managing your practice Closing the Diversity Gap in the FinancialAdvisory Industry

Here are some strategies that have worked for the financial firm, Edward Jones.

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Monica Giuseffi, MBA

Every day, financial advisors help clients prepare for the future. Now it’s the industry’s turn to prepare for the road ahead.

The business of managing wealth is changing. Women and ethnically diverse investors are poised to play a more significant role, bringing with them unique needs and priorities. It is more important than ever for the financial industry to proactively learn how to better serve these investors.

Over the next 40 years in an unsurpassed wealth transfer of more than $41 trillion, women will inherit 70 percent of the estates, according to Boston College’s Center on Wealth and Philanthropy. Women often approach investing differently than men. For example, they tend to be more relationship driven and more focused on what they can do with their investments (e.g., care for their families) than on a dollar amount.

While relationships with a financial advisor are not necessarily gender-based, there’s still a bias among many women. In a recent poll, two-thirds of women prefer to work with a female financial advisor. With women representing only 31 percent of financial advisors industry-wide, according to The Bureau of Labor Statistics, we are not prepared to handle that preference.

Meanwhile, the ethnically diverse population is growing. The U.S. Census Bureau states that by 2044, the white population in the U.S. will become the minority, and the collective of diverse populations—Hispanics, African Americans, Asians, etc.—will be the new majority. Cultural nuances around family and community connections, as well as risk tolerance and trust, impact the relationship they have with money.

Building the pool of diverse financial advisors involves both effective recruiting and retention.

Today, ethnically diverse groups have a collective $4 trillion in buying power, according to the U.S. Department of Commerce. Yet, they are underserved. Effectively approaching them requires a deeper knowledge of their needs and concerns.

The U.S. labor force is also tilting toward more diversity. More than half of accountants, pharmacists and forensic scientists are women, as are 65 percent of college graduates. Similarly, millennials (those in their 20s and 30s) will soon constitute 75 percent of the workforce, and two out of every five millennials are culturally diverse.

Regardless of gender or ethnicity, investors who work with a financial advisor receive an average 3 percent increase in the value of their portfolios, according to a study from Vanguard Funds, titled Advisors Alpha. It’s a grassroots effect; when individual investors succeed, they help strengthen our nation’s economy. As an industry, it is our responsibility to continue to serve investors inclusively in order to support opportunities for personal economic growth.

Why the diversity shortage

Many of the challenges our industry has in recruiting women and diverse candidates can be overcome. For starters, there’s a risk aversion during the early years because of the commission-based income. Recognizing this, many firms have restructured compensation plans to provide a fixed salary in the years it takes for financial advisors to build their businesses.

A second issue is that there appear to be few women and/or diverse role models. This optic is not one that suggests women or diverse financial advisors will flourish and rise to the top ranks.

Finally, candidates may not grasp the honor in pursuing a career as a financial advisor. Movies and headlines tout greed and corruption rather than the difference advisors make. Financial advisors help set individuals on a path to a dignified retirement, help send kids to school and help them advance socioeconomically.

The way forward

Building the pool of diverse financial advisors involves both effective recruiting and retention. Here are some strategies that have worked for Edward Jones.

• Combat the optics. We bring together 50 to 100 successful women and diverse financial advisors and firm leaders for recruiting and networking events throughout the year. The energy is high, and women, diverse financial advisors and senior leaders are accessible. For candidates at recruiting events, this means seeing their potential from the eyes of others like them. For new financial advisors at networking events, there is access to peer-to-peer support.

• Highlight the importance of the work. The Edward Jones Opportunity presentation delivered to business and civic organizations features not just the work, expectations and compensation, but also the value of the work we do for clients. According to Research in Organization Behavior, finding meaning in one’s work has been shown to increase motivation, engagement, empowerment, career development, job satisfaction, individual performance and personal fulfillment, and to decrease absenteeism and stress.

• Set objectives around qualified candidates, hiring and retention, and measure them. Review results regularly and strategize what works and where to improve. Be flexible to make changes as needed.

The road forward in closing the diversity gap within the financial-services industry, like investing itself, requires a steady, systematic approach with a long-term vision.

Monica Giuseffi, MBA, began her career with Edward Jones in August 2001. After serving as a financial advisor in Atlanta, she relocated to the St. Louis headquarters in 2016 to assume responsibility for Branch Team Inclusion & Diversity. She was named a principal with the firm in 2016.