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  • by Kate Healy
  • Managing Director, Generation Next, TD Ameritrade Institutional

AdvoKate: What we can do to increase diversity in financial planning

The RIA industry has continued to experience steady growth each year — and I can tell you, it’s not due to luck.

Individuals are looking for trusted financial advice more than ever and they want to work with someone they feel they can relate to. And right now, the RIA pool doesn’t look like the investors.

A need for diversity among financial planners

The beauty of our country is that diversity increases with each new generation and will continue to do so. While attempting to grow your business and attract next gen talent and clients, it’s important to understand and be able to work with all types of associates and clients.

We know it’s imperative that the financial planning profession work toward expanding and diversifying the ranks of financial planning professionals who can meet the needs of increasingly diverse consumers.

We work closely with the CFP Board’s Center for Financial Planning, and since TD Ameritrade Institutional is the Lead Founding Sponsor, I sit on several councils, including the Diversity Advisory Council. One of our most ambitious projects to date has been a comprehensive study: Removing Barriers to Racial and Ethnic Diversity in the Financial Planning Profession.

Understanding why there is a gap in the industry

This study opened the curtain behind our profession’s worst kept secret: We have an issue with diversity. We know that out of the approximate 80,000 CFP professionals in the United States, less than 3.5% are black or Latino — which is a concerningly low percentage when you consider the overall representation of these ethnicities within the U.S. population.

Now we are learning why. The study provides us with insight from over 2,000 participants. One of the key questions asked black and Latino business professionals why financial planning hadn’t been a top-of-mind career choice, and what their main reasons were for not being interested in the field.

Information collected from these business professionals showed that the number one response, given by 58% of the group, was that they never thought of financial planning seriously as a career choice. Followed by the second most common response that 41% of participants said they don’t know enough about the job.

As head of TD Ameritrade Institutional Generation Next, this is something I hear about too often.

I frequently hear from college financial planning program directors that the number one reason more students in general are not studying to be financial planners is because they do not realize that the profession exists.

The sustainability of our industry and our willingness to embrace the future of the next generation go hand-in-hand.

How we can all make a difference

We can’t quickly solve for the lack of diversity overnight, but we are continuing to work with the Center for Financial Planning, and the rest of the industry, to attempt to break down barriers.

I encourage you to educate yourself further on this topic by reading the summary of study results, and upcoming thought leadership and action plans.

And, there are steps you can take now to help the industry start seeing a change sooner than later.

As part of the study, a mix of ethnically diverse CFP professionals, hiring/recruiting professionals, consumers who currently work with a financial planner, and prospects were asked what they thought could be done to boost diversity in the industry.

Most agreed these four general strategies would be the most effective:

  1. Formal mentoring programs. Hire more interns, hire more interns, hire more interns. I can’t stress this enough. It’s an invaluable opportunity for students to get a real feel for the industry and it’s a win for your business. If you need help, check out our RIA NextGen Career Exchange.
  2. Boosting awareness of the career – and how it helps. A common misconception about the RIA profession is that it’s a sales job and the thought of a commission-based job can be intimidating. In reality, a career as an RIA can be rewarding on both a personal and a financial level. Helping your community is a big part of why diverse financial planners joined the profession.
  3. Introducing the profession earlier in the education path, in part through financial literacy initiatives. Go to a Career Day at your local schools. Talk about the importance of making good decisions financially and the opportunity to help others. Get set up on a local college campus as a guest lecturer, volunteer to host informational sessions at high schools, and participate in recruiting fairs. To help promote careers in financial planning, we launched the TD Ameritrade Institutional NextGen Scholarship and Grant Program.
  4. More diversity hiring programs at firms. Minorities do not believe this career is open to them because there is currently not enough diversity in leadership and senior ranking positions to convince them otherwise. You can’t be what you don’t see, and right now, it’s hard to see…
  5. And I’m adding a 5th that wasn’t part of the study. Educate yourself on diversity, and more importantly, inclusion. This is a hot topic right now and there are great resources out there:
    1. InvestmentNews is running features all year focused on Diversity and Inclusion in our profession, with articles from thought leaders throughout the industry.
    2. Listen to 2050 Trailblazers, a podcast series from Rianka Dorsainvil that provides voices and perspectives you probably haven’t heard before.

I’ve been all over the country — to countless universities, conferences, and seminars speaking about this topic. And the good news is that almost none of this information comes at a surprise. And the bad news? Almost none of this information comes at a surprise.

We’re nowhere near done, but we’re garnering more tools each day. Share your ideas with me on Twitter (@KateHealy_TDA) and use #RIANextGen to join in on the conversation.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.

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