Why Fidelity says diversity efforts pay off for both firms and advisors
SALT LAKE CITY — Wealth management firms that prioritize diversity have higher pay, better growth in their client base and a more satisfied workforce, according to Fidelity.
The asset manager and custodial giant commissioned a blind survey of more than 450 advisors from across the industry, and in-depth panels with 25 others, Sarita Bhagwat, Fidelity Clearing & Custody Solutions’ vice president of market intelligence and thought leadership, said Sept. 25 at the FSI Forum.
Results from the survey show “empirical evidence that firms that are actually focusing on diversity have some really strong business metrics,” she said in one of two sessions held by FSI on the topic. Fidelity also cited research showing that advisor retirements will outpace new entrants to the field by next year.
The industry has a long way to go to reflect the demographics of the country, and Fidelity itself took corrective steps last year after the dismissal of two portfolio managers amid harassment allegations. Only 23% of CFPs are women and less than 4% are black or Latino, according to the CFP Board.
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Ideas for enticing advisors with a greater range of backgrounds and experiences into the industry include an expanding list of networking groups for women called the W Source. Fidelity’s study also praised independent broker-dealer J.W. Cole Financial and RIAs Brighton Jones and Sandy Cove Advisors for their recruiting methods.
“It’s engineering your business process, especially at that moment of truth,” said Amy Philbrook, Fidelity’s Head of Diversity & Inclusion, referring to a prospective advisor’s decision on whether to join a firm. “At the macro level, success in diversity and inclusion isn’t about programs, it’s about practices.”
The survey deemed just 51% of wealth management firms as “diversity-focused” based on advisors’ responses to questions evaluating companies on their beliefs in diversity and the steps they took to include it in their strategy and culture.
Firms receiving the most positive results paid gross yearly compensation of $383,000, compared to $335,000 at firms seen to be lacking a focus on diversity. More than 85% of the diversity-focused firms have more clients this year, while less than 75% of the other firms have brought in more clients.
Advisors at the diversity-focused firms also reported higher satisfaction with their companies, their careers, their own hiring and onboarding at their practices and the degree to which their firms have lived up to the value they said they would provide upon joining.
For its part, Fidelity has trained its more than 40,000 employees on “building a respectful workplace” and set up a new committee as an additional means of “appropriately handling and resolving formal complaints of inappropriate behavior,” the company said in a statement.
The survey’s case studies reveal other best practices. Sandy Cove hired three part-time employees who are women with previous financial experience. J.W. Cole set up an online network connecting its women advisors, and Brighton Jones has scalable training for nonindustry hires and a director of compassion.
“These firms of various different sizes are doing creative and new things to bring in new and diverse talent into the firm,” Bhagwat said. “We’ve seen the diversity-focused firms actually having better success on a variety of metrics. So there is progress being made.”
The three firms are not alone in their efforts. Major IBD networks Ladenburg Thalmann and Advisor Group unveiled strategic agreements this year with the W Source to help female advisors launch chapters serving as referral groups between one planner and about 20 to 25 other professionals.
Advisors Hannah Buschbom and Tom Goodson started the W Source last year, and Goodson expects the number of chapters to grow to 55 across the country over the next eight weeks, he said.
“We’re tracking this. It generates millions of dollars in referrals,” Goodson said. “That’s 1,000 women that are now connecting and referring business to each other.”
Some women have advanced into leadership roles, like Advisor Group executive chairwoman Valerie Brown, or built their practices up over decades, such as Mary Kusske of Independent Financial Group. The industry will need to work hard to attract the next generation of advisors, though, Kusske says.
“The message of ‘financial advisor’ as a profession needs to step it up a bit,” she says. “We need to get younger people into the profession because it is a great career path.”