CFP Board event urges wealth managers to share demographics

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The certifying organization overseeing the industry’s largest and most respected planning designation is calling on more wealth managers to release the demographics of their advisors.

In sessions at this week’s CFP Board Center for Financial Planning Diversity Summit, executives, academics, advocates and the chair of the Congressional Black Caucus explained why the data they discussed as part of this year’s theme of “metrics that matter” is crucial to any long-term effort to boost representation of historically excluded groups of advisors and clients. While Merrill Lynch became the first large brokerage to reveal its number of Black, Latino, women and minority advisors last year, few other firms have followed suit.

The history of racism in America means that “we’re always going to have to be transparent” about statistics like workforce demographics, promotions, pay equity and pipelines, according to Ella Bell Smith, a professor of business administration at Dartmouth University and author of “Our Separate Ways: Black and White Women and the Struggle for Professional Identity.”

“You measure what you value — it’s just that simple,” she said. “We talked about George Floyd and how much interest there was after George Floyd. And a year later, you don’t see much action. You don’t see much interest, and the conversation has moved on to something else. I’d like to see a reality where we realize that these issues always have to be forefront.”

Indeed, the demographics reflect “the vast disparities that we see at the top of organizations and really across the finance sector” when comparing the available industry statistics against those of local populations and client bases, said Stefanie Johnson, an associate professor of organizational leadership and information analytics at the University of Colorado. More companies are tracking pertinent data, but they’re just not sharing it publicly, Johnson said.

“They’re measuring yield from attraction to selection and attrition and all of those different areas of human resource processes where we might see differences, but then they keep that information relatively obscure,” she said. “If we could be honest about our data, it would be a huge step forward in figuring out best practices and where we can make pivots. But I think that’s still a big hurdle to overcome.”

Financial advisors could play a larger role than they might think in putting pressure on companies to take such actions as releasing demographic data or working with more asset managers owned by women and minorities, according to Rachel Robasciotti, the founder of impact investment firm Adasina Social Capital. Managers who are Black, Latino, other minorities and women manage just 0.9% of the holdings across the entire asset management industry, according to a January 2019 study by the Knight Foundation.

Planners “don’t often see themselves as allocators who are able to make a systemic impact on diversity, equity, inclusion and fairness and asset management,” Robasciotti said. “When you look at a fund and try to decide whether or not you’re going to put that in the model portfolios for your clients, you’re performing a due diligence process. And you may be using a set of standards that keeps assets in the hands of those who are already managing them.”

As of last year, Merrill Lynch had increased the share of its advisors who are Black, Latino and women compared with their respective levels five years earlier. The percentages aren’t very high, but the firm has a larger proportion of minority advisors than their overall representation among CFPs and all financial advisors.

In addition, 54% of the firm’s new advisors are women or minorities, up from 39% in 2017, according to the firm. The share among the firm’s 105 market managers has increased to 40% from only 29% five years earlier, according to remarks by Andy Sieg, president of Merrill Lynch Wealth Management. While parent firm Bank of America’s pledge to spend $1.25 billion to promote racial equality and economic opportunity has come alongside similar commitments among its rivals, Merrill’s data offers a rare example of a company showing its work publicly.

Treating diversity as “a commercial imperative for us” has resulted in “increased representation at every level,” at Merrill, Sieg said, noting that the firm aims to boost the numbers more in future quarters and years to come.

“It’s something, of course, [that’s] much talked about in our industry, but rarely achieved,” Sieg said. “From our standpoint, we’ve tried to be much more transparent around the diversity profile of our team. And once again, I’d love to call on the rest of the industry to match this level of transparency because the industry needs it in particular around advisor representation.”

At the federal level, Democratic Rep. Joyce Beatty of Ohio received support from the CFP Board for a bill she introduced earlier this year that would require firms with at least 100 employees to disclose their diversity data. In addition to being chair of the Congressional Black Caucus and a member of the House Financial Services Committee, she leads its Subcommittee on Diversity and Inclusion.

“You can’t measure what you don’t count,” Beatty said. “I thank the CFP Board for recognizing this, advocating for more transparency in this space and building off of those efforts with events like today.”

The panelists suggested the data is just a big first step. The numbers tracking diversity among advisors and employees represent only one part of the data and the beginning of a larger goal, according to Cy Richardson, a senior vice president with the National Urban League and the chair of an advisory group overseeing the Center for Financial Planning.

“We must go deeper,” Richardson said. “We need to measure the culture of these firms and the retention, attrition rates and listen to the stories that people tell when they leave. We must get ahead of the exits. We need to know what keeps people in the industry and what makes them languish and/or leave. We need to ensure that these firms are not just hospitable places for people of color or places where they can thrive. We need to redesign the systems, structures and policies that have been limiting.”