We hear a lot about diversity, equality and inclusion, and with good reason. Our society has come a long way, but more needs to be done for the American workforce to truly reflect the multicultural makeup of America.
Despite the nationwide push for enhancing diversity and inclusion in the workplace, the financial advice industry is one of the least diverse fields. The U.S. Bureau of Labor Statistics reports that only 5% of the 537,000 Americans employed as personal financial advisers last year were African-American, with Asians and Latinos accounting for 6.9% and 6.6% of our country's advisers, respectively.
At first thought, an obvious solution to the lack of diversity in a financial advisory practice might appear to be to hire a chief diversity officer (CDO). Many companies in different industries brought CDOs into their businesses after the creation of the Office of Minority and Women Inclusion (OMWI) in the Dodd-Frank Act. The
OMWI was established to monitor and assess the diversity practices and policies at entities regulated by eight federal agencies, including the
Securities and Exchange Commission.
However, hiring a CDO is not, on its own, a viable long-term strategy for improving diversity and inclusion.
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More: Consider diversity when it comes to mergers and acquisitions)
Research findings published by global search and leadership advisory firm
Russell Reynolds Associates in January 2019, said 47% of the companies in the S&P 500 Index have a CDO or an equivalent role in their organizations, and 63% of these CDOs were hired or promoted to their positions in the last three years.
While on the surface these findings look promising, Russell Reynolds found that 53% of the CDOs in S&P 500 companies hold an additional role unrelated to diversity and inclusion, which can limit the time and resources the person can allocate toward optimizing results. When Russell Reynolds surveyed nearly 100 CDOs in its network, the firm found only 35% of them track employee demographic data. So, most of the polled CDOs have no way of knowing if their efforts to enhance diversity are actually working!
In short, diversity and inclusion can't improve if company executives view them merely in the context of a requirement. Unfortunately, too many do. Russell Reynolds' annual Diversity and Inclusion Pulse survey of more than 1,800 business leaders across the globe provided respondents with a list of eight business priorities, and "diversity and inclusion" came in last in order of importance.
As a member of a minority community who has more than 25 years of experience in various facets of the financial services industry, including wealth management, I have found that the companies where the leadership teams proactively embrace diversity and inclusion are those that are most able to recruit and retain the best employees, regardless of demographic category.
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These organizations are the places where women and minorities not only work, but are comfortable expressing ideas, freely contributing input and feel they are valued team members who can advance within their organizations. An inclusive culture is a competitive advantage. It is a cornerstone of solid team dynamics, and it brings points of view that can sometimes be overlooked or ignored into the decision-making process.
Gurinder S. Ahluwalia is co-founder and CEO of 280 CapMarkets, as well as a member of the board of directors of HighTower Advisors.
