It should not surprise anyone that there is gender bias out there in the financial advising world, and the only solution is to seek greater understanding, not escalating demands.
Few would argue that the financial world is still guilty of a general bias against women. This has historically been a man’s world, from the beginning of history onward, and the financial domain is not one that responds to changes in general very quickly, and this applies to everything, not just the changing role that women are playing in investments.
The road to enlightenment requires more light to be shone, where understanding needs to be the goal if we wish to understand things better. If we instead seek to try to solve these issues by way of confrontation, this will only see opposing sides dig in, where reason gets displaced by emotion and poor thinking ultimately remains unchallenged.
Financial advisors owe their clients many obligations, and one of them is certainly to do their very best to be as free of bias as they can be, and this applies to all biases, not just those based upon one’s demographic.
Whatever biases an advisor may hold toward demographic groups, strategic biases are by far the most dangerous, where an advisor is found to prefer certain strategies of financial management that may not be in the interests of their clients at all ultimately, but their biases prevent them from seeing this.
We need to go into what biases actually are to really root out the existence and extent of biases among financial advisors, or biases held by anyone for that matter. A bias is essentially a belief about something that is not based upon the facts, where our preconceived beliefs prevent us from understanding the facts about a particular situation, in our case a financial one.
Bias is often defined as a form of prejudice, pre-judging in other words, and that’s certainly one of the features of biased judgement. We use the term prejudice to describe situations where we either apply false beliefs generally or apply beliefs that may be valid generally to specific situations without adequate examination of the particulars.
Bias in itself is more comprehensive though. We speak of a biased coin that will land on one side or the other more often than it should, an unfairness of a discernable nature. Unfairness in judgement of facts always involves a contortion of them, just like our coin has a contorted shape that allows for its bias toward heads or tails.
Even though we’re broadening the way that bias is often understood, the way we’re looking to use it to describe potential bias among financial advisors is actually a narrow one, where bias in itself involves any sort of preference. We need to separate these, by distinguishing between subjective bias, which is a matter of fact, and objective bias, which is an attempt to contort the facts of a situation.
The facts must always be used to govern our judgements, if truth even matters to us. The facts are what are true, and what is not true is factually mistaken. If we wish to even pretend that we are guided by reason, reason itself concerns itself with interpreting facts in a correct and unbiased manner.
It is extremely important that we make the distinction between subjective and objective bias, where the subjective only concerns what is true about us, and the objective speaks to what may be true about the world.
Gender bias gives us a nice opportunity to demonstrate how bias functions in our thinking generally, where we can then use whatever insights we may gather to further illuminate the role of gender bias in financial advising.
Financial advisors may have personal beliefs that include gender bias, which may or may not be objectively appropriate. We can imagine an advisor who may dislike advising women for instance, and may even exclude women from their practice. This is gender bias however you slice it, to the extreme, but whether or not this should be seen as acceptable is a bigger question than it may appear to a lot of us.
The advisor down the hall feels the same way, but he takes women on as clients, but puts himself in even more of a parental role than usual with them, not taking the time to pay enough attention to the needs of his female clients, and breaches his professional duty to them as well as providing even more lousy advising than these people usually provide.
This situation is very different from the first one, as the first advisor does his very best for his male clients, and chooses to avoid situations where his personal bias may conflict with his professional responsibility. This advisor is fictional, because while there may be people who may like to run such a practice, no one actually does and they don’t turn away money anyway no matter who is holding it, provided that they are holding enough of it to tempt them.
We Should Not Water Down This Issue with Impertinent Fluff
The reason why we are using the men-only advisor as an example is to seek to root out the gender bias of a different sort that is a big factor as well, and certainly divisive. It’s easy to imagine how up in arms this no women allowed advisor would make a lot of people, including people who report on these issues and see this bias color things too much.
This results in their articles becoming too watered down with fluff, observations that are purely a matter of the sort of bias they feel against the guy who doesn’t advise women, things that may offend them personally but lack a real objective basis.
This is a shame, because there are some real issues here with gender bias in advising and they are of the second sort, where we allow our personal biases to interfere with our professional conduct.
This is an absolute wrong, regardless of what you may believe or whatever biases you may hold. We need real evidence to get a conviction here, or to even establish that this is a problem, and real evidence does not include such things as measuring how much an advisor looks at each partner when advising them.
