Diversify Your Assets…and Advisors

By hiring advisors from a wide variety of racial, socioeconomic, and cultural backgrounds, firms can appeal to broader target audiences, and even encourage minorities, many of whom are more hesitant to enter financial planning space (or have historically been kept out) to work with an advisor who understands their perspective.

When it comes to diversity, the financial services industry remains heavily white and male; according to the US Bureau of Labor Statistics, only 34% of personal financial advisors are women, while 7.9% are black, 10.7% are Asian, and 8.2% are Hispanic or Latino.[1] As the industry is attempting to diversity, it’s important to keep in mind why advisor diversity matters; what’s being lost in an advisor monoculture, how to increase diversity and inclusion in the workplace, and how to maintain and expand the number of non-white, non-male advisors.

Not only is working toward inclusion the right thing to do, but when it comes down to it, diversity is good for business. Studies have shown that “greater diversity leads to stronger sales revenue, customer growth, greater market share, and higher profit levels.”[2]

Advisor-client relationships are ultimately based on trust, and trust is built on foundations of mutual connection and understanding. Clients, especially minority clients, often connect with someone who “gets” them, and it’s often reassuring when the person who could make or break your financial future has not just learned understanding, but experiential knowledge of your lived experiences. “People need to be with people whom they feel can understand them, can empathize with them and are not judging them. . . If they are speaking to a financial advisor of their own culture, they may find it easier to share that information and give the advisor the full picture of their assets and liabilities,” explains  managing principal of MRV Associates Mayra Rodriguez Valladares in an interview with the Tampa Bay Times.[3] By hiring advisors from a wide variety of racial, socioeconomic, and cultural backgrounds, firms can appeal to broader target audiences, and even encourage minorities, many of whom are more hesitant to enter financial planning space (or have historically been kept out) to work with an advisor who understands their perspective.

However, when cultivating a diverse workplace, beware of common blunders. While diversity statements and inclusion training modules may seem like a good first step, these policies don’t actually make the workplace friendlier to women and minorities. Harvard Business Review found that while most people assume these create a fairer, more equitable workspace, they do quite the opposite, in fact. “Even when there is clear evidence of discrimination at a company, the presence of a diversity policy leads people to discount claims of unfair treatment. . . it not only makes white men believe that women and minorities are being treated fairly — whether that’s true or not — it also makes them more likely to believe that they themselves are being treated unfairly.”[4]

Diversity is also not the end goal; it’s simply a middle step, and without inclusive practices that ensure marginalized voices are treated equitably and with value, diverse hiring practices and work environments will eventually end up driving minority employees away. As Senior Research Associate Dr. Meghaan Lurtz notes on Kitces.com, though there are more efforts to increase diversity in the financial sector than ever before, numbers aren’t changing. “The financial planning profession may be attracting more diversity but is also losing diverse CFP professionals at a faster rate… such that the overall diversity among CFP professionals has not increased despite a steady rise in both the total number of certificants and the number of diversity programs targeting them,” she states.[5] The difference between diversity and inclusion is visibility vs. engagement; inclusion involves fostering a space where personal, racial, cultural, and other differences are acknowledged and celebrated, and all voices are respected and valued. Minorities should be able to speak up and speak out without fear of retaliation (or losing their job!) and bring personal strengths to the table. Aside from creating friendly, open work environments, spaces also foster more creativity and drive innovation and profits as well.

Lastly, an important part of inclusion and retention can be mentorship, Lee Bethel explained to PlanAdvisor.[6] A Black advisor who began practicing in the 70s when few financial professionals of color even existed, Henderson credits the support and mentorship of Lang Dixon, another Black advisor, with helping him establish himself early in his career. Said Bethel, “he was a mentor and a great friend all wrapped up on one. He brought me into his practice and gave me an opportunity to be successful.” Dominique Henderson, founder of The Jumpstart Community of Financial Professionals, and founder of DJH Capital Management in Dallas, Texas, agrees. “If I only have time to tell people one thing, it is to find a mentor . . . That person can give you so much insight. That’s not to say it is easy to find a mentor, but doing that work is very worthwhile. It’s your best single bet to success,” he said. Firms committed to diversity and inclusion may therefore want to consider setting up a mentorship program to help new advisors find their footing with the help of more seasoned professionals of all backgrounds, and even old hands may learn something from one another.  

[1] https://www.bls.gov/cps/cpsaat11.htm

[2] https://www.cfp.net/-/media/files/cfp-board/knowledge/reports-and-research/racial-diversity-in-financial-planning/why-diversity-matters.pdf

[3] https://www.tampabay.com/news/business/2021/02/11/why-financial-advisors-of-color-matter

[4] https://hbr.org/2016/01/diversity-policies-dont-help-women-or-minorities-and-they-make-white-men-feel-threatened

[5] https://www.kitces.com/blog/diversity-inclusion-women-minorities-lgbtq-financal-planning-industry

[6] https://www.planadviser.com/mentorship-diversity-opportunity

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

Back to Blog

Latest Entries

Need a Proposal?

Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering.  Through this examination, we can help you optimize the service you receive.

get xpress proposal