At a recent conference of independent financial advisors, Martin Smith, president of Bowie, Md.-based Wealthcare Financial Group, was the only African-American present in the room.
This, of course, was no surprise to him, he says, since there are barely any black independent financial advisors. But the absence of African-Americans in the independent advisory space is certainly food for thought, Smith says, and it’s a reality he believes is going to take some more time to change.
“The wirehouses have been more interested in hiring African-American advisors because many have recognized the potential that Baby Boomer African-Americans present,” he says. “Many firms have hired African-Americans to reach out to these people, but on the independent side, we’re just a handful and I don’t see that changing very soon.”
Of course, going independent isn’t an easy thing to do for anyone, particularly for the young people coming out of college that the wirehouses tend to focus their hiring efforts on, Smith says. Regardless of color and ethnic community, the thought of launching into the independent space is daunting, yet African-Americans and, to a certain extent, Hispanics, are even farther away from an independent career than others, he believes, because their communities just don’t have the kind of financial make-up that warrants, requires or encourages independent advisors.
“Many of those who do get into the independent space early on can and do because they have a family business or practice already established,” Smith says. “African-Americans and Latinos are not in this business generationally—you don’t see grandfathers and fathers in our communities handing over their businesses because they just don’t have businesses to hand over.”
But even though the road to an independent practice may be harder for African-Americans and for Latinos than it is for others, Smith still believes this is a goal that young people entering the profession should aspire to.
He credits his success as an independent to hard work, knowledge, education, and above all to his desire to be independent.
Smith got his start by selling mutual funds and term life insurance before moving onto A.G. Edwards, where in a short period of time, he became the first African-American advisor to earn an award for his performance. But despite this, Smith was convinced that the independent route was the one he wished to take, and after a short stint at Merrill Lynch, went out on his own.
That wasn’t an easy thing to do, and Smith lost many of his clients when he left Merrill Lynch. “But in a year and a half, I built my book back up from $1 million to $22 million just by cold calling,” he says.
In general, African-Americans and Hispanics have not had a great deal of experience with independent advisors. Those who do seek out advisors are more likely to want to work with someone at a large, brand-name firm, Smith says, and this is one more reason why the bigger firms are beefing up on their recruitment of minorities, and also why there’s so few minority independent advisors.
But even if there’s been an increase in the number of African-Americans and Latino advisors at these firms, the level of financial knowledge within the communities themselves is still very low, Smith says.
Education is key, he says, and it’s only when there’s sufficient education that the approach to finance and financial planning can change enough to eventually reach a level at which more minorities would seek out independent financial advisors.