Convert Outsiders into Insiders

This podcast is brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.

Hi everyone, this is Sterling Shea from Barron's. I want to thank you for tuning in to another episode of The Way Forward. This year there's been so much to talk about in the wealth management industry. Advisors discussing ways to increase their digital engagement with clients, approach growth and running the business in the light of the crisis, also managing investment portfolios during a period, period of unprecedented uncertainty. In the investment markets has certainly been a challenge. But other events this year has forced us as an industry to take a hard look in the mirror and ask ourselves, what can we be doing to better improve the opportunity and presence of talent of a diverse background in the wealth management business? We think this is an enormously important issue that everyone who cares about this business needs to address. Not only because it's the right thing to do, but also because we believe that in the future, clients are going to gravitate towards teams that represent diversity. And diversity currently is sadly lacking in the wealth management business. So we've all got to come together and talk about how we can move the needle to not just attract more diverse talent into the industry, but also to create a business environment where diverse advisors are able to thrive and add value in this incredibly important business and endeavor. Well, we have a guest today that I think can lend incredible perspective to that challenge, uh, and some, uh, perspective also on what might be solutions that we as an industry can think about and take action on moving forward. D.A. Abrams is Managing Director at the Center for Financial Planning for the CFP Board. DA, thanks so much for joining us.

Thank you so much for having me.

How have you managed the transition to the virtual experience?

You know, it's a little challenging for me only because I'm an office person. You know, I'm sort of a hybrid between an introvert and extrovert, but I do get a lot of energy from people. So I'm managing, but it is indeed a little challenging.

Well, you're not the only one, if that makes you feel better. But let's jump right into it. As I mentioned, recent news has forced us to further examine as an industry the incredible need for more diversity. Start out by just telling us your thoughts on the current environment and what advisors should be doing to help champion diversity in the business.

Well, I mean, the untimely death of George Floyd, the way in which it occurred and the events that followed have really shined a bright light on the many barriers that African Americans, Blacks, as well as other people of color still face. So rather than regurgitate all that we've been witnessing since late May of this year, I mean, here are some ways in which I believe advisors as well as others can help champion diversity and inclusion. So, so number one would be evaluate our behaviors. I mean, in my view,— and not just my view, this is a fact— we all have biases. Some are conscious, but many are unconscious. You know, I mean, how is this showing up in the workplace? I mean, how is this showing up in our daily lives? And once we identify these unconscious biases, what are we doing to solve for those? So that would be number 1. Number 2, challenge negative stereotypes. I mean, be proactive in showcasing positive images. Behaviors and successes of people of color. I mean, for me, it's kind of easy, right? Let's look at these examples. Michael Jordan, great basketball player, some would argue the best of all times, but even a better, in my view, businessman. That's positive. Andrew Yang, the fellow that just ran for president. Oprah. That's a pretty positive image, isn't it? Robert Smith, the venture capitalist that I believe it was last year, gave the commencement address at Morehouse. And then as a surprise waved or said that he would pay any outstanding loans for those in that graduating class. I mean, that's pretty positive. And then a friend of mine, her name is Arlan Hamilton. She's the founder and managing partner of Backstage Capital, not yet a billionaire, but a very, very positive individuals. So, I mean, again, let's challenge these negative stereotypes and promote the positive. Something that we're all familiar with, and that's becoming a mentor. Look, mentorship proves beneficial for both parties. I mean, it offers support, guidance, advice as the mentor and mentee navigate conversations surrounding diversity and inclusion. Number 4, sponsorship, in my view, is even better than mentorship. Advocate for and recommend people of color and women within your firm, as well as outside your firm, for hiring, developmental opportunities, as well as advancement. Number 5, learn about people that are different than you. As you're doing this, you'll discover a multitude of things that you have in common. In fact, you'll probably have more things in common than not. And then number 6 is twofold. Give. Perform pro bono work for underrepresented populations, those that may be unable to pay for financial service, uh, financial planning services, but then also give the gift of education to one of the CFP® Board's Center for Financial Planning scholarship programs for underrepresented populations who are seeking to complete requirements for CFP certification.

