In my experience as a coach and consultant in the wealth management industry, there is an urgent need to review firms’ perspectives on creating diverse teams, specifically when it comes to wealth advisors.

While leadership across the industry has relayed a message that building diversity is a priority, the data fails to show progress on any front. From a gender perspective, research published in 2022 shows that, in 2010, 69.3% of wealth advisors were male and 30.7% were female. Sadly, more than a decade later those numbers had hardly budged, coming in at 69.4% male and 30.9% female in 2021.¹

When we look at race and ethnicity, the troubling tale continues to unfold. Following are the percentage of wealth advisors by ethnic group in 2010 and in 2021:

Caucasian: 78.8% in 2010, 72.2% in 2021
Asian: 7.47% in 2010, 8.27% in 2021
Hispanic: 6.69% in 2010, 9.42% in 2021
African American: 5.63% in 2010, 5.61% in 2021²

These statistics stand in direct opposition to the messages our industry is putting forth. Virtually every organization in the financial industry has spent considerable time and budget delivering the message that it is committed to attracting and retaining team members who reflect the diverse makeup of the communities they serve. Many firms even have incentives in place where leaders receive additional compensation if they move the dial in creating diverse teams. And yet we have seen virtually no progress in the quantitative results industrywide.

What is causing the lack of progress on improving diversity in our industry? And how can leaders take steps that will allow them to deliver on the pro-diversity messages they are communicating?

In this article, I outline three areas of focus that I believe are key to making those messages a reality and helping ensure we don’t continue to see the lack of progress we have witnessed for over a decade.

JHI

1. Revamp training and development programs

Research conducted recently by Cerulli Associates shows that the five-year failure rate of new advisors entering the industry is hovering around 72%,³ which personally feels low, as I have seen other research showing an 80% to 85% failure rate. How can our industry be proud of those numbers?

Clearly, gone are the days of “smile and dial.” We must now enter the age of ownership and support. There needs to be a clear plan for growth and development for new advisors entering our industry, with defined steps and expectations, as well as coaching support to ensure new advisors can acquire the skills they need to be successful.

Critically, this onboarding process must be fair, equitable, and inclusive to all new advisors of all genders, races, and ethnicities. As an industry, we need to challenge our current thinking and find ways to change our actions to match our intentions.

As you think about how you onboard new advisors at your organization, I encourage you to ask the following questions:

– What are we missing in terms of how we support the success of new wealth advisors entering the industry?

– How can we help new advisors acquire the skills they need and map out a career path that will help ensure lower failure rates?

– How can we provide our new advisors mentoring and guidance from established advisors?

2. Ramp up awareness and recruiting efforts

A 2021 article published in ThinkAdvisor by Bernice Napach highlighted different reasons why women and members of minority groups are not joining the wealth management industry. The article, which cites additional research conducted by Cerulli in partnership with industry organizations such as the Financial Planning Association, revealed that “limited visibility of leadership” was the number-one obstacle to success, cited by 78% of female advisors and 82% of advisors of color.⁴

Our industry needs to take a deeper look at how we are communicating what is needed to be successful. In addition, it’s critical that firms focus on recruiting in diverse communities where the message can be delivered personally to these candidates. This personal connection is key: The advisors we recruit today should reflect the diversity of the clientele who will be tomorrow’s wealth creators in an increasingly diverse global economy.

With that in mind, consider the following questions around how your firm is working to recruit and retain diverse talent:

– How can we build awareness of the opportunities that are available to diverse candidates?

– How can we expand our recruiting efforts to ensure we’re connecting with a diverse pool of candidates?

– What specific steps can we take as leaders in the industry to retain diverse talent knowing the barriers minorities face?

3. Appreciate and cultivate diversity of thought and experience

This last area has to do with shifting your current mindset. This shift starts with understanding that we tend to be more comfortable interacting with people who share similar backgrounds and experiences. Unfortunately, this tendency to seek out the familiar is part of the reason we are seeing such a lack of progress on improving diversity in the industry.

That’s where the mindset shift comes into play. Instead of giving in to your instinctive tendency to interact with people like you, focus on building appreciation for other people’s differences. And when it comes to recruiting and hiring, consider how individuals’ different experiences and perspectives could contribute to the success of the organization.

Research has shown that diverse and inclusive teams outperform those that are less inclusive by 50% on average, and that individual employees who are part of a diverse organization outperform those at non-diverse organizations by 12%.⁵

Knowing that diversity is directly tied to performance is a strong motivator to start building a more diverse team. As you work toward that goal, ask yourself:

– As a leader, how can I claim my biases and push myself outside my comfort zone?

– What can I do to build my knowledge and curiosity of cultures that are different from my own?

– As a team, how can we work to create a diverse and inclusive culture through accountability, ownership, and commitment?

As I stated at the beginning of this article, I strongly believe our industry needs to do better. Simply putting forth messages about diversity is not enough, and it is clearly not leading to actual progress. We need to commit to changing both our mindset and our actions.

It’s also important to note that not making progress on the diversity problem will come at our own expense. Consider the fact that women are positioned to inherit a majority of the $30 trillion in wealth that is expected to be transferred by the baby boomer generation, which researchers note is close to the annual U.S. gross domestic product.⁶ If your firm – and the industry as a whole – is not prepared to serve those female investors, they will look elsewhere for the services they need.

There is tremendous work to be done to counteract the gender and ethnicity biases that have contributed to women and minority groups feeling they are not part of the world of finance. As a group, we need to raise awareness of the lack of progress so we can start breaking down barriers and moving the industry-wide diversity agenda forward – with actions rather than words.