Why Diversity Is Good for Your Business (and the World)
Advisors are rewarded in many ways when they grow diverse teams.
This article originally appeared in Morningstar Direct Cloud and Morningstar Office Cloud.
These days, we seem to be hearing about the need for greater diversity within financial advisor firms all the time--at conferences, in the media, and from our various provider channels. There are even diversity awards and firm profiles for those organizations embracing diversity. What does it all mean? Is it just a temporary, “politically correct” phase? Are there benefits or drawbacks? How can a firm increase diversity?
Does Diversity Matter?
Let’s start by asking the question, Why would diversity matter to financial advisors and their practices?
Are you doing it to seek recognition? Is diversity a tool in gaining access to a specific target market? Is it to make yourself feel noble?
While any of these reasons for boosting diversity can be a plus, in my opinion, you must truly believe in it as both a duty and an asset for it to be worthwhile. Attracting and retaining a diverse workforce is an ongoing commitment.
Benefits of Diversity
First, I happen to believe that diversity is a civic duty. Yes, this comes perilously close to wanting to feel noble as a reason. But I feel that a duty is a basic requirement rather than an “extra credit” accomplishment.
Finance professions are notorious for consisting primarily of white males. These professions offer great compensation and rewarding careers that serve clientele who, it happens, are not primarily white males. Are the doors to financial education programs and entry level positions closed to minorities? Or is it that we are not doing enough to attract diverse candidates? Our country--and world--is made up of a majority of “minorities” (women, non-Caucasian, and so on), so advisors need to move the needle toward a mix that more closely resembles the population we serve. In Bloomberg’s “How U.S. Demographics Are Changing: America Got Less White, Older and More Urban Last Year,” the following trends were noted:
Duty aside, I feel strongly that diversity truly adds value to a firm. A lack of diversity can lead to groupthink and tunnel vision. Bringing together people with diverse backgrounds and experiences can allow for more creativity and better solutions for both the firm and its clients. Dan Lefkovitz, strategist for Morningstar Indexes, wrote in his article, “Why Diversity and Inclusion Matter to Investors,” research shows that “companies serious about diversity and inclusion achieve superior financial results.”
Additionally, a diverse workforce can attract a more diverse group of clients. After all, if most firms are attractive to primarily white males, there are a lot more opportunities in going after “minority” populations. Of course, Hispanic clients don’t require Hispanic advisors nor do women necessarily need to work solely with women. Yet, it’s not a stretch to understand that a firm that includes a more diverse mix of employees broadens its appeal. Again, targeting niche markets should not be a primary reason for a diverse workforce, but the potential is certainly a plus.
Not only can diversity help attract new and varied clientele, it can also benefit the community by providing qualified financial advice to the underserved. As noted in a recent report by Filene, minorities are underrepresented in every category traditionally used to measure financial standing; minorities make up about 30% of all U.S. households yet account for only:
In my practice, located in San Diego, we have an initiative to target the Spanish-speaking market. We have several native Spanish-speakers on our team, and we will soon be rolling out a Spanish version of our website along with blogs. Of course, our diversity has already led to “niche” practice areas. As a woman-owned firm, with many women professionals, we serve a higher percentage of single women/high-earning women than most of our peers. Our individual involvement in community activities that resonate personally has also led to a significant percentage of Jewish, gay, or charitably inclined clients.
Finally, another great benefit of diversity is fun! It is definitely less boring to be among a group of co-workers who have different points of view, who can expose us to a variety of customs, and who can share different cultures. When we spend over a third of our waking hours at work, having a more engaging work environment can make a very positive difference.
How a Firm Can Increase Diversity
In order to have more qualified, diverse job candidates, a diversity initiative must begin at the educational level. After all, if there’s not much in the funnel, there won’t be much to choose from. RIAs can do more to help influence and encourage minority students to pursue an education and a career in finance. There are many ways to do this:
When hiring, advertise in a variety of print or online publications and resources. Be sure to note that your firm welcomes diversity. When interviewing, consider how a candidate’s unique perspective can add value to the team. I am a firm believer in this concept. If you have two equally qualified candidates and one is a minority, I would hire the minority person. (Of course, “equally qualified” is more easily envisioned than occurring in reality.) Or, if you have the flexibility, hire both!
This strategy has worked extremely well in my firm. Our diversity has enhanced almost every aspect of our practice. In our group of 15, we are represented by:
And we are a happy group! Just take a look at our home page photo.
Sheryl Rowling, CPA, is head of rebalancing solutions for Morningstar and principal of Rowling & Associates, an investment advisory firm. She is a part-time columnist and consultant on advisor-focused products for Morningstar, and she continues to actively run her advisory business, from which Morningstar acquired the Total Rebalance Expert software platform in 2015. The opinions expressed in her work are her own and do not necessarily reflect the views of Morningstar.