How Firms Can Take Actionable Steps to Advance Diversity in the World of Finance

The CFP Board Center for Financial Planning has released a new thought leadership report, “Diversity in Action: How to Sustain the Financial Planning Profession,” that features case studies from six leading financial planning firms on what they are doing to recruit more diversified financial planners to their practices. The six firms are Charles Schwab, Fidelity, HoyleCohen, Merrill Lynch Wealth Management, Northwestern Mutual and Wetherby Asset Management.

“Racial and ethnic diversity is critical to the sustainability of the financial planning profession,” says CFP Board Chief Executive Officer Kevin Keller. “Now is the time for change. The Diversity Summit provides the occasion to learn from industry experts who are sharing new viewpoints, overcoming challenges, creating successful opportunities and taking notice of what is indeed working to advance diversity and inclusion in our profession. The points made in this important report will prompt actions among financial planning leaders, firms and other key stakeholders to expand the talent pipeline and broaden our service to all Americans.”

The white paper—which the CFP Board released as part of its third annual Diversity Summit and Career Fair, which runs through November 20—says more women and people of color can be attracted to the industry through diversity, equity and inclusion (DEI) work. The paper says this is particularly important as financial planners continue to retire and the nation is in the “midst of a racial reckoning.”

The paper says there are three basic principles that need to be applied. Managers must be engaged in solving the problem. Teams need to be exposed to people from different groups, and workers should be encouraged to be accountable for change. “This research confirms what our case studies show: that tactics focused on control are less effective than those that invite people to contribute,” the paper says.

The paper recommends seven steps that firms can take to become more diversified.

First, the DEI initiative should be tailored to strengthen each individual firm’s mission and values. Second, the firm should establish why the DEI initiative is important—and put this in writing as a mission and vision statement.

Third, a firm needs to ensure leadership commitment. “The prioritization of DEI work needs to come from executive management to underscore its importance,” the paper says. “Executives and senior leaders must be authentically committed.”

Fourth, the firm must develop a strategy with goals and tactics to support its mission and vision statement.

Fifth, the paper says, establish and track metrics, and sixth, engage all employees by inviting their feedback and contributions. “This creates buy-in, transparency and trust, especially from people impacted by racism,” according to the report

And finally, firms need to evaluate their progress by using surveys and questionnaires and then determine where there is room for further growth.

Along with this, the center says firms should create a position for a DEI officer/manager/director who reports to the president and/or CEO of the firm. The DEI officer should be supported with a substantial budget to implement best practices, including training and hiring.

The DEI officer should also be supported with councils and/or task forces. Firms also need to collect and use demographic data as a baseline measure of where the firm is and where it wants to be.

Employees need to be held accountable for inclusion, and they should be given incentives, such as awards in the form of financial resources or accolades, when they advance DEI work.

Firms also need to educate workers about the importance of DEI, provide mentors to new hires and actively recruit more diversified workers.

“Diversity leads to stronger sales revenue, customer growth, greater market share and higher profit levels,” the paper says.

The paper notes that Black and Hispanic people account for nearly 30% of the U.S. population but make up less than 4% of the country’s certified financial planner (CFP) professionals.

“Especially within the context of the pandemic and the national racial reckoning spotlighting racial disparities, the absence of diversity is felt in our everyday lives,” the paper says. “Our current historical circumstances present an opportunity for us to ask ourselves what we can do as individuals, as firms and as a profession to advance a more inclusive and diverse society. … The journey towards a more diverse and inclusive workforce is a marathon, not a sprint. We have to put in the work day in and day out.”