Moving Away From an ‘Old Boys Club’ to Leading Diversity Initiatives
On his first day in the Oval Office, President Donald Trump signed a flurry of executive orders aimed at dismantling a slew of Biden and Obama-led initiatives. While the move didn’t send shockwaves, given the promises he had made throughout the campaign trail to revert laws on immigration reform, birthright citizenship, and diversity, equity, and inclusion (DEI) programs, it forecasted the aggressive changes and attitudes to come during Trump’s second administration.
Now, with Trump halting DEI plans in the public sector, and as mega institutions like Walmart, Target, and Meta scale back on diversity and inclusion practices, some worry if firms in the retirement industry will abandon their DEI initiatives. Others question whether several in the retirement plan space ever advocated for these strategies in the first place.
Despite efforts in recent years to diversify practices, the financial advisory industry at large continues to be dominated by white men, even as investors of color outpace them. U.S. Bureau of Labor Statistics (BLS) findings show that Black talent only encompasses 7% of the financial advisory workplace, while those of Hispanic and Asian descent also fall short in the industry (6% and 8%, respectively). White people on the other hand make up over 82% of the financial advisory space. Meanwhile, data from a FINRA Investor Education Foundation study reports that by 2030, affluent multicultural households, which include Asian, Black, and Hispanic households earning an annual income of $125,000, will reach 20 million with a compound annual growth rate (CAGR) of 6%, compared to a 2% CAGR for affluent non-Hispanic white households.
Rosalyn Brown, a PFN program manager at Principal Financial Group and the past president of WIPN, an organization that aims to empower women in finance, touched on the nuances of hiring candidates based on personal resemblances or parallels. Such similarities can be confused for meritocracy—the idea that candidates should be considered for a role based on qualifications solely.
“These are very male-dominated industries, so it’s hard to see the different facets of the population that we serve if your work population is all the same,” says Brown. “It’s a proactive approach because you’ll have to say, ‘let’s look at our employee base, let’s look at our client base,’ and ask yourself if you’re serving a diverse group of clients, and then proactively make changes if that isn’t the case.”
The disparities in the workforce extend to women as well. According to the most recent Census data, women make up only 31% of the financial advisor workforce. Other findings suggest even dimmer numbers—job research firm Zippia in 2021 found that women advisors encompass 27.8% of the space, 2021 research from Fidelity Investments showed that 18% of advisors are women, and a 2023 InvestmentNews Advisor Benchmarking Study reported that only 18% of advisory firm owners are women. Other studies suggest even slighter figures in the number of women who hold senior management positions.
“There’s been ineffective incremental growth on women in the C-suite and on the board of directors in investment companies and recordkeeping firms that support advisors,” said Amy Glynn, managing partner and chief financial wellness officer at the Viking Cove Institute. “It hasn’t been meaningful over the last few decades.”
But statistics aren’t even necessary to prove the overwhelming number of white and male advisors in the industry—the lack of diversity is palpable at most retirement plan advisory industry conferences.
Yet, the influence of DEI in the industry is also clear. Opening conversations on inclusion in the advisory workforce, educating advisors on microaggressions, bias, and privilege, and recruiting new and diverse talent are essential to one of the bottom-line benefits for firms: business. According to the CFP Board’s “Why Diversity Matters” study, companies who are more racially diverse earned an additional 15% in revenue compared to those with lower levels of diversity. The study also included statistics that supported the idea of gender diversity in advisory firms.
“When you look at diverse teams, they perform better,” observed Liz Davidson, founder and CEO of Financial Finesse, a financial wellness provider who is lauded as one of the first firms to expand financial coaching past high-net-worth participants. “There is study after study that shows that if you want to make the best possible business decision, having stakeholders with different skill sets, different backgrounds, different perspectives, is going to lead to that instead of this homogeneous group-think where you have too many people that come from the same background, have the same perspective, and have the same skill set.”
Opponents have generally distanced DEI efforts and meritocracy from one another, with arguments that the former squanders the idea of hiring candidates based on qualifications. However, Davidson believes the two ideas go hand-in-hand. “DEI done right promotes meritocracy,” she defended. “If you believe in meritocracy, you would want a diverse workforce that really opens up the entire pool of qualified applicants, so you have more to choose from in order to fill positions, and you really want a culture that is designed to foster the strengths of your entire workforce and goes about that by being a culture that is welcoming to all perspectives and encouraging around all perspectives, skillsets and so forth.”
Next: Prevalence of DEI
