The lack of diversity in the financial planning profession has dogged our industry since it became considered an industry. Our local newspaper, The Buffalo News, runs an annual article at the beginning of the year about what local advisors think about the coming year’s financial outlook. It features the typical line up of white guys with their prognostications about what the market is likely to do in the coming year. A woman wrote a letter to the editor complaining that it’s always white guys giving such forecasts. The problem is, that is representative of our industry. The average financial advisor is a 57 year-old white man. While many more women (myself included) have carved out careers in the financial services industry, most of us are caucasian. It shows improvement, for sure, but there’s still so much farther to go.
It seems the banks have the greatest degree of both ethnic and gender diversity, probably most likely due to strong diversity initiatives. We simply don’t see that kind of representation in other areas of finance. It’s troubling.
There have been many studies that have tried to determine the problem and how to fix it. There has recently been a push from the Financial Planning Association to promote diversity in our industry through various methods, but most prominently through a scholarship program that the FPA is sponsoring. This has come under quite a bit of controversy (members may wonder why only certain ethnic groups would qualify for such scholarships when those of us who do not belong to such groups may have struggled financially to pursue our careers). This argument is indicative that the initiative may not gain the traction it needs to promote its mission, but it’s a start.
I was at a marketing seminar last night and the instructor, Peter Hall (who really did a great job, IMO) mentioned something that resonated so strongly with me, I knew I had to blog about it with this topic today. He said that the main difference between the socio-economic classes was their planning horizon. He gave the example that the lower-lowers (homeless) have a planning horizon that is only a few hours long (where to get a meal, shelter etc…) whereas the upper-uppers plan for their grandchildren’s college education. This would explain why most financial planning clients are in the middle to upper income and net worth categories; they have the luxury of thinking past their immediate needs.
But this doesn’t explain why African-Americans and Hispanics (not to mention native Americans, whose percentage as clients and advisors is so low it doesn’t even show up on the survey results) don’t pursue a career in financial services. It could be that they don’t possess the financial resources to pursue the higher education necessary to obtain certain positions. Or it could be that they don’t have role models in their social circles that can pave the way for them to follow.
Or could it be that they simply fear discrimination and figure it’s not worth the trouble.
Our industry needs the talent, ideas, and perspective of a broader spectrum of people to serve a broader clientele. Other professions have attained such diversity, why not ours?