Year after year, the financial advice industry bemoans the lack of diversity in its ranks and debates the causes of the field’s continued dominance by male professionals.
Amid all the talk, progress has been piecemeal. As my colleague, Bruce Kelly, reported recently, despite splashy announcements when women-led teams are recruited, only 34% of financial advisers were women in 2020. That’s progress from 31.6% in 2016 but still a far cry from parity.
Our recent benchmarking research, published in the 2021 Adviser Compensation & Staffing Study, contains similar findings. At participating independent advisory firms, only 32% of executive and advisory roles were held by women.
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It’s not as though women are absent from the industry. They account for 49% of total staff at studied firms, according to an analysis of the data. Yet, because they are underrepresented in the most lucrative roles, total compensation for the industry’s median male employee was 92% greater — $154,000 versus $80,000.
To be sure, the data also promise a more gender-equitable future for the industry. Women accounted for only 28% of lead advisers (firms’ most experienced professionals who take primary responsibility for client relationships). But they represented 40% of lower-level service advisers and 44% of staff at the entry-level role of support adviser. Most firms, 72%, provide career tracks for their advisers to grow in their roles, and the pipeline of female professionals within firms is improving.
But even if firms can manage burnout and let those career trajectories play out, the industry clearly has more work to do if it wants an advisory workforce that reflects the gender distribution of the country and, increasingly, its distribution of wealth, too.
The industry could start by making a commitment to the development of its administrative and support personnel. According to our research, only 40% of firms currently have career tracks in place for these vital roles that are disproportionately held by the industry’s women.
That includes the roles of operations manager, client services administrator and compliance analyst, of which women held 74%, 85% and 70% of roles, respectively. These jobs require deep knowledge of the firm, its clients and the industry. Firms should have career tracks in place that ensure these dedicated staffers can grow alongside the business.
More than that, the career paths of advisers and the people who support them could cross more often. Many people come to financial advice and planning as a second career, some from elsewhere in the financial sector but others from entirely unrelated professions. In fact, the most common background for entry-level advisory hires in our study was another industry. It stands to reason a client service administrator at an RIA could be just as successful in an advisory role as a former attorney or teacher.
As the advisory profession continues to broaden from hard investment management to more comprehensive financial planning, the industry will need to continue to broaden its search for talent and bring in professionals of diverse backgrounds.
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