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.

Recruitment And Mentorship
Northern Trust Asset Management has made a point of recruiting from historically Black colleges and universities—tapping a talent pool that many other firms overlook.

“It’s common for the current generation in my community to be the first that’s going to college,” says Antonio Tovar, a wealth manager at Stone Wealth Management in Austin, Texas. Tovar is a Hispanic professional in his mid-20s. “Many of those who might be well-suited to join the financial services industry are unaware of the opportunities available to them.”

Erica Wright, an advisor in the Bell & Wright Financial Group of Northwestern Mutual in Milwaukee, says people from underprivileged backgrounds “would benefit from formal mentorship programs.” Wright, a Black woman, adds that apprenticeships would “allow advisors to be compensated while they develop skills.”

Kimberly Foss, founder and president of Empyrion Wealth Management in Roseville, Calif., concurs. “More and better educational outreach, especially to women of color, should be a consistent goal for all of us in the CFP space,” says Foss, a white woman.

Never Too Young To Start
That outreach can’t start too young. “Our primary and high schools need to do a better job of exposing girls to various areas of finance,” says Fouz at Azzad Asset Management.

Kayla Holland, a wealth planner at Crestwood Advisors in Boston, who identifies as a white woman, says it’s crucial to “increase awareness and education about what we do as financial planners and how we help families achieve their goals.”

To Laura Barry, a managing director at Wealthspire Advisors in Milwaukee, and a white woman, it’s about teaching kids “the power of understanding personal finance in their own lives as well as how cool it is as a career choice.”

Beyond Lip Service
Of course, it’s easy to say you value differences. But you also have to maintain policies that “enable you to actualize your good intentions,” says Thomas.

He suggests starting at the top. Having women and minorities in the executive suite encourages others to join. It also makes it easier to incorporate diversity policies throughout the business. For example, Northern Trust Asset Management had at last count invested more than $5 billion with 22 different minority-owned investment-management firms. It also recently increased its target for equity-trading commissions paid to minority brokers in its collective investment trusts from 10% to 15%.

Amy Webber, president and CEO of Cambridge Investment Research in Fairfield, Iowa, recommends starting with a thorough self-assessment. “What you discover can be eye-opening,” says Webber, a white woman.

Doing The Hard Work
Megan Carpenter, CEO and co-founder of FiComm Partners, an Irvine, Calif.-based financial communications company, says it’s important not to put the burden of inclusiveness on the shoulders of the excluded.

“We’re expecting these marginalized populations to accept our job offers, agree to speak at conferences, or help us spend the money we’ve set aside for DEI initiatives,” says Carpenter, who is white, referring to budgets for diversity, equity and inclusion. Instead, she says, leaders must actually do the hard work.

Think of it as “culture add” instead of “culture fit,” says Barry at Wealthspire Advisors—i.e., valuing differences that add to the culture. “It’s learning to have conversations we’re uncomfortable with … and that requires time and patience with ourselves,” she says.

Brooke Kelley, president of the Kelley Group, a Los Angeles-based financial-services consultancy that she, a white woman, cofounded with her husband, Sarano Kelley, who is Black, points out that the tide may be turning. “The industry needs millennials,” she says, “and millennials … want to see more color, gender, etc.”

Firms can either “lead this change,” she says, “or chase it.”