Women who have left Wall Street to launch their own independent registered investment advisory firms offer similar reasons that men give for making the move. Like men, they desire more control over their businesses; they are far more comfortable working for clients as a fiduciary and earning a fee than as a broker generating a commission by selling products; and they don't want to be boxed in by a wirehouse's limited offerings of products and services.
But women who have gone independent in the financial advice industry have had experiences and made decisions that male advisers probably could not imagine. Those include waiting for children to grow up a bit before leaving a wirehouse to start a career at an RIA; mentoring younger women on the balance of career and family; and dealing with the hurdle of starting careers in the male-dominated cultures of Wall Street banks and wirehouses.
“I like choices, and I don't like people penning me into a corner,” said Barbara Hudock, founder and chief executive of Hudock Capital Group. She left Merrill Lynch in 2001 after two decades, and moved to an independent-broker-dealer network. In 2009, she started the RIA.
“When you worked at a wirehouse, it felt like you were able to help our clients in spite of back-office rules,” Ms. Hudock said. “I got frustrated being told, "You can't do that,' and it wasn't for compliance issues but costs and other reasons.”
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“The business is very difficult for women who have families. It's tough to balance everything,” said Lori Van Dusen, who left Smith Barney in 2008 and eventually opened her own firm, LVW Advisors, where she is CEO. “Being an adviser gives you a degree of flexibility you don't have if you are in management at a big bank or brokerage firm. But it would have been difficult to do what I'm doing today when my kids were smaller.”
“I had a manager at Morgan Stanley who literally told me to my face that men make better brokers and women make better assistants,” said Debra Wetherby, founder and CEO of Wetherby Asset Management. She left Morgan Stanley and launched her firm in 1990. “That was almost 30 years ago. I said, "I'm sorry you feel that way because I'm a broker, and I'm not going to be an assistant.'”
Female registered investment advisers and industry consultants interviewed for this article cited standard estimates that women make up 15% to 20% of the financial advice industry. That means there is certainly ample room for growth, they said.
“Study after study demonstrates that diversity is a strong net positive for an organization,” said David DeVoe, managing partner of DeVoe & Co., a consulting firm for wealth managers and RIAs. “But given the fact that women are half of the investing population, coupled with research showing women have different priorities and decision-making processes related to wealth management, the case can be made that half of the adviser population should be women.”
“Women make investment decisions differently from men, and data show women advisers are in a better position to help women investors best achieve goals and objectives,” Mr. DeVoe said. “Women are more focused on the security of their assets and wealth. Men have a greater focus on gaining alpha and increasing the value of assets.”
The differences between men and women are becoming better understood. According to a recent white paper by The Vanguard Group, which examined gender differences in participants in defined contribution plans, women across all income levels save at rates that are between 7% and 16% higher than men's.
Women are far more likely to hold a target date fund and trade one-third less frequently than men, according to Vanguard. The paper also challenges the notion that women investors are more averse to risk. While women's exposure to stocks is on par with that of men, “female participants skew towards less-concentrated risk,” according to Vanguard. “Women are less likely to hold employer stock and more likely to hold balanced investment allocations.”
Such investor tendencies are in the wheelhouse of female advisers, Ms. Wetherby said.
“I think women are natural caretakers and part of our job as a fiduciary is to take care of clients,” she said. “I think that would be an old-fashioned notion if that's all we asked of the staff. I ask it of my male advisers as well as the women. The men on my team also have a high degree of emotional intelligence. I don't think that's unique to women. I just think it's more naturally present.”
“I spend a lot of time mentoring women, five calls a month” Ms. Van Dusen said. “I think that's my obligation and responsibility.”
The questions in those conversations focus on children, family and work, she said. “How do you balance all that and do this? If you're a woman [adviser] with a family, it's very hard.”
Those mentoring sessions also focus on questions all advisers would ask, said Ms. Van Dusen. How to develop new business and how to differentiate yourself are two common themes, she said.
“The RIA industry is still pretty young and my hope is we get more women in the industry,” Ms. Wetherby said. “You need both perspectives. My [chief operating officer] is male, and I really need his more "process' way of thinking. And my approach is more values-based.”
“There is a real opportunity for women to work as advisers,” she said. “I'm a total believer in the independent, RIA model. There are good people across the industry, but a business based on selling product has too many inherent conflicts.”
