Black and Latino financial advisors and their white counterparts are not going to have minority clients to advise unless the economic base of the country is expanded, said Henry Cisneros, former secretary of Housing and Urban Development and partner at Siebert Cisneros Shank & Co., an investment bank and financial services company.
“I believe in the absolute significance of finances. The world revolves around questions of money. Minorities see themselves locked out of the system; something needs to change,” said Cisneros, a speaker at the CFP Board’s Center for Financial Planning diversity summit held recently in New York City.
Cisneros and John Rogers, founder, CEO and chief investment officer of Ariel Investments in Chicago, both of whom are known for their advocacy work for minorities, were speakers at the all-day diversity summit. The center simultaneously released a report, “Racial Diversity in Financial Planning: Where We Are and Where We Must Go” at the summit.
Both advocacy leaders agreed the wealth base of the country needs to be raised for minorities at the same time that the financial planning industry needs to more accurately represent the population of the country. Only 3.5 percent of certified financial planner (CFP) mark holders are black or Latino, while the two groups make up more than 30 percent of the population. “We are way off track,” Cisneros said.
“It shouldn’t be true, but many people still want to work with advisors who look like them,” Cisneros noted. But, currently, there is a lack of both minority advisors and minority clients.
“Blacks and Latinos make 70 cents on a dollar for what whites make for the same work,” he added. “And when it comes to wealth, they fall of the cliff: Blacks and Latinos have one-tenth the wealth of white people and most of that wealth is in home equity.”
Thirty-five years ago when Rogers, who is black, started in the financial industry, he said he knew of only a handful of financial advisors who were people of color. “We in the industry need to teach young people about finances – not only how to balance a checkbook, but also to see those of us in the industry as role models.”
But advisors also need clients to serve. “The wealth gap between whites and minorities is real and it matters immensely. If you do not have access to wealth, you do not have wealth to leverage to go to school or to start a business,” he said. Minorities are frequently focused on managing from day to day, not thinking of building wealth, he said.
Several things need to be done to raise the wealth base and increase diversity in financial planning, both advocates said.
Ariel has an internship program that, over the years, has created leaders in the financial industry, Rogers said. “Our internship program has become a pipeline for leaders in the financial field in the Chicago area and across the country,” he said. Other firms should do the same. Ariel also works with schools and the University of Chicago to promote financial planning courses and internship programs that place students in positions with foundations across the country.