Hiring multicultural advisors is good for clients and for firms, a survey released Tuesday by Edward Jones found. But how can a firm increase that diversity? Sallie Krawcheck offered concrete steps in a recent LinkedIn post.
“There has been an increase among minorities, especially minority business owners, in wealth,” Jesse Abercrombie, a financial advisor with Edward Jones, told ThinkAdvisor on Friday. “The minority client is seeking more financial planning than ever before. It’s very important for financial services firms to embrace that so that they can be part of that growing need in the industry.”
More than three-quarters of Hispanic and African-American respondents said a diverse advisor base was in clients’ best interest. Almost 80% said the same about the best interest of the firm. Asked how to close that gap, popular suggestions included mentoring groups, a focus on diversity hiring, and cross-cultural training.
Instead of mentoring programs, Krawcheck, a former Bank of America-Merrill Lynch executive and current owner of the women's network 85 Broads, suggested employing a sponsorship program. “While a mentor is good, a sponsor is better," she wrote. "Sponsors don’t just answer a junior person’s questions, they actively advocate for them … on things like new assignments, jobs and money.”
Firms should also look at their hiring process, she wrote. If qualified candidates are appearing for open positions but not getting the job, hold someone accountable: “Make sure to identify why they don’t and then put in place an action plan to deliver the needed skills or experience so that they are not passed over again in 6 months’ time.”
Another hole in the hiring process could come from “cascading bias,” according to Krawcheck. This is when review metrics are based on the people who are already successful; thus candidates for promotion are mirrors of the current leadership. To get around this, Krawcheck suggested firms examine their performance review system, as well as require performance metrics to supplement managers’ suggestions when recommending a proposal.
Minorities represent 37% of the population in the United States but only 8% of people working in financial services, according to the U.S. Census Bureau and the Securities Industry and Financial Markets Association.
Abercrombie described Edward Jones’ cross-cultural development program, EDGE (Expectations, Development, Guidance and Expertise), which provides training to advisors on various issues that might come up relating to race, ethnicity or gender. “You’re in a classroom with 10 people and a visiting veteran,” Abercrombie said. “What they do is they talk about some of the issues and some of the challenges that minorities face in the industry and how to overcome those issues.”
Another program, BRIDGE (Bringing Results through Inclusion-Driven and Guided Efforts), is based on three pillars, Abercrombie said. “The first pillar is to attract minority FAs: strategies and ideas to attract FAs. That’s really where the industry stops. They attract, but then there’s nothing special taking place.
“Our next pillar, then, is to support those financial advisors. For the first 12 months, they’re assigned another financial advisor, who also happens to be a minority, as their BRIDGE ambassador.”
The final pillar helps develop minority advisors for leadership roles. “What we want to do is take the minority FA and develop them into future leaders of the firm,” Abercrombie said.
For the study, Edward Jones surveyed more than 2,000 Americans. Surveys were conducted by Harris Interactive in September.
Going back to accountability, Krawcheck suggested assigning responsibility for progress in the diversity program to someone who is not yet an executive but has a good shot at getting there. “Better yet, a white male 'hipo' (high potential executive), partnered with HR. […] This will signal the importance of this to the company in a way few other measures can."
There are cultural efforts companies can make to encourage diversity, too. The simplest is to encourage workers to join outside networks. Doing so “expands individuals’ perspectives and knowledge,” Krawcheck said, “and it can provide a valuable feedback loop (and a safe setting) in what is essentially a learning process of leadership.”
Krawcheck acknowledged that increasing diversity isn’t an easy obstacle to overcome. “It takes a commitment throughout an organization, starting with the very top, to engaging professionals through the course of their careers, in recognition of the real competitive advantage this can drive.”
- Check out Krawcheck, Blayney: Top Financial Mistakes Women Keep Making on ThinkAdvisor.
- Read Krawcheck's LinkedIn post, 10 Ways to Improve Your Company's Diversity Results.