Equality Under Corporate Policy for Diverse Financial Advisors
Equality Under Corporate Policy for Diverse Financial Advisors; The giant strides Banks & Wealth Management firms have taken to bridge the Diversity, Equity, Belonging, and Inclusive (D.E.B.I.) gap within the retail WM industry.
By Christian Nwasike
“It is important for diverse Financial Advisors to Think Outside the Box #THOB when entering, building or transitioning a successful retail wealth management practice. ”
CHRISTIAN NWASIKE
Some current Diversity trends in the
retail Wealth Management industry.
There is wealth in our communities, Who will manage that wealth for us? Most people, prospects or clients look for
things that they have in common–people do business with whom they like and trust.
Current D&I trends in the retail WM industry:
According to BLS (May 2018), 325,000 Financial Advisors.
According to CFP Board,
◦ 33% Women
◦ 8% Black/African American
◦ 7% HispanicSize of retail WM pie $68trillion in the next 25 years – major opportunity
$ 30trillion over the next decade to change hands as are parents are gifting more while alive because they are living
longer.Next 25 years according to US Census projections, no majority race/ethnic group, people of color collectively become majority.
13% of affluent investors who received an inheritance said they chose to work with the same advisor their parents used.
of the 87% remaining, 88% of the respondents indicated never even thinking about it.
Steps already taken by major
Firms.
Surveyed firms in the retail WM space. Asked 4 general questions to get updated information on
training programs which have been historically unaccommodating of diverse Financial Advisors.
Questions asked:
Salary programs for new diverse FA’s.
Training Programs for diverse FA’s.
Recruiting efforts to attract diverse FA’s.
Retention efforts for diverse FA’s.
Findings – Overwhelmingly
positive!!
Why is change needed? The Pivot.
Rush to accommodate the new, different type of client/demographic – a more socially conscious,
diverse demographic.
We see mergers and acquisitions, race to zero; free online trading platforms, Long Term Stock
Exchange (LTSE) etc.
Characteristics of the new client demographic:
Employees – Work for the Firm
Owner – Own shares of the firm in 401K or IRA or trading account…somehow.
Stakeholder – Live with families and are active in communities where most Firms operate or, do
business.
Disadvantages of not changing.
Brand and reputational loss.
◦ The average revenues of firms with high levels of diversity are 14x higher than firms with lower levels of
racial diversity in the same category.
◦ Public shaming and organized boy cuts of brands via social media hurt perception, likeability and impact
the “trust ability” factor of the brand in eyes of community.
Financial loss.
◦ From 2000 -2019 retail WM firms have paid over $530 million in penalties for settlement of race and
gender cases mainly relating to hiring, promotion and pay.
Human capital loss
◦ 41.4 million employees left their jobs in 2018, up 8.3% from 2017. Average cost to replace an employee
with $100K base salary is 213% according to SHRM! Do the math…
Still more to be done and it’s a
collaborative effort.
◦ As hiring effort are increasing due to targeted efforts, assigning culturally competent sponsors/mentors within the
Firm to diverse FA’s is crucial to success and retention efforts.
◦ Corporate policies need to be revisited and updated in many cases to give more support to Diversity Managers. Bad
Samaritan policies or “un-written” rules; “See wrong but speak none of it” needs to be addressed. Evidence shows
firms in the WM industry retaliate at employees who raise their hands about disparate or inequitable treatment
under corporate policy. We see that from the volume of settlements in the Industry relating to race and gender.
◦ Change the narrative about demographics to encourage interest in the industry. For example according to Boston
College CWP, $3.5 trillion is set to change hands in the B/AA community over the next 25 years. Consider these
facts:
Players of color in the following leagues:
◦ 81% of in the NBA average salary $860K lowest salary $400K
◦ 73% in the NFL average salary $7.1M lowest salary $1.4M
◦ 43% in the MLB average salary $4M lowest salary $545K
◦ 84.2% in WNBA average salary $130K
Supplemental Training & Coaching Programs can help.
Firms need have more culturally sensitive and specialized supplemental training programs for diverse FA’s. This will help FA’s better prepare to engage with a changing prospect and client demographic – a more socially conscious, diverse demographic.
Questions?
Some examples the avenues for support, education & community within the industry:
A.A.A.A.- The Association of African American Financial Advisors.
Dalton Education- SIE Examination help.
N.A.S.P.- National Association of Security Professionals
