An overwhelming lack of gender, racial and cultural diversity has remained a sore spot for the investment and financial advisory industry for decades.
Roughly 79% of America’s 434,000 financial advisors are white (Caucasian). And only 31% of financial advisors are women. Minority groups are significantly under-represented. Only 8.1% of councilors are black (compared to 12.2% of the total population). And only 7.1% of advisors are Latinx (compared to 36% of the population).
Meanwhile, women make up more than half of the US population and are estimated to control more than 60% of all personal wealth in the United States. People of color will collectively be become a majority of the US population by 2045, according to census projections. And while the data from the Federal Reserve show that white families currently hold the majority of the wealth in the United States, the wealth of black and latina families is growing at a faster ratealthough it may not help close the large wealth disparities that exist.
Representation is important for investors from diverse backgrounds, as there are often issues of empathy and trust when it comes to working with a financial advisor. In a recent study of 3,500 middle-income black women, 60% of respondents cited difficulty finding financial professionals or advisors they “trust” as a barrier to seeking financial help. It’s hard to ignore what’s at stake: the industry needs to recruit new talent to stay relevant. And powerful tailwinds are pushing financial services to accelerate the pace of change.
Supply of advisers threatened
According to a JD Power Study 2019, the average age of a financial advisor is around 55, and around one-fifth of professionals in the industry are 65 or older. It is estimated that approximately 103,000 financial advisors will retire by 2030or nearly 40% of the 260,000 advisers in the United States.
The demand for financial advice is increasing
At a time, request for personal financial advisers is expected to increase 5% through 2030, according to the Bureau of Labor Statistics. Millennials are largest american populationand more than 75% say they want to work with an advisor to help them mitigate risk and plan for retirement.
Wealth Ownership Transfer
Meanwhile, over the next 25 years, about $68 trillion is expected to change hands, with much of that money ending up in accounts belonging to younger generations. These investors have developed their own investment priorities, driven by both financial goals and values. They are also champions of diversity when it comes to supporting brands, including financial service providers.
Next Generation Investors
The next generation of financial advisors brings new perspectives to serve clients and attract new ones. They understand the behaviors of young investors and their different views of wealth compared to previous generations. These new advisers have already adapted their approach when interacting with clients and prospects to resonate with young investors and investors from different cultural backgrounds.
Assess customers more thoroughly
Next-generation advisors understand that to attract and retain investors, they must go beyond understanding their risk tolerance and time horizons. They need to understand investors in a multidimensional way and engage with them in a way that resonates and connects.
Incorporate values-aligned investments
Previous generations believed in active management, as do new generations, who want to play a more involved role in their investments. Many align their financial decisions with their values in order to influence the behavior of companies and brands in the face of social and environmental issues.
Create an engaging experience
Finally, next-generation advisors understand the value technology plays in delivering best-in-class investor experiences. For them, technology is essential to meet customer demands and seize new business opportunities. They use it to build deeper connections with current clients and to reach new prospects by personalizing all aspects of wealth management.
How do you nurture and attract next generation advisors?
Advisors are already beginning to see how meeting the changing needs of the investor requires greater gender, generational, racial and cultural diversity as well as the different and new perspectives they expect. But achieving diversity in hiring means breaking with old patterns. Here’s what companies need to do to attract and retain next-generation advisors:
- Respond to their values/promote their purpose: Next generation advisors are socially conscious and expect the organizations they work for to reflect their values. Businesses need to focus on how they impact people’s lives and build meaningful relationships. The change in messaging means moving away from the idea “you can make a lot of money working here” to “you can help your clients achieve their dreams”.
- Empower them: Next-generation advisors are digital natives and expect a cutting-edge work environment where innovation is encouraged. More than that, they want to provide the superior, highly personalized service they know investors are looking for. This is an opportunity to leverage their innate digital prowess to help shape the future of financial planning. Companies that encourage the adoption of new but underutilized technologies are at an advantage in attracting new talent.
- Set them up for success: Next-generation advisors take an entrepreneurial approach to their careers. They probably won’t stay long if they can’t keep learning, growing and progressing. A true commitment to diversity and nurturing the next generation means providing training and mentorship to ensure they feel supported and on track to help their clients achieve their financial goals while achieving their own goals. careers.
Realizing the value of a diverse workforce is one thing. Building a business where diverse talent is represented and well-integrated at all levels of the organization is quite another. It starts with committing to creating an inclusive culture that empowers everyone to reach their full potential.