Career Building: Certifiable Steps Towards Fixing the Financial Advice Industry’s Diversity Challenge

The future of wealth is diverse and multicultural. As America continues towards ever increasing racial and ethnic diversity, savvy financial services firms should be recruiting advisors — and assembling advisory teams — in alignment with the nation’s evolving client base. A key component of this effort is ongoing investments in the professional development of underrepresented advisors, ensuring they have the advanced education and practical tools necessary to fill positions on elite teams and serve lucrative clients.

The market opportunity is compelling. Data from a recent FINRA Investor Education Foundation study, for example, found that investors of color are outpacing the rate of new investors from other demographics. In fact, by 2030, affluent multicultural households (Asian, Black, or Hispanic households earning $125K+) are expected to reach 20 million in number, growing at a compound annual growth rate (CAGR) of 6%. This compares to an expected 2% CAGR for affluent non-Hispanic White households.

Moreover, research consistently shows that diversity within advisory teams helps foster trust and improved relatability with clients. This is especially true for clients who may feel more comfortable working with advisors who reflect and understand their unique cultural backgrounds, financial challenges, and aspirations. A 2021 research paper by FlexShares, titled “Diversity is Good Business for Advisory Firms,” showed investor preferences for diverse advisory teams are growing more and more pronounced. In 2019, 30% of investors preferred a diverse advisory team, but that number had risen to 58% by 2021. The research also demonstrated that the importance of gender, sexual orientation, and generational affinity in advisor selection had risen.

Challenges to Inclusivity Remain

Unfortunately, despite the compelling business opportunity, significant challenges remain to building more inclusive advisory teams. One of the most basic is the overall underrepresentation of minorities in the advisor profession. Despite long-standing industry awareness of this problem, personal financial advisors are still 79% white. The cost of certifications, limited access to professional mentorship, and a lack of early awareness about career paths in financial advising have all contributed to this disparity. Financial services firms have also traditionally recruited from a narrow pool of candidates, perpetuating homogeneity and missing opportunities to onboard diverse talent.

Even when firms are successful in recruiting diverse talent, retention and appropriate professional development can be challenging. Minority advisors may experience a sense of social isolation at firms with predominantly white staffing, which can hinder their sense of belonging and career progression. Additionally, a lack of targeted mentorship programs in explicit support of underrepresented advisors can make professional growth arduous. An even more pernicious possibility is found in the distribution of client accounts within some firms. Advisors from minority backgrounds have made powerful claims of receiving fewer lucrative accounts, or being assigned smaller, less profitable client books. In sum, these sorts of biases can add up to job dissatisfaction, put a relative cap on earnings potential, and make it difficult for underrepresented advisors to keep pace in terms of assets under management.

Responding to Shifting Markets

The financial services industry is well aware of these challenges. There is a realization that by featuring diverse advisors, advisory teams can parlay cultural insights about their clients into providing better service and creating more durable relationships. For example, multicultural financial perspectives and decision-making processes may be influenced by unique family structures, religious beliefs, or collective financial goals that differ from the individual-centric model many advisors are familiar with​. If a team lacks the human resources to perceive and interpret such nuances, the firm risks providing advice that does not fully resonate with or benefit minority clients.

Fortunately, many financial services firms are actively seeking to redress their diversity challenges. Strategies include implementing alternative recruitment paradigms, boosting mentorship programs, and implementing more inclusive policies. One tactic is the shift to skills-based hiring instead of relying on “traditional networks” — which have been implicated in the perpetuation of the financial services industry’s racial homogeneity. Similarly, firms are forging partnerships with Historically Black Colleges and Universities (HBCUs), Hispanic-Serving Institutions (HSIs), and other minority-serving organizations to create pipelines of diverse talent​.

An Equitable Opportunity: Financial Certification Scholarships

In the bigger picture, less than half of the U.S. population will be white by 2045, while Hispanic and Black populations will grow significantly. These demographic shifts are already reshaping wealth ownership, with women and minorities accounting for an increasing share of investable assets. As affluent multicultural investors and households become more prominent sources of demand for elite advisors and high functioning advisory teams, the industry must continue its efforts to diversify its talent pipeline and buttress the skills and professional development of financial advisors.

One under-utilized strategy for ensuring long-term professional success as a financial advisor, and increasing the diversity of expertise for advisory teams, are scholarship programs, such as those offered by the Investments & Wealth Foundation. These programs help address systemic challenges faced by minorities, women, veterans, first-generation professionals, LGBTQ+ individuals, and people from low-income backgrounds in the financial advice industry. By offering financial support, they enable talented individuals from these underrepresented communities to pursue advanced designations like the CIMA®, CPWA®, and RMA® certifications. These, and other similarly advanced certifications, are often prerequisites for securing roles on elite advisory teams — yet require a substantial discretionary investment.

The Investments & Wealth Foundation’s scholarship program works to overcome this barrier by helping cover the costs of Institute certifications. The prestige and expertise associated with these certifications can help empower multicultural advisors with the credentials necessary to compete for and secure roles on elite teams, better serve their individual clients, and supercharge their portfolio of professional qualifications. In this way, scholarship programs serve as vital tools in ensuring that underrepresented talent has the qualifications to persevere as exceptional financial advisors. Afterall, the future of financial advice is likely to be shaped by those firms who deeply integrate diversity into their core business strategy.