Practice Management January 3, 2022

Can the Adviser Industry Make Real DE&I Progress in 2022?

Experts who work on adviser industry diversity, equity and inclusion efforts see reasons for optimism in the New Year, but they are also realistic about the size, scope and deep-seated nature of the challenges they face.
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The final PLANADVISER Practice Progress webinar of 2021 focused on the important and evolving topic of diversity, equity and inclusion (DE&I) in the financial advisory profession.

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Among the speakers on the webinar were Rosalyn Brown, a 2022 WIPN Board Member leading diversity, equity and inclusion efforts; and Dawn Harris, director of diversity and inclusion for the Certified Financial Planner (CFP) Board of Standards. During the event, Brown and Harris discussed in detail how the dynamics of the COVID-19 pandemic have really hit women and communities of color hard, citing data that shows some one in five women of color in financial services have considered leaving the industry.

Among the main reasons cited include a lack of opportunity and a lack of representation in leadership roles, and the stresses of the pandemic have only increased these problems. Looking forward to 2022, Harris and Brown contemplated whether financial services companies are finally starting to turn a corner and realize that if their women or their diverse talent is underpaid or undervalued in relation to their peers, why would they stay? If there is no trajectory for advancement, then why would they stay?

In the end, as summarized in the Q&A below, Brown and Harris shared a mixed perspective on the question of how much DE&I progress they expect the industry to make in the New Year. They shared the hope that the diversity-focused discussions of 2020 and 2021 will result in real and sustained action, but they also voiced significant concern that not enough is being done by industry leaders to resolve longstanding inequities that have, for too long, marred the reputation of the financial services industry among communities of color.

PLANADVISER: Rosalyn, can you please give us your personal assessment of what impact the Black Lives Matter movement and the community organizing spurred by the murder of George Floyd might have had on our industry? Also, has the experience of the COVID pandemic had an impact?

Brown: First of all, COVID has impacted people so differently across socioeconomic groups, and we are still living through the worst of it. It has been an even greater challenge for communities of color, and it will continue to be in 2022.

When we talk about things like the Black Lives Matter movement, and George Floyd’s murder, it really brought to the forefront and to the public’s consciousness experiences that people of color have long known and long understood. So, I would say the experience of the last several years and the elevation of this discussion have shifted certain communities’ viewpoints about inequality, and that is positive, but we are still far from seeing true changes and the resolution of the systemic challenges we are speaking about today.

We have seen similar patterns in our history. For example, if we think about the life and teachings of Martin Luther King, Jr., one of the biggest things he did was work to create a vision, so that the wider culture could see the brutality that exists for communities of color. By first creating this vision and broader awareness, that would then promote change. Today, we are all experiencing a similar thing. The broader society has had to confront the microaggressions and the more egregious biases that people of color experience in the workplace and in public life.

Among diverse financial services professionals, it is the same. Even if they feel supported in the workplace, which is not always the case, they often feel they “can’t take their uniform off” when they leave work. They hope, if they get stopped by the police on the way home from the office, that their professional appearance will make some kind of an impression and help to keep them safe. These are the challenges that people of color in our industry are still very much grappling with in 2022.

None of these things or ideas are new. They are simply newly realized by a population of people who haven’t had to see or experience them before. I am hopeful that we can capitalize on this moment and make this a true turning point for our society, but I am also worried that this moment will blow over, so to speak.

 

PLANADVISER: Dawn, what is your perspective when it comes to the progress that may or may not have been made over the past two years?

Harris: I agree with all the points Rosalyn made, and that there is a clear need for collaboration across the industry and to get all hands on deck to solve these challenges.

One of the conversations we had at our recent CFP Board diversity summit was about the importance of leadership and leaders taking accountability for solving these problems. The leadership of the financial planning profession simply must understand and address, in a systematic way, the barriers that people of color face when it comes to achieving success in this industry and in public life. This is never going to be an overnight thing, of course. True progress is going to take a sustained and very conscious effort, to make it real and durable.  

