Research has repeatedly shown that diversity is good for businesses. Companies benefit from employees’ diverse backgrounds and perspectives to drive innovation, attract new customers and increase profits. However, diversity in the workforce can also have a significant impact on the customers of a company.
One example is the financial planning profession. The United States is changing in terms of its demographic makeup. Hispanic, Black, Asian and other minorities are continuing to increase. Despite persistent wealth gaps that impact many minority communities, median earnings are increasing and so is purchasing power.
These groups are not only accumulating wealth but are also less likely to use a financial advisor than white families. A financial planner is used by 28% of Black households, and 17% of Hispanic families to help them achieve their financial goals. This compares to 31% of white households. RAND Corporation reports that Hispanics as well as Blacks have less confidence in their ability and ability to cover unexpected short-term or long-term costs.
RAND research indicates that a large number of these people could benefit from financial planning advice. One problem is that the current demographic makeup for financial planners doesn’t reflect the U.S. populace: Only about 4% are Black or Hispanic at the end of 2019.
Interviews with financial advisors and current and potential candidates for the job show that a diverse workforce can better reach diverse communities. In research conducted by the CFP Board Center for Financial Planning, CFP® professionals cite the opportunity to expand access to financial services in underserved communities and to help improve their understanding of personal finances as key benefits of being a financial planner. Nearly 60% of respondents agree that Black financial advisors and Hispanic planners would be more successful in attracting clients from similar ethnic backgrounds.
“Diversifying the talent pipeline is an opportunity and a prudent approach for financial planning businesses,”D.A., Center Managing director Abrams CAE. “We are successfully working with many firms who want the industry to reflect our nation’s shifting demographics and respond to the increasing purchasing power of people of color.”
Abrams believes that similar messages can be of great value in reaching diverse communities. Different people think and communicate differently about money. The Center interviewed potential financial planners of color who explained that their families were more concerned with getting by than saving and investing. In contrast, other families believed it was inappropriate to talk about money. Financial advisors can benefit from sharing their backgrounds and mutual understanding to help clients change their thinking and overcome cultural barriers.
Diverse financial advisors help to raise awareness about financial planning as both a profession and a service within their communities. Many take an active part in the promotion of financial planning by attending parent meetings at local schools or leading workshops at community centers. Mentors and role models are also provided to students who might be interested in pursuing a career in financial planning.
Recognizing these issues and opportunities, the Center hosts an annual Diversity summit to offer a forum for discussing initiatives that can improve diversity in financial planning. The Center’s third Diversity Conference will be held from November 18-20, 2020. It will address sustainable diversity and inclusion within the profession. Visit https://2020diversitysummit.cfp.netRegister now to learn more
The potential to improve the financial well-being and social mobility of diverse communities by focusing on recruiting financial advisors from these areas and working with them.
