IQ Financial Advisor – Content Page
People of color will collectively become the majority of the U.S. population by 2045, according to a study published by the Certified Financial Planner Council Financial Planning Center. And yet, today, black and Hispanic advisors make up only 5% and 7.6% of industry advisor ranks, respectively, according to research by the career platform zippia. Zippia research also shows that women make up just 27% of the advisor workforce.
This stark disconnect suggests that any company that doesn’t take steps to diversify its advisor ranks risks missing out on a large number of leads and cutting off a large recruiting pool.
So how did the industry arrive at this misalignment? An industry commentator cites a longstanding culture of hiring among the familiar ranks.
Those who are in the financial industry and who have historically controlled it generally recruit advisers with whom they can identify and who operate in professional, personal and cultural circles similar to them, Kyle Winkfieldauthor, radio personality, and director of financial planning from Rockville, Maryland Finley Alexander Wealth Management, said in an email response to requests for comment.
Decades ago, a non-inclusive hiring position may not have had a significant impact on a company’s bottom line, but in 2022, a cohesive advisor force can significantly limit a company’s ability to attract wealthy investors. According to a recent study by Bank of America, blacks make up 17% of affluent Americans without a financial advisor and Hispanics 18%. Meanwhile, about 20% of the unadvised wealthy identify as LBGTQ, according to the study.
The Bank of America study further shows that 32% of affluent Hispanics and 27% of affluent Blacks say they don’t know how to find the right advisor.
Of course, this is a problem for customers who find themselves with abundant assets but little or no guidance, but it is also a missed opportunity for the company, a reality that the subsidiary of BofA Merrill Lynch tries to approach. The recently launched Merrill Advisor Match platform matches advisors with potential clients based on a match index compiled from each party’s answers to personality questions. Merrill said the platform is largely intended to reach affluent people from underrepresented populations.
But there is also the question of whether a homogenized company has recruited the best advisors and created an environment best suited to developing effective business strategies. Companies with a diverse workforce tend to be more innovative and creative, according to a 2019 CFP Board white paper. That’s because the heterogeneous environment forces people to confront preconceived notions, the agency wrote. accreditation in the article “Why Diversity Matters”. Meanwhile, when leadership lacks diversity or fails to foster a diverse culture, staff present fewer ideas with market potential, according to the same study.
And since a homogenized workforce tends to lead to a homogenized customer base, there may also be a residual effect of potential advisers staying away for fear of being discriminated against by customers, according to research published in May by Wiley, a global research and education publication. “If a diverse person wanted to hire a financial advisor or enter the industry, they had to come to terms with certain realities and experiences,” says Winkfield.
As with any problem, the first step, according to Winkfield, is to recognize it. “People have to first recognize that the problem exists before they can start demanding change,” Winkfield says.