Early in my career I was fortunate to be included as a member of the Diversity Counsel at Chase Bank, now part of JP Morgan Chase. This was in the mid '90s, and, to its great credit, Chase was clearly ahead of the curve on this initiative. It was then that I learned, from a sage leader that ran the group, that lack of diversity was a “blind spot.” Like that area on your back right tire on the highway, it requires an overt action to lean forward over the steering wheel just a bit to catch that blind spot in the side view mirror. If you don’t lean into it, he said, you just can’t see it. You won’t know what you don’t know. And this blind spot can occur without malice, as we fall into comfort zones that are so natural to us. I’ve never forgotten that metaphor.

Fast forward 25 years and many Wall Street firms have followed Chase’s lead and leaned into this issue for all the right reasons. It is well established that a diverse workforce with many views and opinions is the optimal way to run a business. And there is a tremendous social benefit as well.

Indeed, having a diversity and inclusion (D&I) initiative is table stakes these days, and critical if a firm is to avoid the blind spots that may otherwise exist. But in the wealth management industry in particular, there is an increasingly compelling business case emerging for creating a diverse workforce. Based on the market research we’ve done, the acceleration of wealth accumulation amongst diverse populations is a notable secular shift that firms must address to grow their business. Wealth management firms are now realizing that the best way to service a diverse population is with a workforce of advisors and planners that reflects the communities they serve. Doing so will create a trust factor that will allow firms and advisors to demystify the lingo of investing and encourage broader participation in the process of wealth creation. A significant business opportunity exists for those firms that invest in these outcomes and get it right.

The State of Diversity & Inclusion in the Financial Services Industry

In the results of our recently released research report—Closing the Diversity Gap, wherein we surveyed hundreds of industry professionals—a number of telling statistics came to light. For example, women are underrepresented in wealth servicing by 28 percentage points relative to the general U.S. population. Further, Hispanic and African American populations are underrepresented by 12 and 10 percentage points respectively, although about 30 percent of these populations participate in the stock market. Perhaps most notable was that Asian populations, one of the fastest growing populations from a wealth perspective, use a financial professional 30 percent less often than the overall population. And lastly, diverse populations are far more likely (65%) to cite diversity as a key criteria in deciding to work with an investment advisory firm. The fact pattern would indicate that an opportunity exists to better service diverse investor communities.

Our research report further revealed that more than 40 percent of the firms surveyed had a D&I initiative underway. That’s good news. But how well are these programs being executed? How are they being designed, measured, and communicated to employees? And what tools and data are being used to ensure success?

We found there to be a gap between the industry need and the initiatives underway. We also saw varying levels of awareness amongst employees as to the success of the programs, pointing to a need for better communication. One finding was abundantly clear however: firms that remained committed to the cause tend to be more successful. While that may sound obvious, the data was significant at both the three-year mark, and again at the five-year mark, in terms of employee engagement and awareness, and overall program success. The return on commitment, execution, and communication came through clearly in the data. Further, those that use tools, including data and analytics, had an even higher rate of success for D&I programs.

Summing Up: Build a Culture that Reflects the Clients and Communities Served

The wealth management industry has come a long way on diversity issues since I was with Chase. The new digital age provides for broader access to the markets with the ubiquity of data, crowdsourced short squeezes, and fractional share purchases from your hand-held devices. This expanded access is drawing many first-time investors, and diverse populations in particular, to participate in the market. That’s an exciting and important development. Wealth management firms must adjust to this market dynamic by committing to reflect the markets they serve. Not doing so would represent… a blind spot.

Discovery Data is proud to be part of the solution and committed to helping our clients build a culture that reflects their clients and communities. Having access to our D&I data, combined with our core datasets and business intelligence capabilities through MarketSage, will be a game-changing differentiator for our clients in terms of attracting diverse professional candidates.

Discovery Data Resources:
Research Report Summary: Closing the Diversity Gap
Dataset: Diversity & Inclusion
The Data Possible Podcast: Avoiding Blind Spots in Your D&I Initiatives