Practice Management February 14, 2023

DE&I Initiatives: Are They Working?

Retirement advisory firms have been working to implement diversity, equity, and inclusion programs for years, but have they been effective?
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Art by Melinda Beck


The business case for increased diversity among financial advisory firms’ staff has solid support. FlexShares’ 2021 diversity research report described how changing U.S. racial demographics and a broadening of wealth ownership, combined with consumers’ preferences for diversity in their choice of advisers, should influence firms’ hiring decisions. The report concluded that “advisers and firms must change in order to meet the needs of a customer base that is becoming younger, more female and racially diverse.”

The report noted several major discrepancies between the gender and racial composition of advisory firms versus the total U.S. population. For example, an estimated 18.1% of advisers were women versus 50.8% of the population. Non-white groups were also underweighted, according to statistics cited in the report:

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  • Asian: 4.3% versus 5.9% (advisers versus population)
  • Black: 2.9% versus 13.4%
  • Latino: 5.1% versus 18.3%

Financial services firms have been responding to the business opportunity and lack of diversity in their advisory ranks by introducing diversity, equity and inclusion (DEI) initiatives. The Financial Services Institute (FSI), an advocacy organization for the independent financial services industry, announced a DEI program with nonprofit INROADS. Edward Jones, Fidelity, OneDigital T. Rowe Price and other large firms have also launched DEI efforts recently.

While these plans to recruit people of color and women are laudable, have they been effective? Large national firms have been the most forthcoming with sharing their DEI goals and results. In contrast, the mid-sized and smaller firms contacted for this article, primarily retirement plan advisers who had previously announced DEI programs, declined to discuss their programs’ progress.

That divergence isn’t surprising. Large firms have more employees, which creates additional DEI-hiring opportunities. Their size also makes it more likely that they can devote resources to DEI, including having a diversity executive or team to oversee company progress. Another factor is that many DEI programs are new initiatives that started formally in 2020 or 2021 and consequently have limited historical data on hiring and retention. Despite these challenges, several large firms are sharing their results and providing a sense of how DEI hiring is progressing.

Edward Jones

According to St. Louis, Missouri-headquartered Edward Jones’ 2021 Purpose, Inclusion and Citizenship Report, the firm’s formal DEI efforts began in 2007, followed by the start of its Black/African American Business Resource Group in 2009. In June 2021, the company committed to improve diversity “not just at our senior leadership level, but across leadership in the firm’s home offices and our overall financial advisers by 2025.”

In June 2021, 8% of the firm’s U.S. and Canadian financial advisers were people of color and 21% were women. It its U.S. and Canada home offices’ senior leadership roles, 9% were people

of color and 30% were women. The firm spelled out specific goals that it hopes to achieve by 2025 for its U.S. and Canadian financial advisers, home office general partners and leaders. For advisers, the goal is 15% people of color and 30% women. The targets for home office general partners are 15% people of color and 40% women and 20% people of color and gender parity in the firm’s headquarters.

The company provided a progress update with results as of December 31, 2021 in its 2022 Purpose, Inclusion and Citizenship Report. Among financial advisers, the percentage of women grew from 21% to 22%; people of color increased from 8% to 9%. For U.S. and Canadian headquarters’ leadership roles, people of color comprised 17% (up from 9%) and women were 49%, an increase from 30%. Among general partners at headquarters, women accounted for 31%, with 12% coming from people of color. (The leadership category includes leaders of leaders and leaders of associate roles.)

Fidelity Investments

Wendy John, head of global diversity and inclusion with Fidelity Investments in Raleigh, North Carolina, says the company has been committed to DEI for decades. The firm published its first Diversity & Inclusion Report (D&I) in the first quarter of 2021. “In it, we outlined the deliberate steps we took in 2020 to strengthen our commitment to diversity and inclusion at every level in our organization, and we committed to sharing more information and data about how our firm is making progress,” John said. “We continued our commitment to transparency by releasing our second D&I report in Q1 of 2022, which provided an updated look at workforce demographics and outlined the steps we had taken to make progress toward our commitments. Fidelity plans to release its next D&I report in late Q1 of 2023.”

The company does not disclose its set quotas or targets, John explained, but does measure progress in three areas:

  • Increasing the representation of diversity at all levels;
  • Ensuring inclusion and belonging across the workforce; and
  • Creating new opportunities and value for our customers and communities.

Fidelity’s 2021 report provides detailed gender and ethnic diversity statistics on its employee demographics starting from December 2015, with the data broken out into specific work areas. For example, among the company’s overall global workforce, 36% were women at year-end 2015. That number increased to 38% by year-end 2021. In the U.S., people of color were 28% of the workforce at year-end 2021 versus 20% in December 2015.

John says the company has been pleased to see annual incremental improvements in its workforce diversity, including increased gender and ethnic diversity across leadership positions. That positive trend continued between 2021 and 2022. “We had our most significant year-over-year improvements in representation among our historically underrepresented populations in 2021, with progress in both headcount and percentages,” says John. “Representation of people of color increased from 24% in 2020 to 28% in 2021.  This was the case across business units, grade levels and job categories. Specifically, we saw the largest increases in our Black and Hispanic/Latino segments, both increasing by more than one percentage point and our Asian segment increased by 0.9 percentage points.”