Something else to keep in mind is just how important it is for the financial services sector to step up and be a cultural leader on these issues, because of the tremendous power the industry has to help shape and transform peoples’ lives. Communities of color face significant wealth disparities and a lack of access to financial planning. Our profession has the ability to make a difference on some really big challenges—or to continue to perpetuate inequality.

To solve these problems, we need to be collaborative. Those of us already in this industry need to be humble and understand that there are things we don’t know—we all have gaps in our knowledge and experience. Financial professionals must come to these communities and meet people in a partnership mindset—not with a “let me help you and show you what to do” mindset.

 

PLANADVISER: Rosalyn, would you say you are optimistic about the potential for progress in 2022?

Brown: If I’m being totally honest, it is hard to be optimistic about progress in 2022 and beyond. I feel like organizations have talked a lot about these issues. But are they truly investing their money, time and resources towards solving these problems? I think the answer is probably not. Most organizations have simply been reactive to this situation; they have not been proactive and taken bold steps forward.

So many organizations simply threw out a message of inclusivity during the last year, without doing any real work in terms of asking how their business structures and how they go to market and meet their clients could be changed to serve more diverse communities and to serve more diverse talent within their firms.

If you are only pulling people of color into your leadership conversations because you want to check a box or you merely want to make your firm look more diverse when you meet with a key client, that’s not progress. If you are just cherry-picking ideas from your diverse talent without rewarding them or giving them compensation and equity stakes as leaders, that’s not progress. If you are just creating a DE&I position that has no actual budget and no power to make change, that’s not progress, and you aren’t going to get real results.

Unfortunately, I fear that we are just going through the motions as an industry, and we aren’t making the real internal changes that are required to push the industry forward and to create true inclusion and diversity.

Harris: From my perspective, I think it’s also really important to understand that progress is not going to be cookie-cutter. If this profession is really serious about shifting the dynamics of how we communicate opportunities, how we market to students, how we communicate to career changes—it can’t continue to be centered on an eat-what-you-kill mindset that has historically only appealed to a very narrow band of society, namely those who are already wealthy and well-connected.

To make progress as an industry leader, you have to really understand what will attract someone to come into this profession and how the profession can adapt to different needs and viewpoints. I’m not suggesting that, if you are Black, you are only going to have Black clients, or if you are a woman, you are only going to have women as clients. Instead, it’s about building cultural competency and being able to communicate and serve different groups and meet more diverse needs.

 

PLANADVISER: Dawn, can you give us a sense of some of the metrics that you track that show the lack of diversity in our industry?

Harris: Currently, in the U.S., only about 4% of our CFP professionals are Black or Latino—despite the basic fact that these groups together make up nearly a third of the U.S. population. Currently, women make up only 23% of CFP professionals. So that’s the starting point, and the goal must be to ensure our membership is more representational of the U.S. population as a whole.

One of the things that I’m really interested in is the fact that there are thousands of different initiatives that people are doing in this area, but they are just very siloed and separate. Part of shifting the paradigm is going to be broader, cross-firm collaboration.

 

PLANADVISER: Rosalyn, what comes to mind when you hear these statistics?

Brown: The companies that will succeed in the future are those that are hearing the voices of all their employees and providing more open access to promotion and leadership. The advisory industry has a lot to lose if we don’t step up. If you are in a leadership position and you walk the floors of your firm, you will find people of color who have been with you as long as anyone else and who are as skilled as anyone else. To say that the talent doesn’t exist today—that’s just not true and it’s not accurate. The talent is there, they just aren’t getting promoted. They get stuck in entry-level positions because they are overlooked.

Change will only come when today’s leaders are willing and able to see leadership qualities in people of diverse backgrounds, even when they don’t have a ton of leadership experience on paper. If you don’t change your requirements and expectations, you won’t be making progress. An important part of this, which is actionable right now, is not giving people informal roles or letting them punch above the weight of their title.

The structure of early career compensation is another a big issue. I read an analysis recently that spoke about the different experiences of people making the same salary, say $100,000. If you are the first person in your family to have gone to college and you don’t have anyone else in your family with substantial wealth, that $100,000 is going to look a lot different for you than it would for a colleague who comes from a wealthy family and a privileged background. One person may be saddled with student debt and providing support and care for someone else in their family, perhaps both children and parents—they will effectively be living on substantially less than their peer, but the employer will look at both people as being equally compensated.

