Consciously pursuing diversity “offers a range of benefits for recruiting, retention and firm culture,” according to a recent FlexShares study on diversity. But the hurdle for the advisory industry is high.
Indeed, although 32% of the U.S. population is black or Latino, only 3.5% of certified financial planners are. As the study report states, “the U.S. population is rapidly becoming more diverse, but the advisory industry remains very homogeneous.”
Gender also lags. Although 51% of U.S. population is female, only 14% of financial advisors are. Plus, the study finds women are four times more likely than men to work with a female advisor.
However, the study reveals that investors are more likely to choose advisors like them in ethnicity or race. For example, 98% of white clients work with white advisors, 75% of Asian clients work with Asian advisors, and just over 62% of non-white or Asian clients work with non-white or Asian advisors.
It seems, though, that the industry may be forced to change as the growth of minorities is projected to expand going forward. The millennial generation will be the most diverse generation in America and the largest generation in the workforce, according to FlexShares’ research.
In terms of wealth, the wealthiest fifth of the black and Latino households numbered more than five million and had average wealth of about $400,000 in 2015, according to the CFP Board Center for Financial Planning.
Why Recruiting Matters
One key finding of the FlexShares’ study is that 61% of advisors recruit colleagues from their professional and personal networks, which may explain the homogenization of the business.
Forty percent attract talent from other firms, while 26% recruit finance and business majors at universities. Only 8% hire non-business majors.