You bring up a number of, of really important points in there, but one thing I want to just drill down on for the sake of the audience is this notion of giving. I think that's so important, and it's also such a consistent attribute among the most successful advisory teams that we know in the business, a willingness to give back. One of the great dislocations in this business is the fact that, um, the people in this country who most need quality financial advice often are the most challenged to be able to access it. So I really applaud the CFP® Board's efforts to try and deliver some of that advice through expert counsel, uh, to the people who need it most. So thank you for that work. But you bring up these great examples of role models that we can all focus on, and I'll give you— those are really great ones, but I'll also say that they're harder to find in wealth management, not impossible to find, but harder to find. I know the number of Black CFPs by percentage is pretty low. If we were to start with an effort to say, hey, how do we get more people of color and diverse backgrounds in general to join the wealth management industry? What are some concrete steps there? Advisors tell us in general, it's hard to recruit exceptional talent into wealth management. And it's even harder to find promising talent that's of a diverse background. How should advisors start that process? How do we get more people of color in this business?

You know, before— I mean, that's a great question. And before we get to the how, if I can, I would really want to briefly describe the why, because I think starting with why is very, very important. First and foremost, I mean, we know that today's financial planning workforce, as you mentioned, just does not reflect the current as well as the shifting demographics. I mean, it just doesn't. Over the past two decades, African Americans, Latinx share of the American population has steadily increased. In fact, as of last year, 13.4% of the population represented by African Americans, while 18.3% are represented by the Latinx community. That's nearly 32%. Now, you mentioned this and it's, it's true. Unfortunately, the financial planning profession just does not reflect these changing figures. Um, you know, now as it relates to the CFPs, certified financial planners, only 3.8% of CFPs self-report as African American and/or Black. This is a major area of opportunity for us. We realize that the CFP Board is committed to increasing these percentages, not just for the benefit of the CFP Board, but for the benefit of the inflation and the benefit of the public overall. Now, that's the demographic piece. Let's look at the buying power. And this is something we rarely discuss. African Americans, which again, 13.4% of the population, represent $1.4 trillion with a T dollars in annual buying power. The Latinx community, $1.7 trillion in annual, annual buying power. Now, that's a lot of money. I mean, that really is a lot of money. So, so white Americans, that's— I mean, that really is a sweet spot because that's $13.2 trillion. And then if you look at from 2010 to 2019, that's an increase of 39.5%. You go to African Americans, that increase is 48.1%. Same time period, if you're looking at the Latinx community, that increase is 69.1%. That is huge, right? So when you factor in the shifting demographics and increasing annual purchasing power, again, in the trillions among people of color, it just seems to be a very prudent approach to business for firms to foster a more diverse financial planner workforce that reflects America. In short, Let's aim to make the financial planning profession look like America. So here's the how, and I'll be really, really brief with this one. 3 points. One, I think it would be extremely prudent to charge someone with the responsibility to leverage diversity and inclusion, not just for social impact, because that's important, but also for business impact. Ensure that the D&I, or diversity and inclusion, is everybody's business. So again, not just the D&I lead. The D&I person or department or business units, they can quarterback the effort, but it really needs to be an all-hands-on-deck approach to diversifying the business for the, for the good of the business. 3 subsets to that. Let's have some accountability. Ensure that you have diversity and inclusion across the organization. We're talking about metrics. Tie those metrics to meaningful business outcomes, a.k.a. what matters to the organization, as well as the compensation, and then allocate some resources to the effort. Number 2, have that D&I lead report directly to the CEO. That way, the message is not being filtered. They're sitting at the table. They're part of the decision-making at the very top of the organization. And then third, develop and implement a holistic approach to diversity and inclusion. Some, some, some pillars in which to consider would be human assets. Let's call that human capital. It's on all levels, though, not just entry level, but from entry level to middle management to the C-suite on up to the board of directors. It needs to be different. It needs to reflect what the country looks like. Two, image. You know, when I gave the example of Oprah and we talked about wealth management and how folks aren't seeing themselves reflected in wealth management, let's make an effort to do that. Let's ensure that people are seeing themselves in the profession of financial planning. Supplier diversity. I'll be really brief on this. This is probably the oldest aspect of diversity and inclusion is really pretty simple. We're all, all these firms, we're spending money no matter what. Allocate some of those, some of those funds, not new funds, existing funds to diverse-led, diverse-owned organizations. Take a regional approach to this. It can't be a one-size-fits-all. The firm on the national level They, certain things may work for them in the home office, but as you spread throughout the country, you have to be a little more granular. You have to change it up just a bit. Strategic partnerships. There are so many organizations endemic to financial planning, wealth management, and non-endemics that have relationships with these individuals, these populations that we're hoping to attract to wealth management and to financial planning. Let's, let's come up with some win-win partnerships with them. And then last but not least, some training and development. The other thing that I would say is I think it's extremely important that organizations identify primary target audiences, small or large, because when you focus on everything, in my view, you focus on nothing. And as it relates to the plan, your plan of attack, make sure that that plan helps to move the business forward. Again, always connecting to what matters.

