By: Laura Hanichak Gregg
Director of Practice Management and Advisor Research
The coming demographic shift
The client of the future doesn’t look, or act, like the client of the past, or in many aspects, the client of today. As people of all identities -- race, ethnicity, gender, sexual orientations, family status, and more -- overcome historical barriers to access economic opportunities, financial advisors aiming to stay competitive may want to find ways to help a broader range of clients build wealth.
When recruiting new employees, having a diverse staff can signal an attractive and innovative work environment. A workplace culture that values diversity may inspire employees to exchange diverse ideas for potential strategic breakthroughs. The internal knowledge base benefits in the long run from a rich variety of perspectives and mindsets. And, companies that commit and follow through on diversifying their workforce may reap rewards from investors.
Yet, today’s financial advising workforce still doesn’t reflect the changing demographics of our nation. As of 2017 approximately 3.5 percent of the 80,000 CFP® professionals in the United States as of 2017 are Black or Latino. The percentage of Black and Latino people across the U.S. population stands at 13.4 percent and 18.3 percent, respectively.
Notes from the field
From our most recent study -- Advisor Teams and Diversity -- as well as one-to-one engagement in the field, we learned that advisors rank team-building high among strategic initiatives but struggle with recruiting and hiring the right people. As I’ve met with undergraduate Financial Planning program directors, they have told me that they often counsel their students to be highly selective and typically steer them away from firms that offer only the traditional “eat what you kill” positions. That doesn’t seem to be an issue as many programs reporting close to a 100% placement of their graduating students.
Our FlexShares study looked at how advisors were managing the challenge of building teams, including the recruitment and retention of diverse workforces. As it turns out, diversity may be linked to growth not because investors require the ability to invest with a diverse firm, but because diverse firms give investors more options to find something highly important to them: a relatable advisor who understands them and ideally someone that shares their experience.
Behind the FlexShares Advisor Teams and Diversity Study
We conducted this research because we are committed to supporting financial advisors. We designed the survey to look at the motivations and mechanics of building teams and hiring for diversity whether in age, gender, race/ethnicity, sexual orientation or disability. We conducted the advisor survey alongside a high-net-worth investor survey. We wanted to know which kinds of firms see hiring for diversity as a strategic priority. Our data collection gathered tactical information about team building and recruiting. And we asked investors what they thought about these efforts.
FlexShares received feedback from 529 financial advisors in the national survey. We also connected with 200 investors responsible for making financial decisions about their investments. The investors were between the ages of 30 and 65 with household incomes of $200K+ and investable assets greater than $500K (>$250K for participants aged 30 – 35) excluding 401K or primary residence.
We invite advisors to use our research to better understand how and why to build a more diverse business. FlexShares believes that diversity of thought, age, gender, race, sexual orientation and disability will give advisors a competitive edge in the coming decade and beyond. To hear lively conversations on this topic with industry experts, subscribe to The Flexible Advisor Podcast. You may also subscribe to receive alerts when new briefs are posted or download our latest research on this topic now.
Created in conjunction with Tasha Williams of TTW Consulting.