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The Future of Financial Advice Must Be More Diverse

How decades of groupthink may be the bottleneck for gender, ethnic and age diversity in wealth management.

It’s human nature to address challenges based on their most pervasive effects, rather than dissect their causes. Take the ongoing discussion about the need for diversity in wealth management as an example. Endless articles have been written about the need to have more women, more people of color and more age diversity in the industry. As one of the white males who too often exemplifies the status quo, I couldn’t agree more with the impulse: the future of financial advice must be more female, more ethnic and age diversified than it is today.

And yet, evidence is mounting that our pathway to this goal is not an obvious one. Wealth management firms led by white male leadership teams, carrying “Women’s Empowerment” brochures while touting links to articles about the infamous millennials, remain overwhelmingly Caucasian, 50-plus and male. What wealth management leader doesn’t want more women, more people of color and more talent of all ages in their firm? If key stakeholders see the value of having leaders and advisors who look more like the broader demographic of potential clients, then why has progress on this been so incremental? 

Engaging the issue of diversity by the effects first (the imbalance of race, gender and age representation) keeps us from seeing the decades of assumptions that are more embedded, less obvious and likely more causative. A cultural monolith lies at the heart of the financial advice industry. A near-religious view of success and the factors to achieve it rings so fundamentally true that simply questioning these assumptions can, in too many firms, be the ultimate CLM (career limiting move). It’s this monolith of dogma that’s defining the playing field of winners and losers in wealth management, and until it’s addressed, progress on diversity will continue to be stunted. This dogma is so deeply rooted that most can’t even hear the unintentional bias embedded in some mainstay mantras. For example:

Arguably most in the financial advice industry would agree with this statement. But consider this: What if packed into this statement are the exact dogmas keeping free thought from entering the doors? Let’s take a look at some specifics:

  1. “Fixed Set of Goals” and Gender Bias: Based on the idea that most financial advice was designed for “retirement” (meaning an on-and-off switch from a lifetime of work to an end zone of leisure), everything from our planning software to our social media campaigns scream a linear progression toward a decisive finish line. (Fidelity’s Green Line, anyone?) But for decades now, the truth of this progression is less obvious, particularly for women. Women tend to be more non-linear thinkers, they’re more comfortable with combining priorities like work, family, philanthropy and don’t easily measure goals by how much return sits in their 401(k). Their goals are more diverse and more focused on quality of life metrics rather than having “x” amount of money on “y” date. If we want greater representation of female leaders in our industry, we must consider the possibility that the way we frame the goals and methods of our industry may not be as “gender-neutral” as we might have thought. To diversify our executive suites, we first need to diversify our beliefs and open ourselves to the possibility that our way of framing the “right goals” might be excluding the exact people we’re trying to reach.

  2. “Funded as a Consistent Percentage of Income” and Age Bias: The old adages here are rich and embedded: dollar cost averaging, set savings rates, time-value of money projections and more. Let’s face it, the math is simpler when we can tell the client how much to save in fixed dollars or fixed percentage over a period of time to reach some fixed goal. The job gets tricky in a gig economy where wage earners often don’t have company benefit plans, don’t make a fixed amount of money each month, work for a lifestyle instead of a salary and other non-fixed ways of thinking about their finances. Millennials, for example, reject cookie-cutter thinking (about anything) in favor of personalization, and will respond to customized approaches that enable them to earn, save and spend on their terms. As we bring junior advisors into the industry, we’re often training them on yesterday’s financial advising strategies that aren’t relevant to their peers today. Are we willing to staff our firms with advisors who are experts in short-term savings strategies, gig economy-based lifestyle management and financial advice built around six-to-seven career life cycles instead of one-to-two? Or will we continue to ask them to conform to assumed savings strategies that are based on antiquated career paths?

  3. “Invested into Stock Market-Based Accounts” and Ethnic Bias: Today’s definition of wealth management is essentially “stock brokering” 50 years ago. That DNA of Wall Street sales culture has been hard to shake and has had a major effect on the industry’s ability to recruit talent and clients. In many communities of color, hard assets—not intangible ones—are believed to have higher reliability and symbolic affluence. Too many advisors start the conversation about real estate or gold or other fixed assets pejoratively, not realizing the cultural values that their knee-jerk Ibbottson charts ignore. Financial advisors know the very real difference between investment and investor returns, yet all too often they shun those clients or staff who question the cult of capital markets. Firms that are willing to become more asset-class agnostic, focusing instead on holistic financial advice (versus pure stock market evangelism) are primed to attract talent from cultures that don’t relate to a Wall-Street-only view of financial advice.

Are these the only diversity-limiting dogmas? Certainly not. The assumptions of the eurocentric, male and gentrified Wall Street, which spawned the wealth management industry, are sundry and deep. What we know is that simply saying, “How do we hire and promote more women/people of color/millennials/Gen Xers?” is not making rich progress. I suggest strongly that it’s because we’re too often unwilling to address the unwittingly uniform views of success, the linear and assumed paths to affluence, and the tired inheritances of our industrial heritage. If we were to design wealth management from scratch, with a true hope of serving a fiduciary role for the broad spectrum of today’s American adults, I suspect we would not design it as it is. As always, we must start with the long road to empathy to truly move the needle on diversity for the industry.

Nick Richtsmeier is chief innovation officer at Trilogy Financial and chief operating officer of its independent Registered Investment Advisor, Trilogy Capital. He can be reached at [email protected].

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