Opinion: The financial services industry has a diversity problem. Here’s how to fix it.
As conversations about diversity and inclusion have become more mainstream, the financial services industry has largely approached this serious issue with a “square peg, round hole” approach. Finance professionals need to change strategy and come together to meet the challenge of diverse representation in financial services. Without comprehensive and widespread change, efforts to increase minority equity in financial services will continue to fail.
Currently, 80% of advisors in the United States are white and 70% are men. Becoming a more diverse industry cannot be done from the bottom up. Managers won’t listen if only members of the minority voice their needs. We need a genuine, genuine top-down effort in our industry to collectively create a new normal that signals anyone, from any background, “We want you here. You belong.”
Play catch-up before you even start
The wealth gap in America has never been wider. It is more pronounced for minorities and only gets worse. Even before someone from an underrepresented community begins their journey into financial services, the game is seriously stacked against them. Wealthy generational families know what financial advisors are; they understand how their services can greatly benefit their lives. Meanwhile, most people in minority communities don’t even know that financial advisors exist. Awareness of our profession among underserved communities must change to increase opportunity.
Many other aspects of American life contribute to the problem, including health and education. The saying that “health is wealth” is actually true. For example, throughout the COVID-19 pandemic, communities where the average household income is below $50,000 have been hit much harder, and that’s no coincidence.
In addition, education refers to questions of conscience and imagination. Without early awareness and education programs, how can minority families learn to access financial advisor support to build generational wealth? If none of your teachers are like you, how can young minds from underrepresented communities imagine a future as a financial advisor or planner?
Ironically, we were both inspired and motivated to become financial advisors because we were denied entry. But for many who could do the same, the challenges are daunting, especially in an industry that wasn’t made for you. Every person of color has a story similar to ours. It is very difficult to get that first opportunity. Once you have a chance, the struggle continues as we have to work even harder to earn our clients’ trust, all because we don’t look like a traditional financial advisor.
You can’t build on a system that’s broken
After years of struggling to overcome countless barriers to entry, we decided enough was enough. Real change will not happen if we keep trying to build on a broken system. We have to start from scratch and build the industry we want to see. Here are the steps to follow:
- A vision for the future: Career viability and mobility; helping people understand that this is a viable career for them and educating them on the career path of a financial advisor.
- Room for growth: Ensure fair compensation for financial advisors, provide enough runway to scale their business, and keep people from falling before they can really get started.
- Break down barriers: Provide the resources that enable financial advisors to thrive, including technology and community. For example, removing the significant barrier of minimum access requirements in custody.
- You can’t be what you can’t see: Mentoring for minority financial advisors empowers them to overcome challenges and achieve success. Because the experience of underrepresented advisors is unique, having someone who shares that experience and who can offer advice and expand their focus is essential.
Recently, we were both asked to describe what the underrepresented financial advisor community looks like. We both laughed and answered almost in unison, “What community? When we walk around at an industry conference, the two of us are often the entire black population at the event. We try to shed some light on this, but in truth, the devastating impact this has on minority financial advisors cannot be underestimated.
Community is necessary for success, and this aspect of the financial advisory profession for underrepresented advisors has long been absent. The desire that no one should feel like an anomaly is the root of our profession’s problem. Everyone, regardless of race, sexual orientation, and background, should be able to look across a room and see their community represented — and know they belong.
Dasarte Yarnway and Emlen Miles-Mattingly are the co-founders of the Onyx Advisor Network, which helps historically underrepresented financial advisors start, scale and sustain their practices. Follow them on Twitter: @DasarteYarnway and @emilesmattingly.
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