Recruiting more minorities into the advice industry is the right thing to do from a moral standpoint, but it's also good for business.
In the past year, the financial advice industry has acknowledged that it has to do a better job of recruiting women into the profession. It is now a recurring topic of conversation at industry conferences, and some of the bigger firms are starting to launch programs aimed at attracting and bolstering women advisers. Now it's time to turn that energy to another equally important issue: the lack of minorities in the industry.
If women advisers feel alone when they attend industry meetings, just imagine what it is like to be a black or Hispanic adviser wandering around an auditorium filled exclusively with white men?
Industry statistics are hard to come by because most firms don't report the number of minorities in their workforce. One that does, Edward Jones, estimates that 6% of its brokers are minorities. In a discrimination lawsuit against Merrill Lynch last year, the plaintiff claimed the firm's percentage of minority advisers is around 2%. Neither number is anything to be proud of when you consider minorities comprise 37% of the U.S. population and hold an estimated 12% of the nation's wealth.
President Barack Obama's move last week to allow 4 million formerly undocumented immigrants, the vast majority of whom are minorities, to stay in the U.S., underscores the fact that the face of America is changing. As a country, we are more diverse than ever before, and experts say we will become even more diverse in the future.
Surely, recruiting more minorities into the advice industry is the right thing to do from a moral standpoint. But the bottom line is that it is also good for business. As minority populations start to acquire more wealth and have a need for financial advice, some minority clients will feel more comfortable having a minority adviser — someone who can relate to their life experiences and culture.
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A case in point: Blacks historically are strong supporters of their local churches and may insist on donating an above-average percentage of their income to their church. A black adviser might be more understanding of that than a white adviser, who might be more concerned with their retirement savings or helping them set money aside for their children's college education.
Even if minority clients don't insist on working with a minority adviser, they may prefer to do business with a firm that is racially integrated, knowing that the firm's value system aligns with theirs.
Of course, recognizing the problem and agreeing that the industry needs to hire more minority advisers is only half the battle — and in fact, it is the easier half. Figuring out how to correct it is the more difficult part.
Just as the industry struggles to find enough women and younger people interested in the profession, it is safe to say that minorities aren't banging down the doors of advisory firms, pleading to get hired, either.
The fact of the matter is that most minorities, unless they grew up with role models in the financial advice industry, probably don't have a clear idea of what a financial adviser does and the opportunities available to them. But that's not their fault. It is the fault of an industry that has ignored them for too long and has done little to reach out to make them feel welcome.
To be sure, there have been isolated initiatives at financial services firms to either recruit more minorities or bring minority advisers together at industry conferences. But there is little doubt the industry can do more. Firms, both big and small, need to start talking about diversity and drawing up action plans and goals to increase minority representation in their ranks. The industry will only be stronger for the effort.
