Financial planners recognize the industry has too few minorities among its members. But when it comes to the reasons why, the profession is split along racial lines.
White CFPs are more likely than their minority counterparts to attribute the lack of minority representation to a reluctance to pursue the profession, whereas black CFPs are more likely to point to racism and prejudice embedded in firms' hiring practices, according to a new study by the CFP Board's Center for Financial Planning.
"White CFP professionals are more likely to feel prospects of color are reluctant to pursue the profession; prospects and black CFP professionals are more likely to say firms are reluctant to hire," the study's authors wrote.
Across the board, respondents cited two other key hurdles: a lack of role models for people of color within the industry, and the profession being “off the radar” or not top of mind among blacks and Latinos.
Overall, the ranks of CFPs remain overwhelmingly white, with fewer than 2,700 black and Latinos represented among the more than 80,000 CFPs nationwide, the study found.
It's "a systemic problem,” says Cy Richardson, senior vice president of the National Urban League and chair of the center's diversity advisory group.
Just 1.8% of CFPs are Latino and, even fewer, or 1.5%, are black. About 3.5%, or roughly 2,800 of CFPs identify as Asian.
The CFP Board did not break out figures for planners who identify in more than one category, such as Latino and black, or Latino and white. And given their low numbers, the study focused primarily on black and Latino planners, says Marilyn Mohrman-Gillis, the executive director of the Center for Financial Planning.
The study, which surveyed 2,276 adults from a variety of demographics, is intended to complement the center’s effort to attract a more diverse field of planners to the profession. In March, the CFP Board launched its first advisory group focused specifically on racial diversity, chaired by Richardson.
The CFP Board has attempted other diversity pushes in the past, but with limited success. In the four years following the 2013 launch of the board's Women's Initiative, for example, the board has failed to increase the number of women CFPs beyond 23%.
The survey, which was conducted by Fondulas Strategic Research and the Raben Group, examined attitudes hindering Latinos and blacks from entering the profession. It found that three broad areas contribute to the problem.
1) Economic inequality and cultural norms: Researchers discovered that many prospects have never thought about the profession and, if they have, they lack role models for how to enter it. Others lack confidence in their financial literacy skills, fear a commission-based compensation model and fear they won't fit into a largely white profession.
2) Firms' hiring and onboarding policies: Firms focus too heavily on immediate returns from new hires who can rapidly bring in clients. They also believe that clients, a majority of whom are white, want to work with planners who look like them. "Lack of fit" is offered as a common and all-too-easy excuse for not hiring blacks and Latinos.
3) Clients' inherent biases: Some clients may have a preference for working with a planner from a similar background.
Reflective of these findings, "more than half of all survey participants say white professionals are more likely to be hired" than people of color, says Peter Fondulas, president of Fondulas Strategic Research.
Among black CFPs, however, the percentage who share that perception is even higher, at 70%, he says.
The majority of respondents expressed support for three key strategies to boost diversity including formal mentoring programs, financial literacy initiatives and campaigns to boost awareness of financial planning career paths.
The study noted a "silver lining" that once in the profession, black and Latino planners reported roughly the same levels of satisfaction with their careers as do whites, at 60% for the former and 62% for the latter.
The authors also noted that firms can use these high levels of satisfaction to help attract more black and Latino prospects, particularly by focusing on the fact that planners of color will have an advantage in attracting growing populations of clients who look like them. This factor will be increasingly impactful when whites are no longer the majority, Richard says. The Census predicts this occurring 2044.
The center plans to follow up on its latest study with strategies for increasing diversity among financial planners to be discussed at a Diversity Summit on October 23 in New York City.