Yeah, I agree with your sentiment there, and that's some great advice. One thing that I think is important for the audience to think about is there's the enterprise-level solution that involves aligning the C-suite and boards and D&I effort across firms to help galvanize and hold accountable, you know, these tasks and objectives, but it's also got to germinate at the team level to be successful. And individual advisors that are taking on mentorships and looking at resumes and engaging people to join their team need to see this value as well. Can you talk a little bit about what the CFP CFP Board specifically is doing to help the industry cast a better net? How can we attract more CFP candidates of diverse backgrounds in the first place?

So the CFP Board about 4 years ago, closer to 5 years ago, formed the Center for Financial Planning. In fact, that is the business unit in which I head, and there are 3 different pillars. In which we work. One is talent pipeline. So we want to ensure that we're helping firms small and large cultivate a quality workforce to ensure the profession can recruit and retain— the key is retain— talent that it needs to grow. Diversity and inclusion is really, really important, and we want to again help firms foster a more diverse financial planner workforce that reflects the changing demographics in the United States of America. Again, the goal is to make the profession look like America. And then third would be knowledge for practice, and that's elevating the discipline of financial planning as a profession. But just to, just to give a couple of examples of what we're doing in these different areas, I'll start with talent pipeline. We have a number of scholarships available to help aid in which— to aid folks in their educational requirement. In fact, we have 6 programs totaling over $1.7 million in gifts and pledges. 4 of those programs have a diversity and inclusion focus. Program to date, 74 scholarships have been awarded. Over $350,000, again with the focus on increasing the number of women as well as people of color. 8 scholars have become CFP professionals. Many more have not, but 8 have, and 7 are in their final stages of becoming CFPs. We're working very closely with our workforce development advisory group on a brand new student-focused aspiring folks to the profession. It's going to be examining different business models. It's going to be outreach to folks new to the profession, as well as those that may be in the profession but not necessarily in financial planning, but providing them with the tools and with the information that they'll need to make their way in the profession. Another thing that we're doing, that we will be doing, and that's reaching out to high schools and also engaging folks in the college level. These are things that are in the pipeline for next year. Later on this year, we're going to have a diversity and inclusion virtual summit. This will be our third. The purpose of that summit to me, like threefold if you will. The first would be again to provide exposure to financial planning. The other is to bring folks together to share in best practices. And this will be a little challenging, the third one this year, but we're going to find a way to do that and provide a venue for folks to network. So these are just some of the things that we're doing to move the profession forward, to help the profession become a little more diverse and inclusive. And again, there are other things that we have in the pipeline.

Those are all important ideas, and I'm grateful for you and your organization in taking a leadership role in changing perceptions and attitudes and approaches regarding this issue of diversity in the business. But I also know that from where you sit, you have a unique vantage point on how the business is evolving and what the future is likely to look like. And I'd love for you to share some of that perspective with us. In particular, do you have a notion of what you think the team of the future in wealth management is going to look like? And do you think it'll matter if team members are in the office or not?

