The importance of a company seeking consultants that reflect its makeup may be worth considering. For an employer, diversity has been shown to drive revenue, motivate employees and allow for creative problem solving.
Recently, a small women-owned law firm interviewed a handful of financial advisors. The owners turned down large companies with attractive packages for a smaller company. Why? None of the large advisory companies had partners that were women. Aside from wanting to give others a leg up, the women-owned firm questioned whether they’d be heard. We’ve written about the female investor and whether there really is a difference in women versus men in investing here, so we won’t review that topic now, but the importance of a company seeking consultants that reflect its makeup may be worth considering.
For an employer, diversity has been shown to drive revenue, motivate employees and allow for creative problem solving. In one article, authors suggest that companies with greater gender, ethnic and racial diversity have significantly higher financial returns. Another article suggests companies with founding female members have greater long-term returns. Diversity makes sense for other industries in dollars and cents. But the background of an financial advisor may be even more important to small businesses and their employees in how those employees feel that they feel their individual needs are understood.
As mentioned in the article linked above, women often end up with financial burdens of caring for both children and aging parents: the so-called sandwich generation. Having a financial advisor who understands the juggling act required to carry that burden may mean more than just understanding how much (or how little) money to set aside for retirement, but also may mean finding an advisor who helps this delicate balancing act by offering flexible meeting times, alternative meeting methods (e.g., Skype, GoToMeeting, or other software) or is more flexible in meeting outside the office.
Aside from gender, there are significant, and sharp, differences in asset accumulation between races. One government study found “that minority groups have lower rates of asset accumulation, even after controlling for income, health, bequest motive, and so on.” The issue, suggested the Social Security Administration researchers, was in saving behavior. Understanding the saving behavior of different racial and cultural groups may be helpful, but messaging to those groups may be more effective if done by a member of the group. This means diversity in the gender, racial and ethnic backgrounds of financial advisors impacts more than just the idea of inclusiveness. It may mean that greater diversity in the financial advisors available to work with a small business will impact on the retirement savings of the employees of that business.
Aside from saving behavior, different racial populations feel more or less prepared for retirement. According to a study from ING, 54% of Hispanics feel "not very" or "not at all" prepared for retirement, 50% of African-Americans report similarly, compared to 48% of whites and 44% of Asians.
And the feelings of being prepared, or not, as well as the savings behaviors have a real impact on total saved. The same study showed that Hispanics reported saving the least, with an average balance of only $54,000 for retirement, with Asians having the most at $81,000 on average. Different cultural groups reported different barriers to saving. For example, African-Americans reported debt as their main barrier to savings with Hispanics noting lack of knowledge about saving options and according to the same study at least 70% of Hispanics had no formal investment plan. While Asians may be topping out other groups in savings, they are least likely to have a will, making passing those savings to future generations more challenging. In short, different groups have different behavior. While any good advisor can understand that behavior, having a diverse group of employees may help change that behavior.
But changing the gender, racial and ethnic make up of your advisory firm takes more than waiving a magic wand or invoking its name like Beetlejuice. If hiring a diversity officer is out of the budget, some firms look to hiring a diversity consultant. Those individuals review human resources policies, observe meetings and offer suggestions on inclusivity. Others hire nonprofit organizations Catalyst, which focuses on women in business, to conduct focus groups and surveys. Others suggest focusing on retaining employees, rather than recruiting them. By understanding what might make a diverse employee want to leave, and taking small actions to prevent that, may make a bigger impact than spending more on recruitment. Similarly, improving your employee referral program can help your firm find qualified candidates that will feel part of the team more easily by knowing established employees from day one.
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