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
Prevalence of DEI
When firms first released statements committing to diversity, equity and inclusion programs, it was seen as an uplifting shift. Years later, others question whether the vows to diversity commitments were just short-lived or had lost steam.
Rather than working with advisors on inclusive education so they can relate to diverse clients, or teaching professionals about the consequences of microaggressions and biases in the workplace, Brown believes that some in the industry defined diversity initiatives as tidemarks.
“They would say, ‘we need one of these, one of these, and one of these,’ and it’s really the diversity of experience that’s needed,” Brown said. “You want someone who understands those things, so you don’t necessarily have to describe those to someone else. It’s important to understand the reasons behind why we need different voices and experiences in the room. And it’s not being a threat, it’s more of an addition to how great things can be.”
While a Janus Henderson study shows that men and women have no preference in working with a financial advisor of the same gender, research shows that respondents place weight on how their advisor relates to them. This includes all areas of diversity, from race and gender to cultural background and sexual orientation.
Much of the sentiment boils down to trust and ensuring the client’s needs and values are recognized, explains Roberta Hess, head of Organizational Change Management at SS&C Technologies and president of WIPN.
“When you think about getting professional guidance for your financial life and how you’ll take care of your family and live in retirement, there is nothing more important than being heard and understood and finding a partner you can trust to make those type of decisions,” she said. “At its very core, the relationship is about that. One of the reasons that diversity is so incredibly important is its importance in relationships and in developing the understanding of those unique needs.”
Next: Work to be done
Work to be done
DEI has been recognized for its promotion in supporting diverse workforces, but it has also received praise for highlighting inclusive thinking. This incorporates how professionals tackle and respond to discrimination in and out of the workplace.
It’s a lesson that still needs to be taught among some in the industry today. Brown, who recalls being subjected by industry professionals to microaggressions and biases including statements about hair, along with assumptions about culture, food, and music, recalls one experience speaking with an advisor during a conference. During their conversation about travel, the advisor mentioned that he had been stopped by airport security for secondary inspection. Responding to the incident, he stated matter-of-factly, “I mean it’s not like I even look like a terrorist.”
The statement stunned Brown, who questioned how the bias influences the advisor’s work with colleagues, clients, and their push for fair retirement practices in the industry.
“If you don’t think you look like a ‘terrorist,’ and then you see someone who you think does, is it okay for them to go through the secondary search? But then what do you do when they are your employee? How do you treat them?” she asked. “It’s more of a recognition of the biases that we have, and how do you, in that moment, ask ‘why am I thinking that? How does that come through in the way that we talk to plan participants? How does that come through in the way that we fight for legislation in the retirement industry?’”
In other instances, Brown has had trouble defending her work in WIPN with colleagues and advisors and has been subject to comments that perpetuate gender bias, like claims that the group drinks mimosas or paints their nails at events or meetings.
Such remarks further dismiss the work and connections the group has achieved in an industry that also continues to build client relationships by partaking in activities like playing golf, Brown added.
“One of the reasons that diversity is so incredibly important is its importance in relationships and in developing the understanding of those unique needs.”
Roberta Hess
“How do you justify time spent with WIPN versus someone’s time spent on the golf course?” she questioned. “It’s truly about making the connections and having those relationships, but one is downplayed and the other is not.”
These experiences highlight the need for inclusivity in a workforce that has struggled with diversity in the past, while calling on senior leadership to denounce statements that reinforce bias. “It’s putting people in positions of power where they can speak up and advocate for others in the room to create an environment,” Brown added. “It shouldn’t always be on you to say, ‘I’m offended’ but it should be on others to recognize things that are simply unacceptable.”
As the future of DEI remains uncertain, some are optimistic that diversity in and out of the workforce will ultimately prevail. Ana Chavez, a lead transition consultant for Ameritas and the DEI chair for WIPN, believes that while obstacles persist, the industry is susceptive to change and improvement. “One thing that I can really appreciate about our industry is that we’re acknowledging these challenges but we’re doing what we can to work through them,” she noted.
Instead of focusing on the divisiveness that’s opponents have created, Hess hopes firms support advisors wanting to expand their clientele and career. “If you’re an employer to your employees, be sure that they’re getting the resources, tools, and the culture that they need to do their very best for their clients,” she said.
Ultimately, at a time when artificial intelligence (AI) becomes prevalent in financial planning and the role of human advisors is questioned, Davidson anticipates that firms will see the opportunities DEI can bring to their business and clients.
“There’s a lot that we know that technology and AI can do, but that ability to connect, to empathize, to motivate, to build that sense of trust, all of that depends on the person who is sitting across from you. If you just look at the demographics of the country and where we are now versus 10 years ago and where we’re going to be going, you have to acknowledge that if you want to grow your business, you have to understand the experiences of all sorts of different people,” she continued. “These things matter to our financial planning and to our worldview on things, and if we lose respect for the uniqueness of people and the things that inform that uniqueness, I think it can be very problematic.”