The fact that it has been shown that advisors gaze at men 60% of the time in a conversation with a man and woman in joint client conversations is just not a pertinent observation. Provided that the advice is sound, this is merely a matter of etiquette and in itself does not even imply misconduct because it is not materially relevant.
If we established objectively that those who looked substantially more at men than women in these situations had enough of a tendency toward dispensing inferior advice toward them when isolated, this may have us wanting to monitor their behavior more closely when dealing with female clients alone, but trying to cite that looking at one person more than another involves any harmful bias on a financial level is just foolish. We need to distinguish between bias that matters and bias that does not.
There are other observations that serve to misrepresent and obfuscate the real issues that involve investors advising couples that form a substantial basis of pleas to protect female investors, where regardless of the distribution of one’s attention, this does not even suggest that the advising itself will be affected in a detrimental way from these things.
While it is not unreasonable for people to have other axes to grind, for instance gender pay inequities, the biases that emerge from this have to do with the natural bias toward paying more attention to bigger accounts, and if women generally have smaller ones, this bias is not based upon gender. Pay equity is another issue and can only fit in this one to the degree that it represents a financial disadvantage, not a gender one.
They also look at assumptions that tend to be made among advisors as to who the advisor believes is the primary decision maker and such. People may be put off by advisors believing that men are more likely to be, but being offended and claiming that such things make a material difference are two different things.
Whomever among the two makes these decisions and what proportion each contributes is not under the control of the advisor, what they decide together. This does not affect the advice that is given, and these things would not happen if a disagreement with the advisor did not occur. The advice is given, and the parties decide, by whatever mechanism and distribution they choose. This is another red herring.
If the clients felt that the conduct of the advisor did not suit their tastes, if they were perceived as being not attentive enough to both, or any other perceived failings, these are just things that distinguish advisors, as a matter of fit. An advisor may be rude to everyone, but one’s personality and one’s quality of advising are separate matters.
There is a preference for women to prefer female advisors, which may just be a preference, or that they have had experiences of less than satisfactory treatment from male financial advisors. This may even be a subjective thing, where they may feel more intimidated by men or just feel more comfortable with women.
Material Gender Bias is a Serious Issue that Does Require Addressing
Financial advisors that have been found to have allowed gender bias to interfere with their professional responsibilities do need to be held accountable, and we also should be proactive to seek to discover and address biases that advisors may have.
Merrill Lynch has started doing this, and now hold live simulations with their advisors to observe how gender bias may play out and how we may seek to do a better job at minimizing it. They have discovered that men perceive women as more risk averse, and need to leave these beliefs at home to perform their duties acceptably, as these beliefs may distort the picture and result in inappropriate advice.
The quality of the advice overall, due to beliefs that aren’t so in touch with what is going on, is a much bigger issue than any of this, but one that we are far more reluctant to acknowledge. The tendency is to not only categorize investors of both genders as being risk averse, they generally don’t have much of an idea about risk anyway, what it even is and what we should and should not be seeking to avoid according to their risk tolerance.
The bar is set very low here and only transactions that involve gross misconduct are singled out, where the quality of advice or the biases of advisors toward particular strategies or particular investments is virtually left to stand unopposed.
You have to know what good advice even looks like to perceive the lack yours may suffer from, and if neither the advisors, their regulators, or their clients know what it looks like, no one will notice that it is missing.
This is the real reason why the investment industry spins its wheels so much, where the goal is to guide their clients toward achieving their goals but let their own limiting beliefs and lack of understanding command them to direct clients in directions other than where they need to go.
This is their risk averse biases playing out, but in this case, their aversion tends to be more toward success than failure, which they instead tend to have an affinity for. If an investor needs to average 20% to comfortably retire, shooting for 5% instead does not get them there and these advisors need to not be so comfortable making people uncomfortable and less uncomfortable about making their clients comfortable.
We need to detest clients of either gender being subject to harmful advisor bias, but it is certainly true that one of the things we need to be on the lookout for is bias against female clients that leads to a lesser degree of service than they deserve.
We all deserve adequate guidance, and the only real way to ensure this is to be willing to become educated ourselves to be able to decide what is adequate. If we’re to be led by the blind, one of us needs to be able to see.