It’s no secret that building a diverse team has a far-reaching impact on business health overall. Not only do contrasting viewpoints, backgrounds, and cultures propagate new ideas and innovation that can move a firm forward in a more agile way, but they also impact the bottom line. According to McKinsey, every 10 percent increase in racial and ethnic equity translates into a one percent increase in company earnings.¹

The hard truth: There’s a lot of work to be done in the world of finance to create more diverse, more inclusive environments where everyone feels welcome. Today, the proportion of white males occupying a C-suite position in the financial services sector is 112 percent higher than for entry-level roles. On top of that, only one out of every 10 executive positions is filled by a woman or person of color.¹

Creating a more diverse talent pipeline is no easy task, but here’s how firms can begin moving in the right direction.

Retool the Recruitment Process

First order of business: Get as close to the problem as possible. While there is much work to do around ousting unconscious bias from the talent acquisition process, the homogeneity within finance is, in part, a downstream effect of what’s happening upstream at colleges and universities, especially when we consider a bachelor’s degree is required for most financial advising positions.

Right now, finance is the 14th most popular major among students attending college in the U.S., and between 2018–2019, 52,678 finance degrees were issued.² If we consider the following enrollment statistics³:

• Women are nearly 25 percent more likely to attend college than men;
• 20 percent of college students are Hispanic or Latino;
• 10 percent of college students are Black or African American;
• 7 percent of college students are Asian or Pacific Islander;
• And four percent of college students are multi-racial.

We should see the same distribution reflected in the talent pipeline of financial institutions cherry-picking recent graduates, right? Wrong. Today, the world of finance is overwhelmingly white, and even more overwhelmingly male. If we follow the “like-attracts-like” logic, people typically avoid environments where they do not see people like themselves represented and actively succeeding in their roles. This is how racial and gender disparities in finance begin.

Financial firms can make strides against this disparity by going right to the talent source—college (and even high school) campuses—and embedding themselves in relevant programs. This can include:

• Partnering with local universities that offer a finance major or minor to grow your firm’s on-site presence.
• Reaching out to department chairs to speak to classes or student organizations about careers in finance and the future of financial planning.
• Working alongside colleges to develop internship programs that give students a window into the working world.
• Visiting high schools and career fairs to plant the seed early and educate young students on what it really means to work in finance.

In other words, increase your visibility and accessibility for the next generation. Show them why the future of finance is exciting and something they’ll want to be a part of.

Institutionalize Holistic and Human-first Planning

Since the beginning, finance has always been a transactional profession. It’s number-crunching, spreadsheets, formulas, and focus. For this reason, it largely attracts pragmatists and fact-minded logicians who find satisfaction in predictability.

But, as we know, the world of financial planning is changing—loosening and shifting toward a flexible and holistic methodology that leans more heavily on intuition, creativity, and human connection. This may require firms to consider new skillsets or backgrounds.

In enrolling the community in this new way of thinking and educating people of all socioeconomic backgrounds on what money means in the grander context of our lives, we may reshape the public perception of financial planning. And if we’re changing the narrative, we may also attract a wider range of personalities and perspectives who now see finance as a profession built on more than dollar figures and rote processes.

After all, what better way to attract a wider audience than with a wider scope of work? By institutionalizing the scope and service of financial planning, your firm can extend its reach to even reengage current employees interested in pursuing a career change or role expansion into financial planning.

To truly help all people achieve financial wellness, the professionals serving them need to represent those who are especially underserved. So much of financial planning is a relationship, and when clients feel understood and represented, it can lead to more trust, openness, and satisfaction.

Prioritize Forward-thinking and Innovation

There is a generational handoff approaching for financial firms. While Millennials are the new workforce majority, they are the workforce minority among financial institutions. According to the CFP Board, of the 90,773 active CFP certifications in the U.S., 72% are held by professionals over the age of 40.⁴

And while there is a significant racial and gender gap that needs mending, there is also an age imbalance that will become increasingly debilitating for firms as their aging workforce begins to retire.

How can firms move the needle on both at the same time? By evangelizing, practicing, and rewarding open-mindedness and innovation at all levels of the organization. This means encouraging your team to challenge the status quo. It means implementing automation tools and technologies that help everyone work smarter. It means acknowledging that good ideas can come from anywhere, or anyone—no matter their background, ethnicity, or the color of their skin.

Firms can start to bolster their future workforce by leveraging technology and creating mentorships or partnerships with young professionals and more seasoned employees to learn best practices.

For more ideas on how firms can address diversity in their talent pipeline, check out our eBook Retaining Talent and Growing Your Enterprise with Financial Planning Technology.

Sources:

¹ McKinsey & Company. “Racial Equity in Financial Services,” 2020.

² College Factual. “2021 Finance & Financial Management Degree Guide,” 2021.

³ Hanson, Melanie. “College Enrollment & Student Demographic Statistics.” Education Data, August, 2021.

⁴ CFP Board. “CFP® Professional Demographics,” 2021.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

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