Ahead of speaking about millennials and wealth management 2.0 at FundForum International this year, April Rudin - Founder and President at The Rudin Group - speaks to us about the stark fact that women are missing from asset management.
While their numbers have been growing, the finance industry as a whole is still male-dominated to an extreme. In fact, only 14% of executive committee members in the financial industry are women. But the dearth of women in investment management is only hurting fund houses, and their clients.
The benefits of women in investment management are outstanding. At the most basic level, we can all agree on the need for diversified hiring in general. A mix of backgrounds gives investment teams multiple options and challenges to the status quo, and it encourages innovation. That in turn improves risk management, and gives investment teams the necessary broad perspective to be the most effective for their clients.
Asset management is a relationship business as much as it is a financial one. Women determine 89% of decisions on bank accounts and own 40% of stocks, but 84% feel misunderstood by investment managers, Mercer reported in a recent study. The surveyed women complained about a lack of respect and poor advice as some of the hurdles they find dealing with financial institutions. A major part of the problem is the lack of women for female clients to work with. Investors want their money managers to be trustworthy and understand their needs. It’s not hard to imagine why women would feel like a heavily male investment team isn’t working for them.
The attributes of women as investors should also stand out. Even Warren Buffett brags that he invests like a woman! Buffett often reminds investors that it is temperament, not intellect, that makes a good investor. Women tend to be less impulsive in their investments, approaching them calmly and rationally. Women trade less, and will be less likely to waver under pressure. They are also more likely to take a longer-term approach, something that falls in line easily with the investment goals of major clients like pension funds.
The stereo-typical frantic behavior of Wall Street isn’t what will help us survive market turmoil. A Vanguard study of the mutual fund company’s 2.7 million IRA clients during the 2008 and 2009 financial crisis found that men were much more likely than women to hit the sell button on their accounts. To make matters worse, the men also had the worst timing, selling their shares during market lows. Where men are confident in their approach, Vanguard found that women were more likely to admit when they didn’t know something, and were less comfortable gambling.
Studies easily identify the plus side for hiring and promoting women in asset management, but the necessary conversations are just beginning. How many women money managers can you name off the top of your head? There shouldn’t be a perception that asset management is a man’s game. Women make up half of the world’s population, and run about half of households. They should be encouraged at a young age to consider finance as a viable and interesting career option for them. Financial institutions for their part need to support women in every stage of their careers, with options like mentors, childcare, and positive work environments.
It’s certainly not that investment managers don’t realize that there are large women-shaped gaps in their firms. Goldman Sachs’ likely next CEO David Solomon recently said that his bank needs to do a better job of promoting women to its top ranks. At the moment, there are just two women out of 11 executive officers at Goldman- co-general counsel Karen Seymour and compliance chief Sarah Smith. State Street Global Advisors has been vocal about promoting women in leadership, going so far as to place the Fearless Girl statue in front of Wall Street’s charging bull.
Vocal recognition of the lack of women in the industry from the top levels of asset managers is a wonderful first step, but more action needs to follow. We’re far from seeing the kind of active hiring and promotion of women that is necessary to make waves in asset management. Likewise, there aren’t enough programs, like those that take into consideration women’s roles as caregivers and parents, that encourage women to stay in their jobs for the long run. Asset managers have a lot of work to do, and the time to start is now.