Does the financial services industry have a diversity problem? Just ask Nick Foulks, director of communications strategy and client engagement at Great Waters Financial in Minneapolis. “The industry as a whole is struggling with the concept,” he says.
As an African-American financial advisor, Foulks says he’s often one of only a few people of color, if not the only one, at conferences and events.
The Scope Of The Problem
The statistics bear this out. According to Boston-based Cerulli Associates, just 18% of financial advisors are women, 5% are Hispanic, 4% are Asian-American, and 3% are Black. Among certified financial planners, the CFP Board found that 23% are women and 4% are Black or Hispanic. For comparison, roughly 51% of the U.S. population is female and 30% is Black or Hispanic.
Though some may say the problem isn’t as bad as it used to be, that’s far from satisfactory. “The industry itself leans toward inadvertent segregation,” says Foulks, meaning some smaller firms may be all African-American or all women, but few are truly integrated.
Systemic Inequities
“We need to focus on changing the systems that have historically ignored and discouraged women, non-binary people, members of the LGBTQ+ community, and people of color—especially Black and Latinx CFPs,” says Rachel J. Robasciotti, founder and CEO of Adasina Social Capital in San Francisco, which advises firms on how to improve their diversity. No statistics were available on non-binary or LGBTQ+ folks, Indigenous or other people of color, or people with disabilities in financial services, but Robasciotti describes herself as a Black and queer woman. (Like all sources in this story, she volunteered her identity preferences.)
“This industry can easily be a ‘boys’ club,’” confirms Manal Fouz, chief compliance officer at Azzad Asset Management in Falls Church, Va., who is an Arab Latina at a firm that primarily serves affluent American Muslims.
Marvin J. Owens Jr., chief engagement officer at Impact Shares, a Dallas-based socially responsible financial-consulting firm, agrees. “Cronyism is widespread,” he says. A former senior director at the NAACP who identifies as African-American, Owens urges businesses to create “a realistic path to success for those who are not well connected through elite secondary education, family or socioeconomic background.” He says they must look beyond traditional sources to “broaden the pool of diverse candidates.”
Diversity Benefits
Besides being the right thing to do, diversity has several key benefits.
First, clients prefer to work with advisors who look like them—and the number of clients who are women or people of color is growing. The CFP Board projects that people of color will make up more than half the U.S. population by the year 2045.
“It comes down to how relatable you are,” says Ellis Liddell, CEO of ELE Wealth Advisors in Southfield, Mich., who identifies as Black American. Most of his clients are Black, too. “Clients want to know that you truly understand their situations.”
Second, diversity breeds “a greater level of engagement, higher levels of trust, and a greater degree of innovation,” says Shundrawn Thomas, president of Northern Trust Asset Management, which has $1.2 trillion under management.
Thomas, who identifies as an African-American man, heads a company that is well above average in its diversity. Its U.S. workforce is 37% women and 27% people of color. More than 60% of its executive committee is made up of minorities and women.
“That translates into many things that are important to our business,” he says, citing high levels of job satisfaction and loyalty, more inventive product development and improved financial returns for the business. “Being part of an organization that embraces diversity makes me a better professional, and it also makes me a better person,” says Thomas.