A recent Pew Research Center study found that the majority of Americans say growing racial and ethnic diversity makes the U.S. a better place to live. While the country is experiencing an increase in diversity, the financial planning profession has been slow to evolve at the same pace.
The CFP Board Center for Financial Planning and other organizations have taken a proactive approach to addressing diversity — not just because it's the right thing to do but because the market demands it. With the country becoming more and more diverse we are seeing greater accumulation of wealth among people of color. In response to this business opportunity, firms are seeking to diversify their ranks.
Currently, blacks and Latinos represent 13.3% and 17.8% of the U.S. population, respectively, and those numbers are continuing to grow. Yet blacks and Latinos make up less than 3.5% of all certified financial planner professionals. These statistics reflect a challenge facing the profession: its workforce is not reflective of the country and the population it needs to serve.
To address this challenge, the CFP Board Center for Financial Planning recently released research findings to identify the causes of the lack of diversity in the financial planning profession. The research found that seven in 10 CFP professionals widely acknowledge the underrepresentation of blacks and Latinos in the financial planning profession. In fact, three in four CFP professionals tend to think of a white male when picturing a financial planner. And 61% of consumers work with a financial planner who is white and male.
The majority of Americans see no difference, though, in the required skill set between whites and blacks (78%) or whites and Latinos (69%). And while the majority of CFP professionals are "very likely" to recommend financial planning to others as a career, it's important to note that black CFP professionals are most likely to recommend financial planning, at 68%, with Latino CFP professionals following closely at 59%. That figure for all other CFPs was 52%.
If black and Latino financial planners are highly satisfied with their careers and perceived by the public to have the same skills as white professionals, why does underrepresentation persist in the profession?
Financial planning is not on the radar as a profession for people of color. Among black and Latino prospective financial planners, 58% have never seriously thought of becoming a financial planner, with 41% stating they do not know enough about the profession to consider it.
Survey results further point to broad factors that contribute to the lack of diversity in the profession. These include economic inequality, firms' hiring and onboarding practices, and clients' implicit biases. Specific roadblocks include a low confidence in financial skills, the substantial training and education requirements, and the absence of role models in the profession.
As consumer demand for financial advice grows and increasingly diverse consumers seek out financial planners, it is imperative that the financial planning profession work toward expanding and diversifying the ranks of competent and ethical professionals who can meet their needs. The research findings highlighted a few key areas where firms can invest in programming and resources to attract diverse professionals, such as mentoring programs (56%) and greater career awareness (51%).
To that end, CFP Board has developed programs in the past to address gender diversity and have found great success. The Women's Initiative (WIN) Advocate Program has created key partnerships and engagement opportunities to educate women and girls about the benefits of the financial planning profession, while the WIN-to-WIN Mentorship Program has facilitated more than 1,600 mentorships that assist women on the path to CFP certification.
Furthering the discussion about diversity, the CFP Board Center for Financial Planning will host its first-ever Diversity Summit on October 23 in New York City to engage leaders both within and beyond the financial planning profession to discuss solutions to increase racial and ethnic diversity among financial planners. At the summit, the Center will release a thought leadership paper offering research-based recommendations for combating the under-representation of blacks and Latinos in the profession, including specific ways in which firms, practitioners and other stakeholders can get involved.
We must come together as a profession to acknowledge the diversity challenge we face, develop actionable solutions and work together to implement them. Building a diverse workforce is integral to the future of the profession, and to ensuring that all Americans have access to competent and ethical financial planning advice.
Marilyn Mohrman-Gillis is executive director of the CFP Board Center for Financial Planning.