Strategies for continuing to diversify the wealth management industry

If wealth management firms want to get serious about bringing more diversity into the industry, they must rethink how they look for new talent, according to a panel of speakers during InvestmentNews’ Women Adviser Summit Wednesday in New York City.  

While the numbers have started to change, the demographics of financial advisers continue to skew heavily white and male. The number of women who hold certified financial planning designations increased 4.2% in 2021 from the previous year to reach a new all-time high, but still only accounts for 23.4% of all CFP holders. The number of Black and Hispanic CFPs increased 13.8%, but represent less than 2% of all mark holders.

One reason is that many financial advisers aren’t looking beyond their personal networks for talent, said Kamila Elliot, the founder and CEO of Collective Wealth Partners.

“The referral bonus is the death of diversity,” Elliot said.

Community groups or student organizations at historically black universities can be good places for advisers to start diversifying their talent pool, she added. “It just takes the extra effort to meet people where they are.”

It also involves an effort to improve what Elliot called “cultural competency,” or understanding that different communities often have different perspectives on money and wealth. For example, Black households donate a higher percentage of their income on average to charitable organizations than white households, while Hispanic household tend value holding cash more than other racial groups, Elliot said.

“Let’s talk about your culture and relationship with money,” she said.

Carolyn Armitage, president of Thrivent Advisor Network, said her firm has worked to create what she calls a “psychologically safe environment” where employees can feel comfortable expressing themselves authentically. This has helped co-workers have the sometimes uncomfortable conversations needed to foster a truly diverse office.

“It’s OK to make mistakes; it’s OK to speak up and discuss the difficult topics,” Armitage said. “It’s OK to show up how you want to appear [rather than] trying to conform to the white male Wall Street image.”

Mentorship programs are often proposed as solutions for attracting more women and people of color into financial services, but they often fall short of accomplishing the goal. In a separate Women Adviser Summit panel, Journey Strategic Wealth co-founder and president Penny Phillips said structured mentorship programs often don’t fit with the next generation of adults entering the workforce.

Many veteran advisers were trained in a negative reinforcement culture — you either hit your mandated productivity numbers or you’re punished, Phillips said. But a generation that grew up in an era of ubiquitous social media has been raised in a positive reinforcement culture, working harder to achieve “likes” than to avoid punishment.

“They come in with a generally positive outlook on relationships and how to do business,” Phillips said, adding that her youngest employees have inspired her to be kinder and more positive.

This outlook needs to be a part of any mentorship program if it is to be successful, she added. “The most important thing you can teach a mentee is how to know their own worth.”

Often, mentors have as much to learn from their mentees as they have to teach them, said Dana Wilson, CEO and founder of CHIP, an online network for connecting investors with Black and Latinx financial professionals. Being willing and able to listen to the perspectives of young women entering the business is key to continuing the progress made on diversity, equity and inclusion, she said.

“At some point, you have to be open to new ideas and thoughts,” Wilson said.

[More: Financial services firms leave billions on the table by overlooking women investors]