Firms Are Hiring More Diverse Advisors. Can They Keep Them?

The Certified Financial Planner Board of Standards has made what its leadership calls important progress in attracting new talent from every background, with nearly 30% of advisors who earned their CFP certification in 2022 being women and 15% coming from a racially or ethnically diverse background.

As Kevin Keller, chief executive officer of the CFP Board, told ThinkAdvisor in a new interview, these percentages mark all-time highs for both categories. However, as Keller emphasized, the effort to recruit more diverse candidates is not a complete solution to the advisory industry’s long-standing and much-discussed racial and gender diversity gap.

“We must also be able to sustain this increased diversity over the long term,” Keller said, adding that retention of diverse talent is essential to improving the diversity at the leadership level of financial services organizations, where representation is even more lacking.

That’s why the CFP Board Center for Financial Planning has focused its fifth diversity-focused white paper on research-based retention strategies that can support a more diverse profession. As Keller emphasized, the retention strategies and best practices presented in the new paper have been compiled from independent research, a review of existing literature on the subject and case studies provided by multiple financial services firms.

According to Keller, these case studies offer inspiring examples of how different firms have successfully strengthened retention, and they deserve consideration on the part of any firm with diversity, equity and inclusion goals.

At the heart of the paper, Keller said, is a broad recognition that consumer demand for competent, ethical financial planning has never been higher. Yet today’s advisors are retiring faster than they can be replaced by new talent, and firms do not demographically represent the clients they currently serve or the increasingly diverse clients they can expect to serve in the future.

As such, Keller said, it is essential that firm leaders continue to seek diverse, qualified talent, but it is equally important for them to implement strong retention strategies that will sustain the profession’s (slowly) growing diversity in the long term.

The Essential Elements of Retention

According to the new report, senior leaders must define and explain the “why” behind organizational efforts to create a culture of retention, including how it aligns with the firm’s values and what they hope to achieve.

Step One is assessing the firm’s existing culture to determine where it stands in relation to the desired future state — and being brutally honest about the current state of affairs. As Keller noted, this can be an uncomfortable exercise, especially at highly successful firms that are used to viewing their operations and organizational structures in a purely positive light, but it’s well worth the effort.

The paper proposes that every step of a firm’s recruitment process, from writing job descriptions to onboarding new hires, should be developed or reimagined using an “equity lens.”

This entails crafting clear and detailed job postings and expanding recruiting networks to help firms source more diverse candidates. Other essential elements include creating deliberate interview processes that involve diverse panels of interviewers and consistent, skills-based rubrics for evaluating candidates.

None of this is work is overly esoteric or complicated, Keller said. It just takes commitment and consistency, and a willingness to admit and address the issues that exist in any given organization.

Management Matters

Naturally, an employee’s relationship with their manager is critical to their decision to stay with or leave a company. As the saying goes: Great talent joins companies and leaves managers.

As Keller spelled out, creating an inclusive management structure requires firms to invest in the leadership and interpersonal skills of its people, with the goal of instilling cultural competencies that promote the firm’s expressed values and enable managers to build trust with their team members.

Despite what some industry veterans may assume, the paper emphasizes, these psychological skills are absolutely teachable, and it is crucial for a firm’s top leaders to demonstrate a personal drive and commitment in this domain.

The other elements of successful talent retention, according to the paper, are the establishment of clear career paths and succession planning opportunities that address the diverse hopes and expectations of a firm’s staff — and expressly communicated opportunities for professional development.

As Keller emphasized, measurement and accountability are key factors in this effort, as they are in pretty much any other aspect of a financial advisory firm’s long-term success.

A Top-Down, Firm-Wide Approach

The paper points out that much of the existing literature on retention strategies “mistakenly” assigns the responsibility for developing and implementing these practices to talent acquisition professionals, human resources departments or an organization’s designated DE&I entity.

A better approach, according to the analysis, is for the responsibility for creating a culture of intentional retention to begin with a company’s senior and executive leaders, regardless of the organization’s size.

As the paper spells out, leaders with positional power must take ownership of their company’s culture, modeling the behaviors they expect to see in the workplace and actively engaging employees in fostering retention.

“Leaders have the ability and authority to set and enforce policies that influence firm culture,” Keller said. “They can provide support for employees of all backgrounds and encourage a sense of belonging within the organization.”

As Keller pointed out, a key responsibility for firm leaders is to develop a rationale for why the organization seeks to create a culture of retention and a vision for what they ultimately hope to achieve. This exercise supports the development of specific goals, tactics and metrics that push the firm toward that vision, equipping leaders and staff alike with clear messages to gain employee buy-in.

According to the analysis, providing clearly defined career paths and criteria for promotions and pay raises is another critical component of retention-driven workplace cultures. Without transparency about how they can progress within a company and how advancement decisions are made, employees may assume they must look elsewhere for growth opportunities and higher compensation.

Keller urged advisory firm leaders who feel like they need help in this process to consult the CFP Board’s many available resources, including the recently published guide to financial planning career paths.

For each rung on the financial planner career ladder, the guide details the skills, experience and responsibilities necessary for success, in addition to providing a framework for compensation and organizational advancement. Firms that have not already done so should consider implementing such practices to support their development and retention of talented professionals, Keller urged.

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