial planning involves and what it takes to succeed.
- Prevalent business models and compensation methods.
- Gender bias and discrimination in the profession.
- Work-life balance concerns.
- Lack of visible role models, networks, and professional development programs.
Once considered a profession focused mostly on selling products and executing trades, the financial-services industry has become much more advice-oriented and collaborative. It seems a natural fit for women. But while you might be better off working with a woman, good luck finding her. Until the financial-planning industry does a better job of attracting and retaining more women in a welcoming and supportive manner, it's doing a grave disservice to all investors.
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