Many Widows, Divorcees Feel Patronized by Financial Advisers

If they feel this way, they are inclined to shun advisers altogether, New York Life Investments learned in a survey.

Thirty-one percent of women who have recently separated from their husband or partner, or who have divorced or become a widow, feel that their financial adviser patronizes them, according to a survey by New York Life Investments. Of this group, 51% said they might not work with an adviser again.

Among women who provide the primary source of their household’s income, 44% believe that advisers treat women differently. Among professional and non-professional women whose primary contributions to the household are non-financial, 32% feel unwittingly excluded in conversations with financial advisers. Twenty-seven percent of women who live alone or as a single family unit expressed a desire for greater financial education.

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The survey also found that 70% of women with household investable assets greater than $250,000 are working with an adviser, but 38% are not completely satisfied with that adviser. Sixty-seven percent of women say they have changed advisers due to poor service or a lack of a personal connection, while only 33% have made a change due to poor performance.

Sixty-two percent of women think they have unique investment needs and challenges. Fifty-five percent tell their friends and family about their interactions with their adviser, 40% think advisers treat women differently than men, and 26% think they have less access to financial education.

Sub Rosa conducted the survey of 800 women for New York Life Investments in 2018.

Study Finds Alphabeticity Bias in 401(k) Investing

Investors tend to select funds at the top of an alphabetically organized list of funds.

A new white paper, “Alphabeticity Bias in 401(k) Investing,” finds that investors tend to select funds at the top of an alphabetically organized list of funds. Authored by academics at Saint Louis University, Seton Hall University and Kansas State University, as well as a researcher at the Ipsos Behavioral Science Center, the paper finds that people tend to select the first “acceptable” option.

“Thus, when a participant searches through her plan’s menu of investment options, she may be more likely to choose the funds appearing towards the beginning of the list,” the paper says. “Since 401(k) fund choices with early alphabet names appear at the beginning of the list, they will be chosen more often than later alphabet named funds. We find that the same fund appearing in multiple plans in the sample receives a significantly higher allocation when it is listed closer to the top of the plan menu.”

The more complex the investment menu, the greater the alphaeticity bias, the researchers say. They also find that regardless of the sophistication of the investor, as measured by their profession, “all participants, on average, display the bias equally. This is even true for professionals employed in the financial sector.”

The researchers suggest that plan sponsors could request that their third-party administrators (TPAs) “strategically order funds so the effect of alphabeticity bias results in a favorable outcome for participants. For instance, if funds were listed in ascending order by expense ratio rather than alphabetically, then the plan design feature would help reduce investment fees paid by plan participants. Prior literature shows that expense ratio is a more reliable predictor of future return performance than past performance. Alternatively, low volatility funds would be placed at the top of the fund menu.”

The researchers’ findings are based on data from Brightscope, CRSP Mutual Fund Database and Morningstar Direct. The full paper can be downloaded from here.

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