It may not come as a surprise that minorities are underrepresented in the financial services industry, accounting for just 3.5 percent of all CFP professionals. But a new study by the CFP Board Center for Financial Planning gets at the reasons for that lack of diversity, and there’s a gap in perception between people of color and whites as to who’s responsible for the underrepresentation.
The majority of non-black, non-Latino CFP professionals (58 percent) attribute the lack of diversity to the reluctance to pursue the profession by people of color. Only 10 percent of that group attributes it to the company’s reluctance to hire people of color, but 27 percent of black CFPs attribute it to companies’ reluctance. Among black and Latino business prospects, 29 percent blame the firms.
More than one in three black CFPs (34 percent) and one in five Latino CFPs (22 percent) think there’s a lack of opportunities for blacks and Latinos in the profession.
The study, conducted by Fondulas Strategic Research for the Center for Financial Planning, surveyed 2,276 people, including hiring professionals, current CFP certificants, consumers with investable assets or income of $100,000 or more who are currently working with a financial planner, and black and Latino business professionals who indicated they would consider the financial planning profession.
Black prospective financial planners were most likely to cite outright racism in hiring or firms not offering enough opportunities, the study said. When asked about the root causes for the underrepresentation, this group ranked these reasons higher than average: prejudice from firms, firms’ beliefs about clients and ethnicity, firms’ assumptions about lack of a cultural fit and fewer opportunities.
“Whites and other ethnicities were less likely to think that there was deliberate discrimination going on,” said Peter Fondulas, president of Fondulas Strategic Research. “I have no doubt from this study that there is a perception that some of that exists, especially among certain constituents, especially among people of color in particular.”
Participants across the board cited the lack of role models for people of color and the profession not being top of mind among blacks and Latinos as the top reasons why these groups are underrepresented.
Hiring professionals were asked about the qualifications they look for in a financial planner, and some of the top characteristics included having a lot of financial services experience, having licenses or certifications, having a strong network of potential clients, having a successful sales background and having a lot of personal connections.
The majority of all survey participants (56 percent) believe firms are more likely to hire white professionals than either blacks or Latinos. Seventy percent of black CFPs believe companies are a lot more likely to hire whites than blacks.
Yet, the majority (78 percent) of respondents believe there’s no difference in skillsets between whites and blacks or between whites and Latinos (69 percent). Still, 16 percent believe whites are more skilled in financial planning than blacks, and even more (25 percent) say whites are more skilled than Latinos.
“We need to change the face of the financial planning profession so that all Americans, regardless of race or ethnic group, have access to competent and ethical financial planning advice to help them increase wealth and ensure secure retirement,” said Cy Richardson, senior vice president, National Urban League and chair of the Diversity Advisory Group.