3 ways you can make a difference in DEI efforts
By Danika Waddell
When I launched my firm in May 2020, I knew that I wanted to make a real commitment to diversity, equity, and inclusion (DEI) efforts in financial planning. Our field has been historically unwelcoming to women and people of color, both as advisors and clients. You have likely heard the abysmal statistics for women and people of color in financial services. Only 23% of CFP® certificants are women, a percentage that has remained steady for more than a decade. In the U.S., less than 3.5% of CFPs identify as Black or Latino, although these two groups make up 31% of the population. I wanted my firm to contribute to making the profession more accurately represent the U.S. population.
There are many reasons why you should care about DEI.
First, the demographics of our country are shifting. The majority of the U.S. population will be made up of people of color by the year 2045. Collectively, the buying power of communities of color is valued at over a trillion dollars and is expected to increase in the coming years. Moreover, there is plenty of data showing that diversity increases the bottom line. But that isn’t the only reason so many organizations are investing in DEI efforts—it’s also the right thing to do.
Second is that investing in DEI is also the right thing to do because of the racial wealth gap (see "The Racial Wealth Gap" in the November 2020 NAPFA Advisor) and systemic structures that are designed to keep people of color, women, LGBTQ folks, and others from obtaining wealth. As CFP Board says in its 2018 report, Racial Diversity in Financial Planning: Where We Are and Where We Must Go, “The research finds that the legacy of racial and economic inequality in the U.S. is the backdrop against which the financial planning profession operates. Due to the history of wealth distribution in the U.S. and the persisting racial wealth gap, the financial planning profession currently has a predominantly white clientele base.”
There is both a tremendous need and, I would argue, a responsibility for our profession to serve people from a variety of backgrounds.
I have had a version of this conversation with many advisors (a significant number of whom are solo advisors like I am), and I usually hear something like “What can I do? I’m only one advisor.” Or, “I’ve tried to hire a diverse team, but I only get applicants who look like me.” I am here to tell you that regardless of your role, you can make a difference.
1. Hiring a diverse team
The first (and most obvious) way to have an impact is in hiring and growing your team. Recruiting diverse talent and then creating an inclusive and supportive environment for those team members is a topic unto itself. At the most basic level, when you post a position for an opening in your firm, think about where you are posting. If you’re recruiting for an entry-level role, consider posting at a historically black college or university (HBCU). The BLX Internship for aspiring Black and Latinx advisors can also help you identify talented individuals early in their careers. The Association of African American Financial Advisors and FPA Latino (accessible only by FPA members) are potential sources for finding advisors of color.
Additionally, we can all make a conscious effort to cultivate a network that draws on different types of people. If your LinkedIn connections went to the same college as you, live in the same city, and/or all share the same demographic background as you, consider going the extra mile to expand your network. In my case, I joined the Association of African American Advisors and attended its national conference to foster new connections.
Review your job description and application for off-putting language. A third-party service or software program can help. For instance, the company Textio says its products are designed to “reveal the bias, business jargon, and harmful phrases that are turning off many candidates and suggest new language that appeals to inclusion-minded people.”
I also encourage those in a position to hire to be bold enough to consider candidates who do not have a finance background. Of course, you have to give them tasks that they are qualified to do, while supporting their efforts to gain necessary training and, probably, a CFP.
2. Choosing vendors
Even if you are a solo advisor, you can have a meaningful impact on DEI through your choice of vendors. In my firm, I have employed a business coach. I’ve also hired a virtual assistant, marketing support, and a compliance consultant. Beyond that, there’s the CRM, scheduling app, third-party asset management, and myriad other choices to be made.
In my case, I went out of my way to hire a woman of color when I started working with a business coach. It took more research on my end, but I found someone who excelled in her work and was a true pleasure to work with. In another case, when I reviewed scheduling apps, I learned that Calendly is Black-owned. That tipped the scale in Calendly’s favor. I’m not suggesting you use a service that isn't up to par, but all other things being equal, I’d like my dollars to go to communities that have been systemically excluded from growing their wealth.
3. Advocating for DEI in the profession
I have volunteered at various levels to try to make an impact from an organizational level. When I was the programs director of my local FPA chapter, I ensured we never put on an event with only white, male speakers. It was important to me that we represented the broader population more accurately and made advisors of color feel more welcome. I continued with that theme when I served as president of the FPA of Puget Sound; that year we brought Lazetta Rainey Braxton as our annual symposium’s keynote speaker to talk about cultural competency. I now serve on the NAPFA Women’s Initiative, as well as serving in an academic outreach role on the NAPFA West board.
If this sort of role doesn’t appeal to you, consider doing pro bono work that benefits people who might not otherwise be able to afford hiring a financial advisor. NAPFA and other financial planning organizations are always looking for mentors and even sponsors. Consider helping a young person who is entering the industry with your support and advice.
To summarize, I believe it is critically important for each and every one of us to make a commitment to the advancement of communities of people who have been historically and systemically excluded from our profession and from the accumulation of wealth more broadly. While the prospect of making systemic change is overwhelming, every individual act makes a difference. Whether you are a firm owner or an employee of a larger firm, I encourage you to consider ways in which you can move financial planning forward. I am confident that as a community, we can make meaningful change.
Danika Waddell is the founder and president of Xena Financial Planning, based in Seattle. She serves on the NAPFA Women’s Initiative Committee, as well as on the West Region Board, where she focuses on academic outreach.
image credit: istock.com/Cecilie_Arcurs