Adviser's Consultant: Building diversity at firms makes business sense

Broad minded approach key to cultivating diversity of clients, staff at advice firms

Aug 24, 2016 @ 12:43 pm

By Liz Skinner

Marguerita Cheng said for the bulk of her clients, she is the first adviser they've ever seen.

About half of the families that Blue Ocean Global Wealth serves are ethnically diverse, and she's most confident that these clients won't be walking away from her anytime soon.

“I've been able to connect with people who never thought they would use a financial adviser,” said Ms. Cheng, who is Chinese-American and based in Rockville, Md., a suburb of Washington, DC. “They are going to be very loyal. They appreciate that I spent the time to educate them and pay attention to them.”

Allegiance is just one of the business benefits financial advice firms that embrace diversity among their clients and their staff stand to gain, she said. Others include access to new groups of clients, and a chance to receive varied input on how to solve a problem or challenge.

“I view diversity as an opportunity for advisers,” she said. “An opportunity to see the world through a different lens.”

Learning about different ethnicities can provide advisers more understanding as they reach out to clients and help them with financial plans.

(More: Financial advice's diversity problem)

For instance, advisers who take on Indian clients should expect to help them save significant amounts for weddings, while those serving Latinos should plan to have real estate investments to offer to clients, Ms. Cheng said. People who are Chinese genuinely like to save, but they are very private about asking for help so reaching out to an adviser feels like an unnatural move for them.

It won't always be easy for outsiders to figure out how to serve certain groups, she said.

“Some communities are more skeptical of advice,” Ms. Cheng said. “Advisers need to be sincere and understand that they are an outsider in that community.”

It's easiest to make the business case for why an advisory firm's workforce needs to be age diverse.

A firm that includes advisers above and below middle-age will be set up for a natural succession strategy, an issue that perplexes many advice firms that are filled with advisers who are over age 50, or even 60.

(More: Help more women succeed as financial planners)

Also, younger advisers are a natural fit to serve the younger family members of the firm's traditional clients, thus providing multigenerational planning, she said.

When advisers are building a team they should look for a range of ages, but also a diversity of experience and interests, especially because financial planning includes many disciplines, including investments, insurance, planning, etc.

“You don't want everyone to be good at the same things. You don't want everyone to like the same things,” she said.

Of course supporting diversity doesn't end with bringing dissimilar people on board. Advisory firms also need to make sure everyone is being included and that no one feels like they don't fit in as an employee or client, Ms. Cheng said.

For clients, that means firms need to make sure their fee models and services offered match with the needs of all clients. Practically speaking, that may mean firms with account minimums or that only charge based on assets under management may need to consider offering an alternative method, such as a retainer fee for service.

(More: African-American advisers ID business challenges)

Tip sheet

• Adding diversity won't happen by mistake, especially in parts of the country where the population is more homogenous. Make an effort to seek out diverse clients and employees.

• Begin by creating a multigenerational practice, it's important for succession planning anyway. If you're an older adviser, hire a young one, and vice versa.

• Recruit young advisers from financial planning or other business programs because today's crop of students are more diverse than the overall population.

• Be broad minded about defining diversity to incorporate a range of experience, as well as age, sex, ethnicity or religion.

• Make sure the firm's fee and service model fit the diverse clients you are seeking. A structure based on the amount of assets under management may be too narrow.

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