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Practice Management > Diversity and Inclusion

CFP Board Targets 'Systemic' Diversity Issues

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CFP Board CEO Kevin Keller.

The Certified Financial Planner Board of Standards’ first Diversity Summit on Oct. 23 in New York was unlike most advisor-focused conferences. It’s not often (if ever) that you find numerous wirehouse brokers mingling with a bunch of NAPFA fee-only RIAs. I can’t recall seeing RIA custodian leaders like Mark Tibergien of Pershing Advisor Solutions and Tom Nally of TD Ameritrade Institutional in the same room as Andy Sieg, head of Merrill Lynch Wealth Management. It’s not usual that the primary sponsors of an advisor event would include both Morgan Stanley and the Charles Schwab Foundation, or that the number of female attendees seemed to match the number of male attendees.

But the most glaring difference from standard advisor conferences was the high number of people of color attending the summit; at most such conferences the number of African-American or Latino or Asian-American advisors would be in the low single digits at most.

That diversity of summit attendees and sponsors and speakers reflected the diversity and inclusion issues that the professional advice-giving industry faces, as noted by CFP Board CEO Kevin Keller in his opening remarks.

Reporting that less than 3.5% of the 82,000 CFPs in the United States were black or Latino, Keller said that the lack of advisor diversity can’t be solved by one individual or group, but rather “requires all of us to be engaged, find solutions, and take action.”

The Summit was convened by the CFP Board Center for Financial Planning, which was founded three years ago and is led by Marilyn Mohrman-Gillis, Keller said, to address “three systemic issues” faced by the planning profession. Those issues: to increase the number of women and people of color in the profession, to attract younger people to the profession, and to expand the numbers of faculty members at the more than 200 colleges and universities in the country with financial planning degree programs. Keller called the center’s white paper on racial diversity in financial planning a “motivational road map,” saying “now is the time to put words into action” to create a “more diverse and sustainable financial planning profession.”

In his remarks, Sieg called Merrill Lynch’s partnership with the CFP Board both deep and strategic, noting that Merrill’s force of 3,900 CFPs constituted the “largest on the Street” among the wirehouses. As for diversity, Sieg mentioned that millennials “aren’t running in the direction of diversity; they notice it by its absence,” called diversity an “economic imperative” and argued that “fundamentally, this a leadership issue.”

Carla Harris, vice chairman of wealth management at Morgan Stanley, addressed the business case for diversity. “There’s not one industry” in today’s world, the 31-year Wall Street veteran said, “that’s not competing around innovation. So here’s your business case: You need a lot of ideas to get to that one idea” that will foster innovation for your company. “Ideas,” she said, “are born of perspective; which is born of experiences; which are born of people.”

So, she argued, you must “obtain and retain” a diverse workforce to eventually yield more innovation. Follow the IAC approach, she argued, to promote diversity: Be “Intentional about getting the right people in the right seats at the right time.” If millennials “don’t see somebody that looks like them,” she said, “that’s not the company for them.”

The A in IAC is for Accountability. Harris believes that the responsibility for building a more diverse workforce doesn’t reside just at the CEO level. Instead, leaders must hold midlevel managers accountable for hiring more diverse individuals. “Make it strategically important,” she counseled.

The C is for Consistency: You can’t make diversity a “bull market” phenomenon.

The Center’s Racial Diversity in Financial Planning: Where We Are and Were We Must Go white paper (see details in this ThinkAdvisor article) was then discussed by Peter Fondulas of Fondulas Strategic Research and Whitney Tome of The Raben Group, the firms that conducted and wrote up the research. The process included online surveys, telephone interviews and in-person focus groups of high-net-worth consumers and of black and Latino ‘prospects,’ who were potential future financial planners.

Five main findings of the research help explain the lack of diversity in the profession but also gives some reason for hope. There is a lack of racial diversity in the profession because there is a lack of awareness among blacks and Latinos of financial planning due to economic inequality and culture norms. Firms’ hiring and onboarding processes are a major barrier to diversity, partly due to the compensation requirements of large commission-based firms. A third factor is client bias, i.e., clients’ tendency to want a planner who looks like them and shares their experiences.

The survey found a fourth factor at work in why there is an underrepresentation of people of color in the profession: 58% of white CFPs and 46% of the consumers surveyed said the cause was a reluctance on the part of “prospects” to enter the field, while less than 30% of black and Latino prospects and CFPs pointed to reluctance as a cause.

The reason for hope? When CFPs were asked whether they would recommend financial planning as a career choice, 68% of black CFPs said they were “very likely” to do so and 59% of Latino CFPs agreed. Fifty-six percent of white CFPs said they were very likely to recommend their careers.

The research found that the three top ways to encourage more representation among people of color in the profession were mentoring programs, an earlier introduction to the profession and fostering career awareness among underrepresented groups.