Better Talent Development Tools and Financial Advisor Recruiting Practices Are Key to Reaching Diversity Goals
The advisor gap in specific ethnicities means that financial services firms may be missing opportunities to connect with wealthy and fast-growing U.S. ethnic groups.
EATONTOWN, NJ — July 14, 2021 — According to Discovery Data’s Closing the Diversity Gap Report 2021, the financial services industry does not reflect general demographic trends in the United States. Firms that employ third-party resources to achieve Diversity & Inclusion (D&I) goals reported perceived program success more often.
By comparing national averages to Discovery Data’s financial services database averages, it is clear that the industry is out of sync. Women are underrepresented by 28 percentage points relative to the overall population. Black and Hispanic/Latino people are underrepresented relative to the general population by 10 and 12 percentage points respectively.
“Smart investors understand that diversification plays a big role in seeing better risk-adjusted returns. Within the world of financial advisory talent, however, diversity has not kept pace with the composition of the overall U.S. population,” stated Saleem Khan, Chief Data and Analytics Officer of Discovery Data.
The research finds that there are stark differences within the financial services industry when it comes to D&I planning. Among registered investment advisers (RIAs) polled, many of which are small and independent, 29% of these firms are not planning to develop D&I policies. Among broker-dealers (BDs), which are typically large and have more formal governance, that number decreases significantly to 5% who are not planning to develop D&I policies. There is a small (6%), but vocal, contingent of “diversity detractors” who expressed strongly negative views of the entire concept.
Over 40% of firms reported having D&I initiatives in place for at least three years. When asked whether their firm had achieved its D&I program goals, a majority (55%) said their firm had either met or exceeded them. The number increases to 89% with D&I programs launched over five years ago. By contrast, the greatest reported underperformance is among firms with programs launched less than 1 year ago (42%).
When asked if they used consultants, tools, or data to support their D&I efforts, respondents using them reported program success more than those who did not. Tools rated as very helpful included Pay / Promotion / Talent Lifecycle Data and Individualized Race / Ethnicity Data (60% of users).
“Industry participants put baseline diversity data and specific talent development initiatives at the top of their list for getting where they need to be—all while helping grow AUM,” says Khan.
The research suggests a significant part of D&I program success comes from recruiting and talent management practices. Better data and tools can provide objective, meaningful input into these processes, enabling firms to find candidates that reflect the clients and communities they serve.
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About Discovery Data
Discovery Data is the leading provider of data, insights, and analytics on the firms and people driving the financial services and insurance industries across North America. The top asset and wealth management, fintech, media, consulting, and insurance companies turn to Discovery Data to improve their business performance.