John says that some of the biggest challenges with Fidelity’s DEI program have been balancing the firm’s focus on improving diverse representation within its workforce while ensuring that its inclusion efforts keep pace with that increasing diversity. “We’re being intentional with our efforts to tap new pools of talent to create a workforce that reflects today’s diverse consumers, suppliers, and businesses,” she says.

T. Rowe Price

In 2021, Raymone Jackson, vice-president, head of diversity, equity and inclusion at T. Rowe Price in Baltimore, initiated a three-year DEI strategy. The company set four specific goals to increase diversity by 2025:

  • Women will compose 46% of the company’s global workforce;
  • Women will hold 33% of senior roles globally. (Senior roles are defined as people leaders or individual contributors with significant business or functional responsibility);
  • Underrepresented talent will compose 19% of the U.S. associate population. (This includes Black and African American, Hispanic or Latino, and American Indian); and
  • Underrepresented talent will hold 10% of senior roles in the U.S.

Firmwide, the company aims for 40% of all candidate slates to be diverse, regardless of role, says Jackson, explaining that the firm defines diverse as female representation globally and ethnically for the U.S. workforce.

Hiring results have been encouraging, says Jackson. In 2022 the year-over-year global workforce share of women employees grew 6% to 44.8%. In the U.S., the company saw a 13% year-over-year increase in underrepresented talent to a total of 18.5%. Overall, 66% of external hires in 2022 were diverse, which Jackson attributes in large part to the company’s diverse candidate pipelines and branding efforts.

Looking ahead, Jackson recognizes potential hurdles to reaching the 2025 goals. “We face several challenges,” he says. “[These include] a challenging external labor market, aligning hybrid work practices, supporting associates through challenging external social justice issues, and continuously sourcing diverse candidates, especially in highly demanded technical and investor roles.”

OneDigital

OneDigital in Atlanta also publishes statistics on its DEI efforts. Unlike the other companies cited in this article, OneDigital had a majority of women (67%) in its workforce at year-end 2021. The dispersion of women in leadership roles varied across functions. Among senior corporate leaders and senior field leaders, 31% and 29%, respectively, were women. Percentages for strategic (54% women) and operational (84% women) leadership of teams, functional areas or clients were higher for women than men.

OneDigital also breaks down its workforce by race and level within the organization and provides the change in each category’s percentage from 2020 to 2021. The results reinforce what Fidelity’s John calls the pace of incremental movements, as the changes in non-white employee categories ranged from 0.78% to -0.40% at OneDigital.

OneDigital is also looking to improve diversity through acquisitions. The firm, which has brought on seven retirement and wealth management practices in the past 12 months, says it will look to onboard 10 minority-owned firms by the end of 2023.  In January, it acquired minority-owned insurance brokerage Bradley & Bradley Associates Inc.

Worth the Effort?

The pace of implementing DEI programs can be slow, but the FlexShares report notes that making recruiting more inclusive has led to hiring success, which it considers a key strategic priority for firms preparing talent needs for the next generation. According to the report, more than three-quarters (77%) of firms focused on DEI report success in hiring new professional talent, versus 56% of those firms that are not acting. DEI-focused firms also report strong 5-year retention rates of diverse talent. This can have a meaningful impact on a firm’s bottom line, FlexShares concludes, because less turnover means fewer dollars spent on recruiting, hiring, training and lost productivity.

Practice Management February 14, 2023

DE&I in a Hybrid World

Women, parents, and people of color are opting in to remote work at higher rates than their peers, but some workplace experts say remote work brings new challenges for equity and inclusion initiatives.
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Art by Melinda Beck


You only have to look at the leadership team at SageView Advisory Group to see how the shift to remote work has impacted diversity efforts at retirement advisory firms.

Pre-pandemic, the entire executive team was located in Newport Beach, California, and consisted mostly of white men. The transition to remote work allowed the team to bring on a more diverse team, including a woman and a person of color, allowing new team members to work from their homes in Minneapolis and Seattle.

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“Remote work has given us an opportunity as plan advisers and adviser firms to expand our talent pool,” says Tara Egan, the firm’s managing director of human resources, who joined the company in April 2022. “I’m a good example. I’m leading our HR department from Dallas.”

Vestwell has also seen a significant change in its geographic footprint since 2020.

“It was very New York-centric,” says Patty Kim, senior vice president and head of people at Vestwell. “But we intentionally made the decision to be remote-friendly to leverage talent across the nation. Especially as we grow our business, we want to make sure we have talent that can serve different time zones and different demographics.”

Opportunities and Challenges

Women, parents, and people of color are opting in to remote work at higher rates than their peers, according to a 2022 Future Forum study. However, some workplace experts say that while remote work has been a boon to diversity efforts, it represents new challenges for equity and inclusion initiatives.

Workers who aren’t in the office may feel less connected to company culture and can miss out on opportunities for promotions or raises.