These are the kinds of nuances we need to grapple with. If you didn’t’ have a parent that could help set you up in that first year out of college, you may have taken on substantial credit card debt. It might take one person working for your firm a decade longer to be able to afford to buy their first home, or they might have to take on more debt to finance the purchase of their first car. There is just so much more going on than simply looking at the compensation number and thinking you understand the full experience of your staff. The investments that we make in our talent must keep these things in mind and really be progressive and responsive.

Practice Management December 29, 2021

The Role of Firm ‘Culture’ in an Evolving Industry

Adviser industry leaders engaged in merger and acquisition activity often say a target firm’s culture matters as much as its financials—but what, exactly, is firm culture?
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PA-122721-OSC 2 Role of the Office-Culture-Brian Stauffer-web

Art by Brian Stauffer

During 2021, PLANADVISER Magazine devoted a significant amount of news coverage and analysis to the record-setting pace of retirement plan adviser industry merger and acquisition (M&A) activity.

According to Fidelity, registered investment adviser (RIA) M&A deals during the month of November alone totaled some $42 billion in assets under management (AUM), and year-to-date, there had been 182 RIA transactions totaling $304 billion in AUM. These figures were up 61% and 78%, respectively, compared to the year-to-date figure for November 2020.

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While no two deals are exactly alike, some clear trends have emerged in the M&A action, including an increased interest in combining wealth management and retirement plan advisory capabilities, as well as an increasing role played by private equity investments. Perhaps more than any other common theme, however, is the constant citation of “complementary cultures” and “cultural alignment” by firms that have made the call to join forces.

For example, commenting on the recent launch of a new joint venture between Lockton and Creative Planning, Ron Lockton, chairman of Lockton, said he has long admired what Peter Mallouk has built at Creative Planning, and that he felt the opportunity to partner with Creative Planning is consistent with Lockton’s goal “to be the best and not the biggest.”

“Importantly, our cultural values around client service and caring for people are in perfect alignment,” Lockton said. “The synergy between our cultures will undoubtedly provide fertile soil for continued innovation and a best-in-class service platform.”

Offering his perspective on the partnership, Mallouk said the battle for scale is an important factor behind this deal and the broader pace of M&A activity, but another key piece of the puzzle is the competition among firms for the best and brightest advisers and brokers.

“Getting the right group of talented and experienced advisers together under one roof is extremely important for long-term success in this industry,” Mallouk said. “In reality, it’s a pretty small pool of practitioners who are experts in this field, so talent acquisition is every bit as important as scale, from our point of view.”

Such comments echo those made by other firms engaged in substantial M&A activity in 2021, among them CAPTRUST, which has purchased multiple advisory practices this year, including the $150 billion acquisition of Cammack Retirement Group back in February. Explaining his firm’s take on the importance of practice culture, David Wahlen, CAPTRUST manager for recruiting and acquisitions, pointed to an internal concept called “One Unified Practice,” or “OneUP.”

“This means that as a firm, we are working together and pulling in the same direction to fulfill our mission to our clients, colleagues and communities,” Wahlen said. “We are able to do this in large part because of our shared employee ownership. More than half of our 1,000 CAPTRUST staff that walk the hallways each day are already shareholders, and everyone is eligible after three years. This fosters a culture that is truly collaborative.”

Due to its growing size and expanding geography, Wahlen noted, the firm has also found it important to identify individuals as “culture carriers,” to help ensure that everyone understands what it means to be good stewards of the firm’s culture and mission.

Regarding the role firm culture plays specifically in the acquisition process, Wahlen conceded it is just one of many factors that come into play—but it is a very important one.

