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Is Diversity and Inclusion a ‘Nice to Have’ or ‘Must Do’ for You?

Our profession is overwhelmingly white and male both by design and practice, which means that it needs to change.

The world is changing whether we want it to or not. Our profession needs to change as well.

Don’t get me wrong, for most, this is the best of times: Markets are at or near all-time highs, firms are managing more assets than ever before (with many achieving scale), and the advent of the age of private equity has enabled growth options and succession solutions that would’ve seemed impossible just a few years ago. Life is good, right?

Well, maybe not quite as good if you’re somehow different. …

You see, if you’re a woman or a person of color, you may perceive this industry a little less benevolently because you’re not invited to the party in nearly as meaningful a way as others. For you, it has been and will likely continue to be if not the worst of times, then at best a decidedly lesser one.

And this is a reality about which most of the older, white and male winners in our profession are either blissfully unaware or blithely unconcerned, which is the problem.

Simply put, our industry’s record on diversity and inclusion (D&I) is appalling: In a country that’s more than half female, women are about 25%–33% of all financial advisors, which means that they’re greatly underrepresented.

And while people of color comprise a third or more of our population, they represent just 10%–15% of the advisor community, according to the CFP Board’s Center for Financial Planning. Another way to think of this is that women and people of color are disproportionately excluded from the fantastic opportunity that this profession offers to folks who are not like them.

Think about it: Honestly, on a scale of 1 to 10, with the former being “not important at all” and the latter being “the most important area of focus,” where does your organization’s diversity and inclusion effort rank? Now compare this with the actual composition of your professionals. Do the two align?

Most likely, you rank the importance of D&I more highly than your execution of it shows, which implies that it’s a “nice to have” rather than a “must do” for your organization. Now aggregate this with the tens of thousands of firms in our industry, and you can see why we are where we are.

Am I suggesting that this is due to overt racism (and sexism, etc.)? No. In fact, few if any of the people I’ve encountered in my journey in our community seem to be racist. But the effect of our collective benign neglect is nonetheless the same: Our profession is overwhelmingly white and male both by design and practice, which means that it needs to change.

And, no, I’m not suggesting this because it’s the right thing to do. I’ve been around long enough to know that diversity and inclusion is one of those things that everyone supports in theory but few actually practice. In America, you can’t be against baseball, apple pie or D&I, publicly at least, but you’re free to disregard them all in your personal and professional conduct.

So, while I don’t believe that the disproportionately older, white and male leadership of our profession has intentionally excluded The Other, I am clear that it’s comfortable with the current outcome, however benignly achieved.

Yet the real reason to pursue the effective practice of D&I is the business case: There is an ever-deepening trove of research that demonstrates that diverse organizations are higher performing, period. Yes, things are really good right now, but the truth is that they could be a lot better if we’re willing to open our industry fully and proactively embrace D&I.

In addition, huge demographic shifts are occurring such that by the end of this decade, there’ll be a new dominant investor class. Truly, the age of the millennials is on the horizon, yet our industry is exquisitely well-structured to serve their boomer parents. Yes, the gravy train is great now, but there’s a bridge up ahead and it’s by no means clear that we’ll be able to cross it.

So what can and should we all do to address this "diversity gap"?

First, measure your D&I performance. After all, we’re numbers people, right? Our most valuable service is to translate our clients’ hopes and dreams into practical, reality-based plans, but we don’t yet practice this with our own people. Look at where you are now, identify some opportunities to diversify your talent in a holistic way (i.e., with respect to race/ethnicity, gender, sexual orientation, age, etc.), develop a plan to achieve this and hold yourself accountable.

If you don’t have the expertise to do this in-house, connect with industry groups like the Center for Financial Planning, the Financial Planning Association and the Association of African American Financial Advisors (Quad-A), among others, who can share best practices.

Next, make yourself uncomfortable by reaching out to organizations whose constituencies are diverse, especially those in our industry. Take this to the next level by collaborating with organizations such as Sponsors for Educational Opportunity (SEO) and the Quad-A Foundation, which are actively engaged in developing a deeper pool of talent of color. (Full disclosure: I’m a board member of both organizations.)

Finally, commit yourself publicly to some reasonable stretch goals and publicize your D&I progress periodically, like our firm, MarketCounsel, has done recently. Drawing a proverbial line in the sand can help you move meaningfully toward a more equitable and inclusive future.

Isn’t this the kind of concrete guidance we give to our clients all the time? Now it’s time for us to practice what we preach.

Walter K. Booker is the chief operating officer of MarketCounsel, a business and regulatory compliance consultancy for investment advisors.

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