Tackling the Problem of Diversity in Financial Services

Does the financial services industry have a diversity problem? Ask Nick Foulks, director of communications strategy and customer engagement at Great Waters Financial in Minneapolis. “The industry as a whole is grappling with the concept,” he says.

As an African-American financial advisor, Foulks says he is often one of the few, if not the only, people of color to attend conferences and events.

The scope of the problem
The statistics confirm it. According to Boston-based Cerulli Associates, only 18% of financial advisors are women, 5% are Hispanic, 4% are Asian American and 3% are black. Among certified financial planners, the CFP Board found that 23% are women and 4% are black or Hispanic. For comparison, about 51% of the US population is female and 30% is black or Hispanic.

Although some may say that the problem is not as bad as before, it is far from satisfactory. “The industry itself is leaning toward unintended segregation,” Foulks says, meaning some small businesses may be all African American or all female, but few are truly inclusive.

Systemic inequalities
“We need to focus on changing the systems that have historically ignored and discouraged women, non-binary people, members of the LGBTQ+ community, and people of color, especially Black and Latino CFPs,” says Rachel J. Robasciotti , founder and CEO of Adasina Social Capital in San Francisco, which advises companies on how to improve their diversity. No statistics were available on non-binary or LGBTQ+ people, Indigenous or other people of color, or people with disabilities in financial services, but Robasciotti describes herself as a Black and queer woman. (Like all sources for this story, she shared her identity preferences.)

“This industry can easily be a ‘boys club,'” confirms Manal Fouz, chief compliance officer at Azzad Asset Management in Falls Church, Va., who is an Arab Latina at a company that primarily serves affluent American Muslims.

Marvin J. Owens Jr., director of engagement at Impact Shares, a socially responsible financial advisory firm based in Dallas, agrees. “Cronyship is prevalent,” he says. A former senior director of the NAACP who identifies as African American, Owens urges companies to create “a realistic path to success for those not well-connected through elite high school, family or background socioeconomic”. He says they need to look beyond traditional sources to “broaden the pool of diverse candidates.”

Benefits of diversity
In addition to being the right thing to do, diversity has several key benefits.

First, clients prefer to work with advisors who look like them, and the number of clients who are women or people of color is increasing. The CFP Board projects that people of color will make up more than half of the U.S. population by 2045.

“It depends on how relatable you are,” says Ellis Liddell, CEO of ELE Wealth Advisors in Southfield, Michigan, who identifies as Black American. Most of his clients are also black. “Clients want to know that you truly understand their situation.”

Second, diversity breeds “a greater level of engagement, higher levels of trust and a greater degree of innovation,” says Shundrawn Thomas, chairman of Northern Trust Asset Management, which manages $1 trillion.

Thomas, who identifies as an African American male, runs a company well above average in its diversity. Its American workforce is 37% women and 27% people of color. More than 60% of its executive committee is made up of minorities and women.

“It translates into many things that are important to our business,” he said, citing high levels of job satisfaction and loyalty, more inventive product development and better financial returns for the company. “Being part of an organization that embraces diversity makes me a better professional, and it also makes me a better person,” says Thomas.