The financial advisory industry has a long way to go to diversify its ranks by gender and race. Despiteefforts by many firms to add more women,Indigenous, and Black and Brown advisors, the percentages of women andminority advisors remains small.
“The wealth management industry has
a diversity problem,” according to a new
report from Cerulli Associates. “Women
and Black, Indigenous and People of
Color (BIPOC) remain drastically under-
represented among financial advisors.”
The report cites several metrics to
support its analysis of the industry:
• Women account for 18.1% of the
financial advisor headcount vs.
50.8% of the U.S. population
• Blacks, 2.9% of advisors vs. 14.2% of
• Hispanics, 5.1% of advisors vs. 18.4%
of the population
• Asians, 4.3% of advisors vs. 6.8% of
Correcting that underrepresentation
lies not just with recruitment but also
retention, which is “the true test” for diver-
sity initiatives, according to Cerulli. More
specifically, its report notes that “wealth
management firms must embed inclusiv-
ity into their culture, as well as rethink
their recruiting, training and retention
strategies,” reflecting a sentiment that is
shared with minority advisors.
The report also focuses on why
women and members of minority groups
don’t enter the advisory industry, why
those who do don’t stay and what firms
need to do to reverse those patterns.
RETICENCE OF BECOMING AN ADVISORThere are multiple reasons why womenand members of minority groups don’tchoose to join the advisory industry,according to Cerulli. To start, they aren’taware of the industry and don’t knowanyone in it.
They also can view the advisor role as asalesperson whose compensation dependson business development, which is oftenthe case and which is seen as incongruent with a purpose-driven mindset thatinitially attracts them to the profession.Also, they face the difficulties of obtaininglicenses and development of foundationalskills and business development strategieswhile also establishing a client base.
A further problem is once theybecome advisors, this group struggles tostay because of obstacles they encounter.
As you can see from the chart below,
the top three obstacles were the lim-
ited number of women and advisors of
color in leadership positions, insufficient
mentoring from successful advisors and
implicit bias, which manifested in micro-
aggressions and not being taken seriously.
HOW FIRMS CAN BOOST DIVERSITYAn advisory firm’s efforts to become morediverse should start with an assessment ofits gender and racial diversity and its blindspots with input from diverse advisors,according to Cerulli. Then a firm can buildaction plans that “should be shared acrossthe institution to ensure accountability andpromote participation,” the report states.
“There is no silver bullet; firms needa multi-pronged approach that removesstructural barriers, builds talent pipelines … and fosters a culture wherediversity is in the DNA,” according toCerulli. “Wealth management firmsmust embed inclusivity into their culture as well as rethink their recruiting,training and retention strategies.”
Firms need to acknowledge andaddress the obstacles to creating a diverseand more inclusive workforce and thencome together as an industry to addressdiversity, equity and inclusion ratherthan compete against each other to meetthis challenge, according to Cerulli.
The report concludes that the upheaval created by the coronavirus pandemic,which has increased flexibility in termsof remote working and work-life balance,offers “a unique chance” for advisoryfirms to challenge the status quo by radically restructuring compensation policiesincluding revenue production goals.
Bernice Napach can be reached email@example.com.
WOMEN IN WEALTH
By Bernice Napach
How to Solve the ‘Diversity Problem’ Within
the Advisory Industry
A recent Cerulli report describes the steps firms should take to add, and
keep, more women and advisors of color.