Wednesday, January 16, 2019

Firing Male Brokers and Financial Advisors

The article Consider Firing Your Male Broker by Investment Advisor Representative Blair duQuesnay in the New York Times has generated a firestorm of comments. Most readers didn’t like the obvious sexism, but I’m more concerned about the muddled reasoning.

The article says research shows women investors outperform men, and therefore, you should choose a female financial advisor or broker. This reasoning presupposes that financial advisors and brokers are focused on the performance of their clients’ portfolios. This is far from the truth.

Most financial advisors and brokers are salespeople who sell what their employers tell them to sell. Typically, they either don’t know or don’t care that what they’re selling isn’t good for their clients. The fact that so many advisors invest their own money the same way they invest their clients’ money shows they don’t have bad intentions.

Even those advisors and brokers who know they’re hurting their clients didn’t necessarily start out this way. But they started to figure out that what they’re told to sell isn’t helping their clients, and they either lived with this knowledge or eventually quit. Some of those who quit go on to get higher designations and work in different environments with more autonomy so they can do a better job for their clients. Unfortunately for investors, this type of advisor typically takes only higher net worth clients.

If a new rule outlawed all male financial advisors and brokers, after a few years of hiring and employee turnover, the typical female advisor would either not know or not care that what they’re selling isn’t good for their clients. Large financial institutions run their operations to get profitable behaviour from their employees whether they’re women or men.

We might then ask whether women should run the financial institutions. The filtering process for high-powered positions in big companies is much more severe than it is for becoming a financial advisor or broker. The only people who move high up on the corporate ladder are those willing to run the company profitably. This applies equally to male and female executives. Whether there is sexism or not during the climb up the corporate ladder, you can bet that those who reach the highest rungs are focused on profits.

In the end, this article isn’t helping investors choose a better advisor, and it isn’t shaping a better path forward for the financial industry. But if investors accept its message, it might help some female financial advisors and brokers meet their sales targets.

6 comments:

  1. By the same token, NY Times does not want to help or hurt their readers by publishing such articles, they only want to increase circulation so that their ad space could be sold at higher rates.

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    1. @AnatoliN: We may question the newspaper's motives, but I'm more concerned with the merits of the message.

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  2. This is my issue with some of the very smart investment advisors and commentators in the U.S. (i.e. the Ritholtz group). They put out so much content and I fear much of it steers investors the wrong way into thinking they should be more active (or choosing advisors who are more active) with their portfolios.

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    1. @Robb: That's true. I read a lot from different members of the Ritholz group, and while they speak positively about indexing, almost everything they write is irrelevant to an indexer. We used to have newspaper writers who pooh-poohed indexing and went on to talk about some aspect of active investing. Now we have smart people who say positive things about indexing and then go on to talking about some aspect of active investing.

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  3. I guess this explains my accidentally landing on an AM radio station yesterday calling itself Biz Canada radio and a version of this topic was being discussed, so I lingered. I think the premise is based more on claiming a difference between men taking on more risk (the term the used was "ready, fire, aim... being men's typical investing strategy) vs a more measured and heavily bond laden mutual fund mix a woman takes.

    In Canada women now account for about 1.5 trillion of investing dollars.(heard that last night as well) I think this is more about marketing to this group, and using current cultural virtue signalling to market to women to attract more of their dollars into high fee funds by stroking their egos. I disagree it has any real relevance. After al,l doesn't Paul Krugman write for the N.Y. Times as well? He has barely predicted anything in years that actually became reality later.

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    1. @Paul: The studies showing that women invest better than men are a common topic. Of course that isn't relevant to whether you're better of with a male or female financial advisor.

      I think you're right that discussions of this topic are often motivated by the goal of attracting female investors, but I think the strategy of appealing to women is not exactly "stroking their egos"; it's more like fueling a sense of competitiveness against men. The fact that some other writer contributes to the NY Times as well doesn't concern me much. I try to look at ideas on their merits.

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