Think about this when you hear the term “wealth gap”: A 2015 St. Louis Fed study found that between 1989 and 2013, even college-educated African Americans saw their wealth decline 55%. This was one part of John Rogers’ answer to my question about why he started an internship program at the University of Chicago that places under-resourced students into asset management and foundation positions.
“I’ve been running Ariel for 35 years, and the wealth gap in the country between the majority community and the minority community has grown — it’s dramatic,” he explained, so he decided to “in a small way, to make a little dent in the problem.”
Rogers is chairman and CEO of Ariel Investments, the asset management firm he founded in 1983 that has $13.2 billion in assets, offices in Chicago, New York and Sydney, Australia, and 99 employees.
A “small way” and a “little dent” to the soft-spoken Rogers means donating $4.5 million of his own money to establish and fund the John W. Rogers, Jr. Internship Program in Finance at the University of Chicago. In the university’s last academic year, the program funded 16 internships at 11 local employers.
Rogers believes the financial services industry could do better to help reduce that wealth gap. He doesn’t say that flippantly. Understand that Rogers is quite familiar with advisors, as more than 80% of Ariel’s assets come through third-party distributors like Schwab, Fidelity and TD Ameritrade.
Furthermore, he speaks from experience. He has long supported educational and financial literacy programs in Chicago. For instance, his 2016 funding to start the internship program was only part of a wider $10.5 million gift to the University of Chicago.
He also recognizes that he is not alone in trying to do something to close that wealth gap. To help find solutions, the Center for Financial Planning of the CFP Board will host its first-ever Diversity Summit next month in New York, and Rogers will be a featured speaker. The Center’s mission is to create “a more diverse and sustainable financial planning profession so that all Americans have access to competent and ethical financial planning advice,” says Executive Director Marilyn Mohrman-Gillis. (See Part of the Solution sidebar on page 56).
Increase the Supply As noted, John Rogers has been thinking about — and acting upon — this issue and its possible solutions for a long time, and he has a different, more direct way to reduce the wealth gap. Simply put, his solution is to first build more wealth among people of color. Doing so, he believes, will usher in related changes for good — including building a more diverse advisor population, a more financially literate population and stronger minority communities where one person’s success breeds other success stories.
How can wealth be built within the minority community? Rogers points out that the most lucrative careers in American society today are in the financial services and the technology sectors. However, they also “happen to be the two sectors that have the least diverse employment and leadership,” he says.
He concedes that there are now “more African-Americans on Wall Street,” where many companies have programs to promote employee diversity and inclusion. But among nonprofits, universities and foundations, which he says typically have otherwise very progressive policies on diversity and inclusion, “the endowment offices of these organizations are almost all white.”
That paucity of African Americans in the money management business is particularly noticeable in the private equity, hedge fund and venture capital sectors. Money managers in those sectors command very high incomes, Rogers says, and the recipients of those high incomes tend to wield not just more personal heft but broader economic and political power within their communities.
His idea for the internship program is to prepare students “to work in the investment offices of major endowments in the United States.” By working in those offices, the interns can be exposed to a career with organizations that do great work, he says, and also be exposed, especially in the larger endowments, to the universe of private equity, hedge funds and venture capital.
His eventual goal, he says, is that “maybe 15 years from now we’ll have an African-American Georges Soros or Henry Kravis or David Rubenstein.”
Rogers uses a socio-athletic metaphor to drive home his point.
Private equity, hedge fund and venture capital firms have not “followed the lead of the major money center banks” in their efforts to hire more people of color, but rather “they look like Major League Baseball in the 1940s, while the big banks look like baseball today” in their workforce diversity.
“In the 1940s, if you were a great baseball player and you were black, you’d play in the Negro Leagues and make a small amount of money. If you were white you’d play in the Major Leagues and make much more money.” But “society decided that wasn’t fair; that wasn’t morally correct.”
I pointed out that it wasn’t society as a whole that first signed Jackie Robinson to a MLB contract, it was one person at one “firm” — the Brooklyn Dodgers and owner Branch Rickey. So to bridge the wealth gap, do you need one or two leaders to take a stand? “There are a few people trying,” Rogers replied, mentioning in particular Henry Kravitz at KKR and Michael Sacks of Grosvenor Capital. “There are a few Branch Rickeys out there,” he said, “but way too few.”
As for the role of financial planners and investment advisors on this issue, Rogers remarks that there will be more advisors to serve the minority community when there is more wealth in that community. In the meantime, advisors can work with their local public schools to “create a more financially literate society” and teach entrepreneurial skills that benefit all the members of that society.
Plus, because successful advisors are courted by their broker-dealer or insurance company home offices, custodians and asset management firms can make sure their workforces and suppliers are “living the values” of workforce diversity and inclusion. Advisors on boards of local institutions can push those same values.
It makes sense, Rogers explains, returning to the Jackie Robinson analogy to make a point about financial services firms and the changing makeup of America. “If you’re a 21st century company thinking about the future, but you look like a 20th century company, how will you convince your clients and customers that you’re a company of the future?”
James J. Green, a former editor of this magazine, is editor of Jamie Green Reports, an advisor-focused writing, editing and shepherding service. He can be reached at email@example.com.
Part of the Solution There are many initiatives in the financial services industry, and specifically among advisors, that seek to increase diversity within the profession and promote financial literacy, especially among underserved segments of American society.
We’ve covered Boston-based TFC Financial’s efforts to support financial literacy efforts in and around Boston through its TFC Financial Charitable Foundation, funded by the advisory principals (not clients).
Mark Tibergien, CEO of Pershing Advisor Solutions, has established and funded a financial literacy program for seniors at his high school alma mater in the Upper Peninsula of Michigan. Tibergien has supported that program for nearly 15 years, and publicly has encouraged others in the industry to support similar financial literacy programs.
In August, the CFP Board’s Center for Financial Planning and The American College jointly announced a program to help diversify the financial planner workforce, specifically by providing scholarships for African-American graduates of the College’s CFP program to take the CFP exam. The American College also offers full tuition scholarships for designation and degree programs through its African American Scholarship Program.
Recently, the Deena Jo Heide-Diesslin Foundation—named for the late wife of noted advisor Dave Diesslin—and the Center for Financial Planning announced a match scholarship for in-need individuals seeking their CFP who are from underrepresented populations within the profession, specifically related to ethnicity, gender, sexual orientation and/or disabilities.
—James J. Green