The financial services industry is struggling to diversify its ranks, and the registered investment advisor industry is no exception. Just 16% of financial advisors in RIA channels are women, 3.8% are Hispanic or Latino, 2.6% are Black and 2.1% are Asian, according to a study by the Investment Adviser Association and Cerulli Associates.

The need to diversify the industry is pressing, but the benefits are clear, and to that end, the Investment Adviser Association has come up with a road map to help RIA firms create or improve their diversity, equity and inclusion programs.

The guidebook is called “A Practical Guide to Building Diversity, Equity & Inclusion at Your Firm,” and it makes the case that diversity programs done right aren’t just good for people but good for business, too.

“Our profession has a long way to go in matters of diversity, equity and inclusion, and now is the time to bring our community together to confront these issues and build a more equitable future for businesses, our employees and our clients,” said Karen Barr, the association’s president, in a statement.

Despite the industry’s steps forward, women and racial and ethnic minorities are still underrepresented in both management and adviser roles, the association said.

To help firms overcome those deficits, the guide covers 11 different facets of building an effective diversity and inclusion program. “To accelerate meaningful change, firms should consider a range of actions, such as building a [diversity, equity and inclusion] team to develop an action plan, offering unconscious bias training to staff, creating affinity groups for diverse advisors, funding scholarships for underrepresented candidates, and forging partnerships with community organizations,” the association said.

The first step in establishing an effective program is to show its merits to senior managers. That starts with building a team that can make an effective pitch and continue to advance the diversity goals in the firm, the association said. “Some individuals will be naturally motivated by personal philosophy or the cultural climate to support [diversity, equity and inclusion]. But others who would be instrumental in advancing such an initiative may either not support it or not be motivated enough to take a stand. In order to gain their support, you may need to make the business case for [it],” the trade group said.

In April, the association released a study with Cerulli Associates (called “Driving Diversity.”) In a survey the firms performed, a slight majority of respondents believed that their firms’ leadership was working to increase diversity and inclusion. However, only 35% thought those efforts were working.

Boosting Profitability
Yet a growing body of evidence shows that diversity and inclusion programs, when done right, motivate employees and boost productivity and profitability, IAA said. “Multiple studies have found there are business benefits … including boosting profits; driving innovation; inspiring millennials to become a significant segment of the workforce; and, increasingly, capturing the focus of customer and client inquiries, expectations and demands.”

That means firms must expand recruitment networks and sources, the Investment Adviser Association said. “Widening the applicant base is one of the most important aspects of any plan to recruit candidates. Your firm should consider groups and talent pools to which the target applicant belongs. Your plan should encompass consistent and sustained engagement with these diverse groups to increase the probability of success and longevity in your diversity recruitment program.”

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