3 Reasons Why Diversity and Inclusion Are Important for the Financial Planning Profession
An increasingly diverse American public requires the financial planning profession to respond to changing times and consumer needs. CFP Board has been tackling this issue head-on for several years, including through its Center for Financial Planning’s annual Diversity Summit, the most recent of which was held in Washington, D.C., in November 2019.
During these Summits, the primary focus is to bring together firms, academic institutions, partner organizations and CFP® professionals in a collective effort to create a more diverse profession through research, case studies, best practices and actionable initiatives. Outlined below are the three biggest reasons why diversity and inclusion are important to the future of the financial planning profession, citing some of the output of past Summits as well as research conducted by the Center.
1. Today’s financial planning workforce doesn’t reflect the shifting demographics of our nation. It needs to.
Over the past two decades, the African American and Latinx share of the American population has steadily increased, according to recent Pew Research. Today, the United States Census Bureau reports that African Americans make up 13.4 percent of the population and Latinx represent 18.3 percent of the population. Unfortunately, the financial planning profession doesn’t reflect these changing figures – only 3.8 percent of all CFP® professionals self-report as African American or Latinx.
2. Improving racial and ethnic diversity in the financial planning profession increases opportunities for CFP® professionals to work with and benefit communities of growing wealth.
As African American and Latinx families and communities create more wealth, they will have a growing need for financial planning advice. According to the U.S. Bureau of Labor Statistics, median weekly earnings for African Americans over 25 years old have risen 33 percent in the past 14 years while the real median household income of Latinx increased 6.1 percent from 2014 to 2015.
As incomes rise in African American households, there is a corresponding increase in spending that outpaces the total population, based on research performed by Nielsen. This is a huge area of growing wealth that will need the services of CFP® professionals. As the country becomes increasingly diverse and wealth continues to accumulate among people of color, savvy firms are diversifying their ranks to reflect the diversity of the public. Firms that lag behind in their diversity initiatives will be in a worse position than firms who employ a workforce that better reflects these growing communities.
3. A diverse financial planning workforce is a win-win for firms and for people of color in the financial planning profession.
In order to provide the best service possible, firms will need to diversify their ranks. Accordingly, firms that hire African American and Latinx financial planners will have an advantage attracting diverse clients compared with their white peers. Research conducted by the Center found that 59 percent of folks agree that African American financial planners have an advantage with African American clients, and 69 percent agree that Latinx financial planners have an advantage with Latinx clients.
But it’s not only good for the bottom line — financial planning is a rewarding career path for people of color. According to the Center’s research, African American and Latinx CFP® professionals say they are as highly satisfied in their careers as other CFP® professionals and are more likely to recommend the profession than other CFP® professionals.
An increasingly diverse financial planning profession not only better serves the American public, but also strengthens the profession. There are several strategies available to help diversify the ranks of the financial planning profession and meet growing consumer demand for competent and ethical financial advice.