Advisers Weigh Financial Planning Versus Money Management

The latest U.S. monthly product trends report from Cerulli Associates compares the approaches to client service and practice leadership adopted by men versus women advisers.

At a high level, the analysis finds women are more likely than men to run “financial planning practices,” as opposed to running practices focused on “money management.”

Cerulli researchers find that asset managers are looking for new ways to package and segment their services for advisers, and increasingly this includes analyzing the role of gender in product preferences and client service styles. While there are certainly exceptions, Cerulli says women across the U.S. advisory profession are measurably “more likely than men to run financial planning practices and less likely to focus exclusively on asset management as money managers.”

Close to one-third of women working as advisers identify themselves as “financial planners,” compared with 21.6% of men. Only 6.4% of women say they run their practice with a focus on money management, less than half the percentage measured for men.

This reporting builds on an earlier Cerulli analysis that identifies a broad move by advisers away from focusing on tasks having to do with pure asset management in favor of tasks such as developing goals-based, individualistic retirement planning for clients. The idea is that successful advisers of tomorrow will allow technology to do the heavy lifting on the portfolio management side, while the adviser can focus on the personal and psychological aspects of planning.

“Industry changes continue to power the popularity of holistic wealth management,” the analysis states. “For example, regulatory shifts have prompted broker/dealers to reevaluate their risk profiles and encourage advisers to use home-office discretionary platforms. If they are successful, advisers may increasingly relinquish discretion. If an adviser does not build individualized client portfolios or their own models, choosing to outsource investment management, they may feel compelled to justify the fees they charge by providing a more expansive set of services, including financial planning.”

According to Cerulli researchers, both women and men working as advisers in the early stages of their career report entering the profession because they have an interest in helping people reach their financial goals. This is a major factor for 94% of women and 84% of men in the industry.

“While both genders consider this factor important, women are more likely to be highly driven by this motivation,” the research explains. “Similarly, an interest in investment topics is less likely to inspire women to become financial advisers than it is men (59% for women versus 91% for men). For advisers who enjoy working with clients toward goals, the goals-based planning process allows them to navigate a client through the emotional tradeoffs of investing and setting meaningful milestones.”

Cerulli researchers conclude that “early-career sentiments will continue to play out via the business models advisers settle into further in their careers … Close to three-quarters (73%) of women find unbiased product recommendations from wholesalers very valuable, compared with only 43% of men. Women advisers are also more likely than their male counterparts to consider advanced financial planning techniques and portfolio construction recommendations to be very valuable offerings from their wholesaling partners.”

Information about obtaining Cerulli Associates research is available here.