“Economics can and should matter to a degree, however in our opinion, nothing is more important than the cultural fit and compatibility of a potential acquisition,” Wahlen said. “CAPTRUST is One Unified Practice, one operating company under one brand. We are not a collection of independent subsidiaries, and this is for the same reasons that a potential prospect and other successful advisory firms have one culture, a set core of beliefs, and a vision and strategy. Every firm that joins come from a position of strength, with strong brands and very talented people. Together, we are simply a bigger version of what they were on their own. If all of the above makes sense and we don’t have to ‘sell’ our model too hard, that is a pretty good indication we could be a fit.”

Such ideas are not new, of course. Back in 2019, Bob Francis, a partner at Wise Rhino Group who acted as a mediator in the Cerity Partners-Blue Prairie acquisition, repeatedly cited the importance of cultural alignment, highlighting the role culture would play in the M&A market for years to come.

“When you look at the retirement advice space, you have a lot of different cultures,” Francis said. “But one simple way to divide it up is to look at practices that have a team culture and then practices where there is a star leader. That star system is not Cerity Partners—it’s a real partnership system. And that’s the same system at Blue Prairie Group. By the way, when you do M&A in this industry, dollars and cents are important, but they come down the road. The first step is to see if these people even speak the same language. Do they agree on the same principles and ethics of business, and will they get along?”

Josh Itzoe agrees with that take. In a recent conversation with PLANADVISER, Itzoe admitted to taking a few months earlier this year to “sit on the couch and recuperate” after nearly 16 busy years at Greenspring—a firm he helped to found and which he has recently sold out of. Itzoe said he enjoyed the downtown, but he quickly began to feel bored and restless, leading him to consider what might come next. Among his new projects is an industry networking and job search platform called Getre(k)ruited, which is designed to help connect retirement plan services providers (i.e., advisers, recordkeepers, third-party administrators [TPAs], etc.) with talent that shares their personal and professional values.

As Itzoe explained it, the Getre(k)ruited platform allows job seekers to search for opportunities by filtering though some 30-plus predefined company values, as well as according to company type, location, job function (advisory, investment management, marketing, operations, etc.), workplace model (in-person, remote, hybrid, etc.) and work status (full-time, part-time, hourly, contract, etc.). Some of the cultural values coded into the platform include the following:

  • Accountability Is Critical
  • Apprenticeship/Mentorship
  • Awesome Work Environment
  • Clients/Customers Come First
  • Committed to Personal Growth
  • Community Involvement
  • Extra Perks
  • Fast-Paced Environment
  • Flexible Work Arrangements
  • Good for Parents
  • Long-Tenured Employees
  • Open Communication
  • Promotes from Within
  • Tech-Forward
  • We Love Interns
  • We Pay Well
  • Work/Life Balance

Beyond working with individual job seekers, Itzoe said, the platform is also meant to help employers. In signing up for the platform, employers must select their eight top values from the list of 30-plus. 

“If we can help companies understand their own unique values, and then help top talent to be able to search for jobs and companies that have core values that match their preferences, it’s going to be a win-win scenario,” Itzoe said. “I believe we can help to build out a new type of talent pipeline. The younger generation is really big on values and culture and purpose—even more than us veterans.”

Looking ahead, Itzoe says, firms that have engaged in substantial M&A activity—especially those who have sold into a larger practice—might find that the cultural fit at their new home is not exactly perfect.

“Not every adviser is going to love working for a larger firm,” he suggested. “The dynamic between a smaller independent firm and a larger firm is different. It will be better for some but not so much for others. I think this applies to non-adviser talent as well, especially when they didn’t have a say in the matter. I’m already starting to hear this from conversations related to www.getrekruited.com. People are very open to new opportunities, especially as a result of acquisitions.”

On the other hand, some people, especially those advisers who just want to do their job and serve their clients, are going to really appreciate having additional resources.

“They may not love some of the new constraints of a bigger organization—or the pressure to adopt things or products/solutions that make them change their previous work style—but it won’t be enough to make them want to change,” Itzoe said. “For those folks, working for a larger firm will be great for their careers. … One of the biggest beneficiaries of these changes will be the younger generation of advisers who are in their 30’s and early 40’s.  They’ve got enough experience to have credibility and enough runway left to have tremendous success when the industry turns over.”

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