“When we aren’t together regularly, it can be hard to understand the day-to-day of our teams,” Egan says. “We may not know what they’re dealing with at home, or what they’re dealing with in their communities. You don’t see and hear those things every day.”

Companies can continue to make progress toward their DE&I goals, but should seek to do sowhile recognizing the pitfalls of DE&I efforts for remote workers and putting new solutions and initiatives in place designed for the way we work now, experts say.

“We are seeing companies having to be a lot more intentional about creating transparency and opportunities for their employees to have an equitable experience,” says Liv Gagnon, co-founder of choir, which aims to life the voices of the underrepresented in the financial services industry. “It can be more challenging for people to fight for advancement, especially women of color who are usually more hesitant to ask for what they deserve. Remote work amplifies that issue.”

One step that SageView has taken to address such concerns is hiring a new HR team member this year with a specific mandate to focus on DE&I. Among his tasks: help set up and expand the company’s employee resource groups (ERGs) and take action based on insights from a new employee engagement pulse survey the company is using to tap into worker sentiment.

Such initiatives are important in all industries, but especially for financial services and retirement advisories, which has historically struggled to attract and retain more diverse talent.

Better Solutions Needed

“When we look at the way the system is now, we are ignoring entire groups of people and preventing them from participating in the conversation,” says Tina Opie, a management professor at Babson College and co-author of The Shared Sisterhood: How to Take Collective Action for Racial and Gender Equity at Work. “That tells you your solutions are not as good as you think they are.”

Among broker/dealers and independent advisory firms, women comprise 18.1% of headcount, with just 2.9% of advisers identifying as Black, 5.1% as Latinx, and 4.3% as Asian, according to 2021 Cerulli Associates data.

“When we are talking about the retirement advisory space, we are looking at an industry that is predominantly white and predominantly male,” Gagnon says. “So you are focusing on looking internally and asking yourself what about our organization creates a place where people from diverse backgrounds would want to work.”

That may require re-evaluating everything from flexible work policies to how the company recruits employees.

“Firms need to ask themselves: ‘Where are we going to find employees that are representative of the communities we want to serve?’ and ‘How are we going to internally create programs that make them want to stay here?’” Gagnon says.

A focus on communication

It also requires an increased focus on being intentional and clear in all communications with coworkers. In a traditional office environment, managers have more data points they can use to evaluate and understand their employees, including body language, tone, and natural office chatter. In a remote setting, they have to work harder to make sure their messages are coming across as intended, Kim says.

Employee also need to work harder at self-promotion, making sure that their managers are aware of their accomplishments, Kim says.

One strategy for managers looking to increase feelings of belonging and inclusion on their teams are to host regular one-on-one meetings with their staffers or even setting up office hours to build connections with workers, Opie says.

In such meetings, managers can talk to their direct reports about what’s working well, and how the company can better support each worker and better utilize their strengths. For coworkers located geographically close to one another, in-person meetings still have a place.

“But maybe, instead of requiring the employee to come to the office, you go to meet them at a coffee shop not far from where the employee lives,” she adds.

At Vestwell, the shift to remote work has also meant a shift in the way that the company evaluates employees, looking to their output and outcomes, rather than face time. That change has also helped mitigate some bias inherent in a face-to-face work environment.

“It evens the playing field a bit, when you’re responsible for a specific piece of business or work, but you’re not seen physically,” Kim says. “There’s just more focus on the quality of the work itself.”

Making Up For Missed Connections

At the Cleveland-based Oswald Financial, which has also benefited from casting a wider recruiting net in recent years, the biggest DE&I struggle has been replicating the training, engagement, and transfer of knowledge that occur more organically in an in-person environment, says Deena Rini, vice president and practice leader of retirement plans and wealth management services at the firm.

To make up for some of those lost connections, Oswald Financial has leaned into more off-site meetings for employees.

“Whether it’s lunch sessions for strategic planning or fun events like happy hours or golf, we make it a priority to have people together, in-person, on a monthly or quarterly basis,” Rini says. “We support the expensive with having employees come into corporate headquarters for that experience.”

In addition, part of the firm’s strategic plan includes an emphasis on one-on-one, peer-to-peer connections both in-person and via videocall.

“Those are opportunities for employees to exchange ideas and work on initiatives together with dedicated time,” Rini says. “That has been a big help for us.”

Another move that retirement plan advisories can make to improve their equity efforts, for remote as well as in-person teams, is moving toward more transparent compensation models, Gagnon says.

“Just being transparent about pay structure, and making sure people understand why they’re getting paid what they’re getting paid can do a long way toward equity efforts,” she says. “Especially if already feel like they’re working in silos.”

A competitive advantage

Research has shown that such efforts pay off for firms, especially in an increasingly diverse world. Organizations that view the remote world as an opportunity to evolve will have a competitive advantage over their peers, Opie says.

It comes down to being able to relate to participants, Rini says.

“Ideally, everyone in the country would be a 401(k) participant, and if you look at the diversity across the country, we don’t all look the same,” she says. “For retirement plan advisers, if your ultimate goal is to help people retire, you need to be able to relate to them, and you’re best positioned to do that if you have a diverse team.”

 

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