The opening day of the 2020 PLANADVISER National Conference included a frank and actionable discussion about what has long been a critical and pressing issue: the lack of diversity in the retirement plan adviser and wealth management fields.
On the digital panel were Teresa Hassara, head of workplace solutions at Massachusetts Mutual Life Insurance Co. (MassMutual), and Amy Philbrook, head of core market sales and workplace investing at Fidelity Investments. The pair boasts decades of retirement industry experience working across a wide variety of roles, as well as many years of engagement on this crucial and evolving topic.
The pair stressed that advisers need to act now to help change the face of this industry, which is overwhelmingly white and male. Not only is this the right thing to do morally and ethically, the panelists agreed, it is also of paramount importance for the continued success of advisory firms and their service provider partners. Simply put, the face of America grows more and more diverse every year, yet the adviser industry does not.
The numbers bear this out. Right now, just 19% of financial advisers in the U.S. are women. When comparing that with the professional fields that intersect with the financial and retirement advisory space, the problem is thrown into sharper relief. Roughly 52% of accountants are women, and 32% of attorneys are women. At the same time, even though African Americans make up about 13% of the United States population, the U.S. Bureau of Labor Statistics (BLS) reports this group accounts for only about 7.6% of financial services professionals.
“To remain successful in the long term, our adviser population has to reflect the American society at large, and it doesn’t do that right now,” Hassara said. “I can confidently say, from years of experience working on this issue, that no real progress can be made without a concentrated effort across all levels of an organization.”
Philbrook agreed with that statement, noting that last year was the first time in many years that the number of financial advisers who retired from their jobs outpaced the number of new advisers entering the profession. This means succession planning and diversity challenges are tied closely together.
“One piece of good news is that the job of being an adviser, frankly, has changed in a way that will make the role more attractive to different groups and types of people,” Philbrook said. “What I mean is that money management is no longer the main part of the job. Today, advisers can rely on powerful technology and solutions to do this work. Instead, being an adviser now is really about communication, service, goal setting and creating deep connections.”
Hassara and Philbrook said this means the door is wide open for people with highly relevant and transferrable skills to enter the adviser industry from other areas of the economy that are already much more diverse. Think the hospitality industry or even human resources (HR).
“That’s the good news,” Philbrook said. “The talent pool is actually really big, because of the way the necessary skills have changed. We have to embrace this notion and accept that the lack of diversity is not a matter of a lack of qualified or interested diverse talent.”
Along these lines, Hassara pointed to various approaches her firm is taking to “make sure we are not just talking about diversity and inclusion.”
“One way we are taking action, for example, is by analyzing our own sub-advisers and asking very tough questions about their approaches to diversity and inclusion,” Hassara said. “We aren’t just settling for polite answers, either. We want to see the actions and the evidence that this matters to them. If it doesn’t, that is going to prompt a tough conversation on our end about continuing to partner with these groups.”
Philbrook emphasized that plan sponsors are also paying attention to such things—and they, too, are becoming increasingly vocal and demanding.
“We hear a lot of questions from clients along these lines,” she said. “Plan sponsors want a partner that can understand and help them to respond to the growing diversity within their own workforces. In one clear trend, they are asking about Spanish language capabilities, and they want to know, ‘Are you just using translation services or do you actually have people within your firm that are from that culture?’”
In terms of actionable recommendations for advisers seeking to address this challenge, the panelists had a lot to say, starting with the fact that traditional recruiting methods are themselves a core part of the diversity problem. For starters, college graduation is way too late to attract new types of people into this profession, they said. Furthermore, business- and finance-focused recruiting fairs on the typical college campus are likely not going to be any more diverse than the adviser industry itself.
“Don’t just do the traditional recruiting fairs and expect that you will have success changing this industry,” Philbrook warned. “You have to put yourself in a position where underrepresented talent gathers. So, you could work with faculty to identify promising talent, or make connections with the clubs and groups on campus that represent and connect minority communities.”
As noted, firms also need to be open to the idea of recruiting people from other fields who don’t necessarily have direct financial services experience but who nonetheless have the skills the modern adviser needs—the ability to create deep connections, build trust, etc. Once talent is identified, onboarding must be flexible and must allow for a substantial period of transition, the panelists agreed.
“The idea of moving to a sales incentive-based position is a big road block for many people, but it doesn’t need to be,” Philbrook said. “The industry absolutely has the means and the capability to support people and help them transition into the role of being an adviser. We have that obligation.”
“Smart people can learn this industry, but it’s the passion and empathy that you can’t teach,” Hassara said. “If you can find people with these qualities, you can teach them the rest, and you can create a workable compensation plan.”