Keeping Up With the Workplace

Art by Lars Leetaru

The financial advising industry has not only a scarcity of women but a well-known diversity gap. In 2018, only 5% of financial advisers identified as black or African American, slightly less than 7% as Asian and 6.6% as Hispanic or Latino, says the Bureau of Labor Statistics’ Current Population Survey (CPS).

Based on self-reported data provided to the Certified Financial Planner (CFP) Board of Standards Inc., less than 3.5% of all 80,000 Certified Financial Planners in the U.S. are black or Latino—significantly less than the representation of blacks and Latinos in the U.S. population.

The adviser industry has, similarly, not kept up with the current U.S. workforce. Today’s employees span more generations and are much more diverse and better educated than ever before. Numerous studies show that more diversity across a company’s workforce leads to better results.

Millennials, for example, who will make up 75% of the American workforce by 2025, the 2018 Deloitte Millennial Survey found, believe working and collaborating with people from varied backgrounds will make a company smarter, richer, more creative and more successful.

“We know that the majority of Millennials identify as nonwhite,” says Kathleen Zemaitis, head of adviser diversity and inclusion at LPL Financial in Denver. Communities, especially those Millennials gravitate to, are evolving, she notes.

The inadequate number of minority advisers to help these young workers is problematic—whatever the client’s or potential client’s race, she and other sources say.

“The fastest growing segment of marriages are of mixed ethnicity. If we aren’t reflecting these changes, we won’t be able to guide our investors with retirement and financial needs,” Zemaitis says.

To address this challenge, LPL launched an Advisor Inclusion Council (AIC), a diverse group of representatives from financial firms and institutions to work along with LPL leaders. The council has identified and is working to advance three primary goals within the adviser industry: to attract more financial professionals who reflect the changing marketplace; to help financial professionals grow their business by engaging new investor markets; and to create inclusive opportunities for financial professionals to connect, learn and share best practices.

‘Chocolate Chips in Vanilla Ice Cream’

Lee V. Bethel, president at Comprehensive Benefit Services Inc., and associated with LPL Financial, in Washington, D.C., has been in the advisory business for over 30 years. He talks about his experience at financial conferences: “More often than not, I’ll be one of the few African Americans there. And it sometimes takes a minute, I don’t want to say ‘to be accepted,’ but for people to realize you’re there because you’re qualified to be there.” He says minorities attending conferences often connect with each other but feel overwhelmed by the sea of other advisers.

The image Bethel uses—“chocolate chips in vanilla ice cream”—to describe being one in a sea of others resonates with Zemaitis, who notes that she has shared that with leaders at LPL. Now that she is aware, “I can’t go to a conference ever again and not see that visual. So, it’s helpful for those who may not see that.”

Bethel has nine professional designations. He says, “I did that for two reasons: one, to show that I can be qualified at what I do, and two, to show my clients that we’ve taken the time to arm ourselves with the education to be as knowledgeable as possible so we can guide them in an advisory capacity.”

The 2019 Elite Advisor Poll by BNY Mellon’s Pershing surveyed advisory firm leaders and revealed that 59% of those at the country’s most pre-eminent registered investment adviser (RIA) and institutional firms are satisfied with their efforts to hire women or ethnic minorities; 41% are “not entirely satisfied.”

When it comes to implementing initiatives that will help them reach and attract a diverse talent pool, advisory firms still have work to do, according to the poll. Twenty-eight percent of respondents are expanding recruiting efforts to include schools with a more diverse student base; 2% are measuring progress on diversity; 9% are offering diversity training; and 14% are reviewing job descriptions to remove any unconscious biases from the hiring and development process. Forty-seven percent, however, take none of these initiatives.

So how can firms increase diversity, specifically in the area of ethnic minorities? “One of the main ways is by proactively creating a diverse professional network and cultivating it over time,” says Christina Townsend, managing director and head of adviser solutions platform strategy at Pershing in Philadelphia. “By cultivating, welcoming and advancing people who have a variety of backgrounds and experiences, we can make our companies stronger, more competitive and ever more resilient.”

An Indirect Career Path

Rickie Taylor, a black regional director at Retirement Plan Consultants in Philadelphia, broke into his career indirectly, after, in 1997, a Prudential adviser at a career fair tried to recruit him. “I was pre-med, but I scored in the top 25% in the country on a [financial] aptitude test.”

