Difficult Discussions About 401k Industry Diversity: 2021 NAPA 401k Summit

401k diversity and inclusion

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“We have a talent shortage, an increase in demand for advice and a more diverse workforce,” Lisa Smith said at the outset of a general session dedicated to diversity and inclusion at the 2021 National Association of Plan Advisors (NAPA) 401(k) Summit in Las Vegas on Sunday afternoon.

So why is the industry still (still!) so male, pale, and stale?

Hosted by Merrill Lynch Managing Director and past NAPA president Patricia Wenzel, the panel was appropriately titled Difficult Discussions About Diversity. It featured several high-profile female advisors and advisors of color.

“It’s a very diverse group [at the conference] and nice to see color,” Wenzel began. “It’s also a testament to how far we’ve come. Diversity and inclusion initiatives have long been a passion of mine, especially as president of NAPA. We formed a D&I committee and immediately launched a census to members. Fully 75% of respondents were white men. I have nothing against white men; I married one, but we’ll talk today about why divert in your practices is so important.”

She began by asking Smith, Fidelity Investment’s SVP of Retirement National Accounts, about the recordkeeping giant’s own research on the topic.

“We see demand increasing for diversity and inclusion in our workforce,” she said. “It’s a growing reality in the country overall. Of the 325 million Americans, only 16% identify as White-only, 27% are Hispanic, 13% are Black, and 5.9% are Asian, although it’s the fastest-growing segment.”

Additionally, 44% of Millennials identify as a minority group. Yet, women, BIPOC, and Asians are severely underrepresented within the industry. While women comprise over 50% of the nation’s population, only 18% have an advisor role. For Blacks, it’s 2.9%.

“Why D&I? Yes, it’s social responsibility, but we’re business people and want to make money,” Pensionmark Practice Leader Tuyen Pham said. “Our industry doesn’t reflect the country’s demographics, but that’s changing, so it becomes a question of ROI.”

SRP’s Managing Director Doug Bermudez said he and business partner Erin Hall come from different backgrounds—good, but different, and that works well for their firm.

Apryl Pope, a Financial Planner with Retirement Plan Partners, added that it’s a case of WIIFM, or What’s In It For Me. If an advisor wants diverse assets, they need a diverse team. It leads to diverse prospects and ultimately brings in diverse assets.

Wenzel asked panelists about a time when their minority status helped them.

Pope recounted a time she was up against a major firm for a prospect’s retirement plan. She thought she didn’t have a chance, but the more she talked, the more the company realized she was relatable and would connect well with their employee base.

“My case is simpler,” Pham said when asked the same question. “You guys call me and ask if I speak Vietnamese because you can’t. I say yes, and you give me that business because I can speak directly with their employees.”

Barriers to entry

When asked about barriers to entry (perceived or real), Smith flashed a screen that showed 10 factors preventing diverse candidates from entering the business. “High rate of failure when starting out,” “Lack of stable compensation when starting out, and “Pressure to meet revenue and production goals” as the top three.

Pope added that firms should look in non-traditional areas when recruiting.

“I was a Peace Corps volunteer, a math teacher, and a basketball coach,” she concluded. “Believe me; I was not on anyone’s radar to be an advisor. But I read a Dave Ramsey book and loved it. It helped me, and now I wanted to help others, so I started teaching adults about finances, and it developed from there.”

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