Beyond Lip Service In DEI

Diversity, equity and inclusion (DEI) have become buzzwords in many industries. Some companies boast about their DEI record, saying they’ve achieved greater participation by women, minorities or other historically underrepresented people. Others simply acknowledge the concept as a noble goal they are working toward.

But beyond the lip service, how is the financial advisory industry actually doing at improving in representation and fair play?

Some Progress But Not Enough

The answer, of course, depends on whom you ask. To Anita Knotts, the founder and CEO of Lotus Women’s Institute, a Chicago-area organization dedicated to attracting, developing and advancing women and women of color in wealth management, the financial advice industry is “sorely lagging behind other industries when it comes to improving representation of women and minorities.”

That does not mean, however, that she thinks there hasn’t been any progress. When Knotts started in financial planning more than 30 years ago, she says, “all advisors at my firm were white and male. The females were all in sales support roles or back office or human resources.”

It wasn’t until she connected with an advisor who was an African-American man—and, later, one who was a white woman—that she began to have hope. “These two experiences were powerful and necessary for me,” she recalls. “Because I am female and a person of color, I needed to see what was possible. This is absolute proof that we cannot become what we cannot see.”

‘You Can’t Just Hire And Call It A Day’

Today, Knotts says, many firms are hiring women and minorities but not promoting them. “You can’t just hire people and call it a day,” she says, adding that such practices “reek of short-term thinking.”

Instead, she says, firms need a bigger investment in coaching, training and generally developing the talents of underrepresented professionals. “I still see a lot of firms simply trying to check a box and make a ‘diverse’ hire, but not really doing much after hiring to actually invest in the development of that person,” she says. “Planting the seed is one thing. But you have to water that seed to watch it grow.”

Manal Fouz, chief compliance officer at Azzad Asset Management in Falls Church, Va., tells a similar story. “I’ve been in the financial advisory industry for nearly 20 years,” she says. “When I started going to conferences, I looked like an alien from outer space—a Muslim American woman of Arab descent wearing hijab.”

But at a recent conference, Fouz was struck by how many women and minorities were present. She’s seeing that more and more.

The advantages of increased representation go beyond fairness, she says. A more diverse workforce brings a greater variety of clients. “People trust people they can relate to,” she says. “Clients want to feel heard and understood.”

The Good News (Sort Of)

Overall, it has become easier for clients to find advisors by ethnicity, language and gender, says Kimberly Foss, president of Empyrion Wealth Management-Mercer Advisors in Roseville, Calif.

She cites a study by the Certified Financial Planner Board of Standards, which found that, in 2022, some 24% of all certified financial planners in the U.S. were women, more than 4% were Asian or Pacific Islander, nearly 3% were Hispanic, and nearly 2% were Black. (No figures were available for the LGBTQIA or disability communities.)

All these numbers were touted as record highs, despite lagging behind where they should be to reflect the broader population. “The effort is there, but we still aren’t seeing the results we need,” says Foss.

The Exceptions

Some firms pride themselves on doing better than those averages. For instance, more than two-thirds of the personnel at Johnson Financial Group in Racine, Wis., are women, according to the firm’s chief human resources officer, Denise Domian.

Diversity is emphasized in the recruitment of new staff, says Domian, and in an internal mentorship program to “ensure that associates feel like they belong and are supported. … Belonging is the foundation for someone coming to work for us and retaining them once they do.”

She concedes, however, that “the number of women diminishes as you move up in the organization.”

At Cambridge Investment Research in Fairfield, Iowa, 64% of home office associates and half of the vice presidents are women, says Cambridge CEO Amy Webber. Still, she says, “We all must think bigger.” For example, when it comes to recruiting, she says, advisory owners should make sure to tap historically Black colleges and universities, women’s colleges and other types of educational programs. Ask yourself, “Are we using the right language with specific demographics in mind?” she says.

Workplace Flexibility And Other Barriers

One barrier concerns workplace flexibility. Azzad Asset Management’s Fouz says that many women prefer a flexible schedule to accommodate family life.

Education is another obstacle. Financial planning classes rarely include training in how the industry works, says Fouz. “Some kind of mentorship or internship program that starts perhaps at the undergraduate level would really be beneficial,” she maintains. “A lot of minorities aren’t aware of what opportunities exist for them in the financial advisory industry, so spreading awareness about the industry itself and career choices within the industry would be huge.”

This is not to say that no effort has been made. Kate Healy, managing director of the Certified Financial Planner Board’s Center for Financial Planning in Washington, D.C., says the CFP Board has a new scholarship “to assist women seeking to complete the education coursework required for attaining CFP certification.”

Many firms also fund scholarships for women and minorities who are interested in a career in financial planning, she adds, and the Center for Financial Planning is at work on “a long-term initiative to raise awareness and understanding of how and where underrepresented groups fit into the profession,” she says.

Healy further notes that client demographics are changing, so firms better keep up. She cites CFP research showing that 14% of millennials are foreign-born and 10% are in interracial marriages. “To understand how best to serve our diverse society, advisors need to become culturally competent,” she says.

Despite these efforts, DEI supporters say no one should expect too much too soon. “It will take years to see the fruits of these initiatives,” says Chelsea Ransom-Cooper, managing partner and financial planning director at Philadelphia-based Zenith Wealth Partners who works in Jersey City, N.J.

Meanwhile, many women and minorities aren’t waiting. They are starting their own firms, she says, which is often the only way to create “supportive work environments” that include “calling out microaggressions [so] people can be themselves and feel safe at work.”

Diane Bourdo, president of the Humphreys Group in San Francisco, might agree. For a recent opening at her firm, she received a large number of applications from women “who were clearly overqualified—and knew it,” she says. “In talking with them, we heard that they would be happy just to find a non-toxic work environment.”

Clients, she warns, might be feeling that way, too. Women don’t want a male advisor who “doesn’t listen fully, doesn’t ‘get’ them, and isn’t attuned to their needs, wants, perspectives and challenges,” Bourdo says. “It’s surprising to me, after all this time and all the conference sessions on this topic, that the dominant culture hasn’t gotten the message that they need to listen more—a lot more.”

As seen on FinancialAdvisor