The financial advisory industry has a long way to go to diversify its ranks by gender and race.
Despite efforts by many firms to add more women, Indigenous, and Black and brown advisors, the percentages of women and minority advisors remains small.
“The wealth management industry has a diversity problem,” according to a new report from Cerulli Associates. “Women and Black, Indigenous and People of Color (BIPOC) remain drastically under-represented among financial advisors.”
The Cerulli report cites several metrics to support its analysis of the industry:
- Women account for 18.1% of the financial advisor headcount vs. 50.8% of the U.S. population
- Blacks, 2.9% of advisors vs. 14.2% of the population
- Hispanics, 5.1% of advisors vs. 18.4% of the population
- Asians, 4.3% of advisors vs. 6.8% of the population
Correcting that underrepresentation lies not just with recruitment but also retention, which is “the true test” for diversity initiatives, according to Cerulli. More specifically, its report notes that “wealth management firms must embed inclusivity into their culture, as well as rethink their recruiting, training and retention strategies,” reflecting a sentiment that is shared with minority advisors.
The Cerulli report focuses on why women and members of minority groups don’t enter the advisory industry, why those who do don’t stay and what firms need to do to reverse those patterns.
Why Women and Minority Group Members Don’t Become Financial Advisors
There are multiple reasons why women and members of minority groups don’t choose to join the financial advisory industry, according to Cerulli. They aren’t aware of the industry and don’t know anyone in it.
They view the role of an advisor as a salesperson whose compensation depends on business development, which is often the case and which is seen as incongruent with a purpose-driven mindset that initially attracts them to the profession. Also, they face the difficulties of obtaining licenses and development of foundational skills and business development strategies while also establishing a client base.
The Struggle for Women and Minority Members to Remain at Advisory Firms
Once women and Black, Indigenous and people of color become financial advisors, they struggle to stay because of obstacles they encounter.