Midlevel a rich but overlooked vein for diverse talent

Diversity promises from the C-level too often fizzle out at the midlevel.

But the middle is where the greatest opportunities lie for meaningful change in financial services — and where our industry must concentrate its efforts and accountability.

The good news is that there’s momentum at the top that can carry forward good intentions to real results. Top executives heading the boards of directors at their firms are either appointing more C-suite officers of color — or designing policies to make everyone feel seen and heard. As core values around race and representation changed in the past two years amid a wider national reckoning, decision-makers became more willing to take a chance on qualified candidates of color, or women, who may have been overlooked in the past

Diversity in the senior ranks of an organization can also make a difference. A McKinsey survey published in 2020 showed that teams of racially diverse executives yielded 36% higher profits. Placing members of underrepresented groups in top positions can serve as signals to minorities in the employee pool that people who look like them have the same opportunities as everybody else — boosting morale, increasing engagement and ultimately affecting the bottom line. A racially diverse C-suite can also lower the chances of diverse staff feeling excluded, tokenized or held back at their organization.

But promises must convert to meaningful progress. Diversity in the advisory industry is slowly changing, but still only 4.5% of  certified financial planner professionals professionals are Black or Hispanic, and women comprise 23% of all CFP certificants, according to 2022 statistics from the Certified Financial Planner Board of Standards Inc.

The greatest opportunity for change lies in the middle — at the branch or regional management level — where diversity programs fall behind or are abandoned in favor of the status quo. C-levels who concentrate on the midlevel will reap diversity results.

The midlevel stall has multiple root causes.

One overriding reason why they fail is that senior executives just don’t get it. They are often well-intentioned and highly motivated, but the scope and importance of the diversity gap in the investment industry seems theoretical and academic.

Not to me.

One of my colleagues — a white man — got it after a day of meeting clients, together, ended very differently for each of us. We dropped off our clients and went our separate ways. I headed to Brooklyn to check in on a relative, and while pulled over to the curb, talking with him, suddenly found myself surrounded by police officers pointing guns at us, while the two of us were brought down to our knees. My then-colleague, was in disbelief about the story — and I realized that even as friends, we inhabited two different worlds, and our divergent experiences informed our understanding of how discrimination can cast a shadow over our lives.

For me, awareness of this gap fostered a sense of urgency about the need to integrate diverse experiences into initiatives and programs, so midlevel executives stay well informed. My white colleague, like so many other midlevel professionals, came to better understand the experiences of people of color — particularly in the wake of the death of George Floyd in 2020.

Our industry has come a long way from institutionalized forms of discrimination, but now is not the time to turn away from calls for greater diversity among the adviser workforce.

I’ve talked with senior-level colleagues who do not always understand the scope of the industry’s diversity problem. I’ve also witnessed programs that die silent deaths at the middle level because branch managers or regional managers are not always on board with greater diversity efforts when it comes to hiring or promotion practices. I’ve seen diversity efforts met with backlash from individuals who felt threatened by change.

Concentrating on tomorrow’s leaders, who are today’s midlevel managers, is the best way to change the industry’s culture.

Hiring a more diverse group of advisers must remain a mission at the mid-management level, because departments like marketing or research can benefit from the perspectives of people of different backgrounds. Link midlevel executive development to marketing efforts intended to draw in women and people of color as they increasingly seeking advisers who look like them or understand their needs.

It's also key for firms to lay down deep roots among the community of mid-career women advisers or advisers of color by encouraging executives to build long-term relationships with these professionals. Many mid-career advisers are career changers launching themselves into uncharted territory — and informal mentorships forged at industry conferences and other networking events are great starting points for both sides: the adviser seeking guidance and the executive at the firm who recognizes the value the adviser could bring to the table.

And match midlevel efforts with smarter, more focused leadership from the top.

Wealth management officers working with a head of diversity can bring to fruition many ideas that can tackle everyday issues. The programs work by addressing root causes and remain a work in progress at my firm – but we’re well down the road of better understanding and supporting all members of our team.

Alex David is president and CEO of Stifel Independent Advisors, a subsidiary of Stifel Financial Corp.