Page 26 - Investment Advisor March 2021

WOMEN IN WEALTH

By Bernice Napach

How to Solve the ‘Diversity Problem’ Within

the Advisory Industry

A recent Cerulli report describes the steps firms should take to add, and

keep, more women and advisors of color.

he financial advisory industry has color in leadership positions, insufficient
a long way to go to diversify its mentoring from successful advisors and
Tranks by gender and race. Despite implicit bias, which manifested in micro-
efforts by many firms to add more women, aggressions and not being taken seriously.
Indigenous, and Black and Brown advi-
sors, the percentages of women and HOW FIRMS CAN BOOST DIVERSITY
minority advisors remains small. An advisory firm’s efforts to become more
“The wealth management industry has diverse should start with an assessment of
a diversity problem,” according to a new its gender and racial diversity and its blind
report from Cerulli Associates. “Women spots with input from diverse advisors,
and Black, Indigenous and People of according to Cerulli. Then a firm can build
Color (BIPOC) remain drastically under- action plans that “should be shared across
represented among financial advisors.” the institution to ensure accountability and
A survey minority advisors con- women and members of minority groups promote participation,” the report states.
ducted by Cerulli, in partnership with don’t enter the advisory industry, why “There is no silver bullet; firms need
the Investments and Wealth Institute, those who do don’t stay and what firms a multi-pronged approach that removes
Financial Planning Association and the need to do to reverse those patterns. structural barriers, builds talent pipe-
Investment Adviser Association, revealed lines … and fosters a culture where
factors that hamper their success. RETICENCE OF BECOMING AN ADVISOR diversity is in the DNA,” according to
The report cites several metrics to There are multiple reasons why women Cerulli. “Wealth management firms
support its analysis of the industry: and members of minority groups don’t must embed inclusivity into their cul-
• Women account for 18.1% of the choose to join the advisory industry, ture as well as rethink their recruiting,
financial advisor headcount vs. according to Cerulli. To start, they aren’t training and retention strategies.”
50.8% of the U.S. population aware of the industry and don’t know Firms need to acknowledge and
• Blacks, 2.9% of advisors vs. 14.2% of anyone in it. address the obstacles to creating a diverse
the population They also can view the advisor role as a and more inclusive workforce and then
• Hispanics, 5.1% of advisors vs. 18.4% salesperson whose compensation depends come together as an industry to address
of the population on business development, which is often diversity, equity and inclusion rather
• Asians, 4.3% of advisors vs. 6.8% of the case and which is seen as incongru- than compete against each other to meet
the population ent with a purpose-driven mindset that this challenge, according to Cerulli.
Correcting that underrepresentation initially attracts them to the profession. The report concludes that the upheav-
lies not just with recruitment but also Also, they face the difficulties of obtaining al created by the coronavirus pandemic,
retention, which is “the true test” for diver- licenses and development of foundational which has increased flexibility in terms
sity initiatives, according to Cerulli. More skills and business development strategies of remote working and work-life balance,
specifically, its report notes that “wealth while also establishing a client base. offers “a unique chance” for advisory
management firms must embed inclusiv- A further problem is once they firms to challenge the status quo by radi-
ity into their culture, as well as rethink become advisors, this group struggles to cally restructuring compensation policies
their recruiting, training and retention stay because of obstacles they encounter. including revenue production goals.
strategies,” reflecting a sentiment that is As you can see from the chart below, melitas/Shutterstock
shared with minority advisors. the top three obstacles were the lim- Bernice Napach can be reached at
The report also focuses on why ited number of women and advisors of [email protected].

24 INVESTMENT ADVISOR MARCH 2021 | ThinkAdvisor.com