When he got married, Taylor says, he and his wife had money to invest, and he remembered the connection he had made with the Prudential adviser. Taylor eventually joined him, in 1999.

Taylor says he quickly realized how difficult the adviser role was. He began by selling annuities and life insurance. In that job, “you start with people you know,” he explains. “The African American community doesn’t have a lot of access to investable assets. I was the only African American on that team, and, overall, I’ve typically been the only African American at the firms where I’ve worked.”

Taylor has found that, in the retirement plan space, minority business owners often have been inadequately educated when their plans were set up. When he comes in to review plan documents and investment lineups, he does a cost comparison and then runs a hypothetical illustration based on accurate information provided by the U.S Census. “What I often uncover is that these plan sponsors don’t know what a safe harbor plan is or even have a good understanding of deferral amounts.” He educates these business-owner plan sponsors about how a retirement plan can work harder for their business and its employees.

What Taylor has encountered points to the value of minority advisers. While minority business-owners can get help from any adviser, one from the same racial or ethnic group may be better able to understand them and build their trust.

Asked whether people of color or from minority ethic groups—either plan sponsors or participants—would like to see plan advisers who look like them, Zemaitis says, “Advisers need to understand participants’ experience, their backgrounds, their cultural nuances, to be able to give them the best financial plan they can. We need to change the face of our industry to reflect those communities because each one—and each investor group within it—has different needs.”

“A diverse staff can attract a more diverse group of clients,” notes Sheryl Rowling, head of rebalancing solutions at Morningstar, as well as a principal at Rowling & Associates in San Diego. “If most firms are trying primarily to attract white male clients, there are many opportunities for going after minority populations. Of course, Hispanic clients don’t require Hispanic advisers, nor do women necessarily need to work solely with women. Yet, won’t minority prospects be inclined to check out a firm that includes a more diverse mix of employees? Targeting niche markets should not be a primary reason for a diverse staff. But the potential is certainly a plus.”

If plan sponsors lack a diverse committee, could that impede minority advisers from being hired? Should it be a best practice for sponsor committees to include various minorities? 

“Yes!” says Zemaitis. “Diverse committees, diverse slates, etcetera, widen the net for more opportunities. Representation is key to moving the needle to a more inclusive work environment. Having a diverse set of voices in a room helps to mitigate unconscious bias and brings diversity of thought into decisionmaking for more holistic business outcomes.” 

James Brewer, founder of Envision Wealth Planning in Chicago, advocates for racial diversity in the financial planning profession. A black man, he helped plan the inaugural Vision Conference of the Association of African American Financial Advisors (AAAA, aka Quad-A), in 2015. Last year’s conference sponsors included TD Ameritrade, T. Rowe Price, and Flexshares. Quad-A was created to address the needs and concerns of African American financial advisers and affiliated professionals. 

Taylor sits on the Quad-A board as membership director and is also on the board of the Financial Planning Association (FPA) of New Jersey as director of diversity and inclusion. His idea to recruit minorities into the adviser business is “to hit the ground running with high school students and college students.”

“Quad-A is having conversations with students at some of the historically black colleges and universities [HBCUs] such as Delaware State and Clark Atlanta University,” he says. “Our mentorship programs let students know what’s available once they graduate.” He says he is also considering setting up student program content and internships.

Rowling concurs as to the value of providing instruction. “To have more qualified, diverse job candidates, diversity initiatives must begin at the educational level, even before the college and university level. After all, if there’s not much in the tunnel, there won’t be much to choose from,” she says.

RIAs can help influence and encourage minority students to pursue education and a career in finance, Rowling notes and suggests multiple ways to do this: Present at schools—middle schools, high schools, community colleges and universities; write articles in publications targeting varied young audiences; donate to targeted causes; sponsor a scholarship for minority students; and offer internships at the high school or college level.

When hiring, she says, “Advertise in a variety of paper or online publications and resources. Be sure to note that your firm welcomes diversity. When interviewing, consider how a candidate’s unique perspective can add value to the team. If you have two equally qualified candidates and one is a minority, I say hire the minority person. Or, if you have the flexibility, hire both!”