So I definitely think that the team of the future will look more like America. We're taking very intentional steps, not just at the CFP Board, but within many firms and throughout the entire profession to ensure that the team of the future mirror the demographic breakdowns of the nation's population, as well as address the very, what I like to believe, very important increasing buying power of people of color. And, and while the office structure itself may look very similar to the structure during this period of COVID-19, most financial planning firms have moved to a virtual advisor. I mean, this is what we're hearing— virtual advisor and client platforms. Recent reports of increased productivity with advisors working from home make it a real opportunity for teams to continue the current structure. So I definitely think it's going to look more like America, and, you know, folks may be working more from home tomorrow than they were before March of this year.

Yeah, we agree. And one interesting facet of this crisis has been the fact that maybe looking forward, geography will be irrelevant in wealth management. You probably have some opinions as well about the client service model. That's something we're spending so much time talking about and hearing about from various advisors out there. Do you think that advisors should be examining that service, client service approach right now? Should they be doing anything differently, do you think?

Well, you know, I like to say that I'm not a certified financial planner, planning professional. However, I am a client and it's my belief that advisors should be ramping up client service in the form of increased client interaction. As well as touchpoints to reinforce the message that comprehensive financial planning is a process guided by sound advice from a financial planner. And, you know, during times of great change comes just a lot of uncertainty. I know that I'm feeling that, and it's my belief that advisors should really use this opportunity to revisit the financial planning process and plan recommendations with their clients, listen to the client's concerns, at least That's what my financial planner is definitely doing a lot, evaluate options and further discuss the things that I should be doing, but then I'm not doing. So I know that your advisors, the advisors listening in have clients such as that. So I think a lot of, just a lot of interaction with clients. I think that's extremely important.

Well, I can certainly underscore that fact by saying that if we examine advisors across the industry in different models and different channels, one success or one element in common of those who are most successful is a passion for comprehensive financial planning at the core of the business upon which they're layering other aspects of value, but that sits as a nucleus in the business. So I certainly underscore that point. I would imagine you're also hearing some interesting stories from CFP holders out there. Can you share any stories that you've heard from advisors on particularly successful client interactions at this time?

Well, you know, I haven't, I haven't heard of one specific story, but, you know, anecdotally, I would, I would say that I have seen some advisors just feel a level of responsibility for client success and reaching their financial goals. And as such, you know, there's a sense of accomplishment that just seems to go along with helping clients stay the course during these unprecedented times. That has been my interaction with, again, my financial planner.

Speculating about the future, you know, eventually this crisis will pass. We'll look back on it as a memory of an interesting period we all went through. But when things are more, say, back to normal in terms of interaction and meetings and travel and all of those facets of life, Uh, do you think anything, uh, will be forever different about the wealth management business? What do you think it's going to look like in 2 or 3 years down the road, and how will advisors be differentiating themselves then?

I think the advisors that are in close touch with their clients will continue to thrive when things get better. I would say that clients may not expect in-person face-to-face interaction as much as they have in the past. They'll do it via Zoom, Microsoft Teams, Skype, but they would certainly expect high touch. That's for sure, because that's what they're getting now. That's what they're getting used to. So I think it's going to be difficult to go back from that.

DA, we're all in the business of advice in one way or another in this industry. I'm wondering if you could send us out with a final actionable idea or a piece of advice that you would offer to the advisors who are listening in?

So I'll give you 3, but I'll be very, very brief. One, I think you definitely got to be proactive in showcasing humanity. Kind of given the times that we're going through now, I think that's extremely important. Number 2 would be interrupt incidents when you're witnessing a negative stereotype being played out. Or lack of humanity taking place. In my view, this, this can be done in the workplace or among friends. If you see something, say something, and do something. Be smart about it, but I think you have to be intentional. And then last but not least, practice inclusion. Invite people outside of your tribe, if you will, to become part of your tribe. In other words, convert the outsiders into insiders.

Well, those are 3 great ideas, and I really appreciate it. I also want to thank you not just for your insights today, but also for the work that you're doing at the Center for Financial Planning and the CFP Board in general's efforts to promote this really important issue of diversity in the business. Thank you, DA.

Thank you very much. It's my pleasure.

I'd also like to thank all of you on the line for tuning in. We'll be back next week with another newsletter, an episode of The Way Forward. Stay safe.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.