The pursuit of minority advisers

On Saturday, all eyes at the Financial Planning Association’s annual conference in Seattle were on keynote speaker Christopher Gardner, the financial adviser whose rags-to-riches story was celebrated in the 2006 hit movie “The Pursuit of Happyness,” starring Will Smith. But even a cursory scan of the FPA audience would have revealed that there were very, very few planners who shared Mr. Gardner’s complexion. The Denver-based FPA doesn’t keep statistics on the ethnicity of its members, but most informal estimates place the percentage of black financial advisers and planners in the low single digits. What’s more, blacks held only 4.4% of professional positions at securities firms, according to a report last year from the Equal Employment Opportunity Commission. The reason for the disappointing numbers, say black planners and advisers, includes the traditional cultural and historical challenges faced by a minority population, compounded by the inherent difficulties of breaking into a demanding profession that focuses on the affluent. “When it comes to investing, we’re newer at this from a generational standpoint,” said Lee Baker, president of Tucker, Ga.-based Apex Financial Services Inc. and chairman of the FPA’s newly formed Diversity Task Force. “As a child, I remember our family had a Christmas Club account. We were saving, not investing.”
The network effect “African-Americans’ access to individuals with capital is limited,” said Mellody Hobson, president of Chicago-based Ariel Capital Management LLC, whose firm conducts an annual survey of black investors with San Francisco-based Charles Schwab Corp. “And we don’t have huge networks of people with money that we can reach out to. Very few of us grew up playing golf at the country club,” Ms. Hobson said. “There were no stockbrokers in my family,” added Octave Francis III, chief executive and chief investment officer of New Orleans-based FFC Capital Management. “Having a conversation about money as a profession doesn’t happen early enough in the black community for young people to understand that it’s an option,” said Saundra Davis, a certified financial planner for San Francisco-based Sage Financial Solutions Inc. She is a member of the FPA’s diversity task force. “Until recently, there hasn’t been enough financial education,” Ms. Davis added. Other black planners and advisers were quick to point out that cultural and racial barriers are exacerbated by the profession’s arduous career path and unforgiving emphasis on numbers. “The industry is tough to begin with,” said Lanta Evans-Motte, president of the Association of African-American Financial Advisers and a financial adviser in Calverton, Md., for St. Petersburg, Fla.-based Raymond James Financial Services Inc. “The retention rate is not that high across the board,” she said. “Financial planning is an odd career path for anybody out of college,” said Chris Long, a CFP and founder and chief executive of Long & Associates LLC in Chicago. “There’s no career track, and it’s hard to get into to start with, and it’s even harder if you don’t know anybody.” The low number of blacks in the profession also reflects an economic reality, Mr. Francis said. “I think that number reflects the demographic of assets, not the population,” he said. “In that sense, it’s a somewhat fair representation.” Racial prejudices still linger, nonetheless. Few black professionals were surprised at allegations of racial discrimination in a class action filed this year by black advisers who worked for Charlotte, N.C.-based Bank of America Corp. (Investment News, May 28). The advisers in that case claimed that the bank assigned them lower-income black clients and territories while steering wealthy white clients in affluent areas to white advisers. While working as a trust officer for a bank, Ivory Johnson, who is now director of financial planning for The Scarborough Group Inc. in Annapolis, Md., said he was transferred from an affluent white suburb to a poorer inner-city neighborhood. Cases of racial steering at financial firms were “not unusual,” Ms. Hobson said. And even if the motives are not overtly racial, Ms. Evans-Motte pointed out that black advisers often are overlooked when plum accounts are assigned internally. Ms. Davis recounted the story of one black adviser she knew who got dramatically fewer calls after his picture was posted alongside his name on a financial planning referral website. Attracting more blacks to financial planning is a formidable challenge, Mr. Baker acknowledged. “We don’t pretend to have all the answers,” he said, speaking before the FPA’s first diversity summit at the association’s Seattle conference. “We’re going to look with an open set of eyes at why financial planning looks the way it does.” After meeting at the summit with other FPA members on the task force and financial services companies interested in promoting diversity, Mr. Baker said, “we’ll see who’s in, what we can do and where we go from here.” The FPA, agrees executive director Marvin Tuttle, needs to overcome its “current one-dimensional demographic … which creates an immediate barrier to entry,” and “create more opportunities to provide entry to all ethnic populations seeking to participate in the financial planning profession.” To accomplish that goal, according to black advisers, the financial services profession must recruit more aggressively, have strong mentoring and retention programs in place and be sensitive to cultural factors affecting minority employees within an organization. “No one really has a program to recruit and nurture,” said Ellis Liddell, president of Southfield, Mich.-based ELE Wealth Management LLC and the top producer last year at broker-dealer Investors Capital Corp. of Lynnfield, Mass. If any financial services company has had outstanding results with minorities, Ms. Evans-Motte said, “we would have heard about it. They would be jumping up and down.” Tough times “It’s a tough market, but things are changing,” said Melvin Carrington Smith, a certified financial planner with First Financial Group of the South Inc. in Birmingham, Ala. “There’s a tremendous opportunity to get in on the ground floor.” “The market is evolving,” Mr. Francis said. “Incomes are rising, and there are more middle-class families in the community. Things are getting better.” PLANNERS MOUNT MINORITY OUTREACH EFFORTS By Charles Paikert NEW YORK — In addition to the Financial Planning Association’s diversity task force, other outreach efforts to minorities are being made by the financial services profession. Initially, the task force hopes to offer scholarships so that minority planners can attend FPA conferences and events, said task force head Lee Baker, president of Apex Financial Services Inc. in Tucker, Ga. The task force will also “engage other interested and connected organizations in creating shared purpose and action steps” to improve minority involvement in the profession, according to Marvin Tuttle, the Denver-based FPA’s executive director. The Charles Schwab Corp. of San Francisco has an active Black Professionals group that is involved in recruiting, as well as an Employee Resources Group that conducts financial-literacy-training sessions in minority communities. In New Orleans, black-owned Francis Financial Group LLC offers internship to minority students. “We want to expose them to how the business works,” said chief executive Octave Francis III. In Birmingham, Ala., First Financial Group of the South Inc. conducts a series of educational seminars covering topics such as financial planning, budgeting and insurance in minority communities as part of its Financial Discovery Forum. “We go to churches, fraternities and community groups,” said Melvin Carrington Smith, a certified financial planner and chartered financial consultant with First Financial. “We stress the importance of financial literacy and want to introduce it to children as soon as we can.” And the Washington-based Money Management Institute inaugurated a Gateway to Leadership summer internship program for black college students this summer. Developed in partnership with the Baltimore-based National Association for the Advancement of Colored People, the program gave 19 students from traditionally black colleges paid internships with major financial industry players such as Goldman Sachs & Co., Morgan Stanley and Bank of America Corp. The program was considered so successful, said MMI president Christopher Davis, that it will be doubled next year and possibly quadrupled the year after that. “This is going to be a very significant program,” he said.