How Statistical Discrimination May Be Costing Your Practice
Falling victim to statistical discrimination may be hurting your bottom line and steering clients away.
Statistical discrimination is our tendency to believe something about a group of people based on a perceived group average. These beliefs don’t necessarily have to come from a prejudiced point of view; instead, they are an example of our minds using a cognitive shortcut.
When we meet someone for the first time, our minds fill in presumed details about them based on the only information we have available at that time: how they look--which can be a result of their race, gender, age, and so on. Once we mentally place this person into a group, we then attribute certain characteristics to them based on what we believe is typical of this group. To give an example using animals, if we encountered a new cat, we might believe that this cat hates water because that’s a common stereotype attributed to cats.
We exhibit statistical discrimination because we are human. We’re constantly confronted with myriad decisions and information, and our minds take shortcuts that are sometimes based on imperfect information. Although this tendency is natural, it can cause a lot of damage, and it’s something we can combat in our daily lives and as financial professionals.
The Far-Reaching Impact of Unconscious Bias
Imagine you’re about to meet a heterosexual couple as prospective clients. As they walk into your office for the first time and you begin to have a conversation, who do you naturally gravitate to as you speak? Everyone’s answer to this question may vary, but, according to research, many times advisors favor the man in this scenario.
This is a common, real-life example of statistical discrimination playing out.
According to a study done by Allianz, 60% of women say that their financial professional treats their partner as the decision-maker. Many women feel that they are “talked down to” by their advisor. This treatment may be an artifact of the outdated stereotype that men make the financial decisions in a household, and it may be a reason why women are more likely to switch financial advisors than men.
This behavior during client conversations, while perhaps unintentional, can have drastic consequences for advisors. Women now control most of the personal wealth in the United States, and many report having a large role in managing their household’s finances. When it comes to heterosexual couples, most women expect to outlive their partners.
These numbers point to one fact: Advisors should expect to see more women taking an active role in their finances. If things continue how they are, many advisors may lose out on a client base that seems to have limitless potential.
Combating Our Shortcuts
Continuing the practice of statistical discrimination while working with individuals is something we should all be careful to avoid, which is easier said than done. It can be hard to notice we’re even incorporating it into our thought process, and it can be completely unintentional. This tendency doesn’t have to come directly from a discriminatory mindset, either. An advisor may think of men and women as equal but still fall victim to this tendency in the spur of the moment.
Nonetheless, statistical discrimination can result in lost clients, untapped markets, and, to be honest, just isn’t the right thing to do.
Here are few things you can do to avoid this tendency in your practice:
Like all of the shortcuts our minds take, it can be hard to notice when we are engaging in statistical discrimination. From research, we know that the best way to combat these sly tendencies is to set up rules or processes to avoid them, as the suggestions above emphasize. Finding ways to steer clear of statistical discrimination in your practice can help open opportunities for you to connect to new and existing clients.