Shared responsibility for winning diverse talent and clients will reap shared results

Every firm and every adviser can pursue cultural competencies that build understanding of the Black, Hispanic and Asian communities, even as the profession overall continues its long-term efforts to appeal to those groups as clients and talent, Kamila Elliott, chair of the CFP Board, said at the group’s annual diversity summit Thursday.

Cultural competency emerged as the theme for two industry diversity summits held this week by the Certified Financial Planner Board of Standards Inc. and the Financial Industry Regulatory Authority Inc.

Building awareness of the profession with college students is a start, but aligning industry and employer culture to capitalize on all that diversity brings is where the payoff lies, speakers said.

“We still have significant work to do,” said Kate Healy, newly installed managing director for the CFP Board Center for Financial Planning.

Elliott gave one example of cultural incompetence: An adviser counseling new clients, who were Black, that they should divert their 10% church tithe to saving and investing — a recommendation that drew laughter from the audience.

The wealth gap between Black and Hispanic households and white households is entwined with barriers to equitable resources and results in education, employment and homeownership, she told the group, summarizing data that illustrated the multigenerational effect of institutional bias. President Lincoln’s promise to give each emancipated slave “40 acres and a mule” for a new start would have amounted to $193,000 in today’s dollars, she said, citing one example of a broken promise that had long-term repercussions.

Firms need to ensure that individuals from underrepresented groups are not overlooked for leadership development, Mark Uyeda, a commissioner at the Securities and Exchange Commission, said at Finra's virtual event, in order to support organizational resilience and to stoke a diverse pipeline for senior positions.

“You hire people to focus on a particular skill set but the higher you go up in an organization, the broader the skills you need, so the pipeline needs to give people the opportunities so when It comes to those executive positions, you have individuals with broad experience,” Uyeda said.

Minorities often have less generational wealth and experience and need more incremental points of entry for investing and for gaining financial management skills, SEC commissioner Jaime Lizárraga said at the Finra event.

“I’ve seen a number of financial literacy efforts over the years, but I have questions about how much reach there is,” he said, “I’d like to see the commission and staff take a look at documents in languages other than English and think about how we can make sure that we get this important information out to investors." 

English-only documents and outreach undermined minority business owners’ access to emergency help in the spring of 2020, as the Covid-19 pandemic crested, illustrating how cultural gaps can exacerbate minority household financial instability. “That was an eye-opening experience,” Lizárraga said.

As the CFP Board continues to research best practices, points of improvement and the longer-term impact of diversity awareness and demographic change within the profession, the industry can do itself a favor by rejecting cliches, said Arlan Hamilton, founder of Backstage Capital. She spoke as an entrepreneur to entrepreneurs, and as a Black, queer woman who has bootstrapped her way to the top echelons of private equity and venture capital by bartering insight and innovation for entré and now, influence.

Abandon the stereotype of “stale, pale, male” and all that entails, Hamilton urged, citing the commonly used descriptor of the industry’s demographics. The compelling rationale for hiring diverse talent and internalizing cultural competencies should be to be “competitive, a cut above, interesting,” she said.

In line with new research that estimates that planners could have reaped $14 billion more in fees just in 2021 had they better served women clients, Hamilton pointed out that it’s in the best interests of senior men in the industry to inform themselves about client communities outside their daily experience.

"Look at how much you’re missing out on because you’re ignorant,” she said. “And lazy.”