Why Women are Leaving Your Bank
Women now own 36 percent of North America’s private businesses, control almost half the personal wealth, and the pace of growth for women has overtaken growth for men. This trend is expected to continue and should give banks something to think about. “Gender-neutral” products and services are de facto male-focused because they do not take into consideration the wealth gap and or other gender-specific priorities or concern. Unsurprisingly, women are overwhelmingly dissatisfied with the services their bank is providing.
Although increased opportunities in education and the workforce have shrunk the pay gap for younger women, men still earn more. And the wealth gap is about more than just income. Women live longer, their salaries peak earlier, and they retire with less money saved than men. A BMO study links the wealth gap to the heavier burden on women as caregivers who spend more time taking care of children, aging parents, and other family members than men. Given the significant difference in men and women’s financial circumstances, it seems peculiar that banks are still trying to sell women products and services that don’t consider their specific needs.
We conducted a study on the stealth attrition of banking customers to gain insights into why so many people are leaving their primary financial institution and there are some clear delineations on gender lines. The group most at risk to leave their primary financial institution skews heavily female. Women make up 59% of the high-risk transaction centric demographic, so named for their purely transactional relationship with banks. They do not view their bank as a good place to get financial advice, nor do they see their relationship with the bank as long-term or trusting. However, financial advice, coaching, and seminars were key reasons they would visit the branch more often. Financial advice is an unmet need for banking clients generally, but for women the need is urgent. In order to meet their growing expectations, banks will not only need to look at women-specific issues, but at the way women consider and choose financial services. Here are some key ways banks can tailor services to women:
Help manage career interruptions
Having children, getting a divorce, taking care of a sick family member, losing a spouse, or coping with a personal health issue all impact women’s ability to earn and manage money differently than they do for men. Women are more likely to interrupt career trajectories to care for young children, after divorce they are more likely to be full-time single parents, and 80% of women will outlive their spouses. Each of these life events will have a significant impact on a woman’s financial well-being. Not only do women need tailor-made services to help them manage money at these critical moments, but they need empathetic financial advisors they feel they can trust. That means more women in this role and ensuring all staff, regardless of gender, are well-versed in how to navigate the kind of financial curveballs women are likely to face. If banks do not start offering such services, women will find them elsewhere.
Understand how women invest differently
There is a myth that women don’t want to invest because they are risk-averse. Ellevest, a female-targeted investment group, believes women have different goals and take a different approach when it comes to investment and that it is in fact a lack of engagement and confidence that keeps women from taking action. A LearnVest study found that 45% of men say they are financially confident – but only 27% of women say the same thing – perhaps unsurprising given the investment industry has made no attempt to engage women. Banks can fill this gap by taking an approach that focuses on what women value in investment opportunities. Women are not looking to move money around frequently – they want longer term investments that will build financial security, and are motivated by family and legacy rather than personal wealth and power. Women will spend more time investigating and want more information before making a decision, and are more likely to prefer investments that match their personal values. Advisors need to better understand the decision-making process and motivation of women to be able to engage them and find investments that suit their needs. If banks cannot convince women they are able to understand what they want, women will look to smaller, niche investment companies who do.
Support female entrepreneurs
According to Forbes, the golden age of female entrepreneurship is upon us. However, one of the biggest challenges women face is access to capital – in fact, women entrepreneurs start companies with 50% less than their male counterparts. Lending to women in traditional banks has gone up, but online lenders are encroaching on this share with simple applications that can be done from anywhere, with quick results. Banks need to simplify and expedite loan applications to ensure attrition to easier processes does not occur. But most importantly, creating small business hubs that are inclusive and targeted to women will give value-oriented female entrepreneurs a reason to deepen their relationship with their bank, rather than leave in search of greener grass.
Non-gender specific financial products and services leave a gap in the market. Banks need to leverage a nimble approach and create female-focused services that speak directly to the financial challenges of women. As control of capital shifts increasingly into women’s hands, ignoring their needs puts banks at a higher risk of attrition to competition who offer more targeted services. Women currently dominate the least satisfied group of banking customers. It is time for banks to give them a reason for that to change.