How does the DEI initiative benefit financial advisory firms?

Financial Planners

Financial advisory firms manage trillions of dollars and are inextricably linked to wealth and capital issues. But when the U.S. Government Accountability Office surveyed the industry in 2017, less than 1% of assets estimated at more than $70 trillion at the time were controlled by minority or women-owned businesses. It has been found.

However, investor interest in promoting corporate diversity may be growing. For example, an investigation by the SEC’s Asset Management Advisory Committee, which has been characterized as the industry’s most in-depth examination of his DEI to date, puts the DEI information at the forefront of investors’ investment decisions. It turned out that

So what should financial advisors consider regarding DEI, and how are companies looking to implement DEI?

important point

  • Financial advisory firms show growing interest in diversity, fairness and inclusion.
  • Proponents argue that the DEI will increase corporate innovation and profits, and many projections suggest that an increase in the DEI would significantly boost productivity across the U.S. economy.
  • However, many initiatives may not be evidence-based.
  • Moreover, while opinion about the DEI is generally positive, the willingness of companies to invest resources in advancing the DEI goal can be volatile.

What is the DEI Initiative?

Diversity, equity and inclusion often mean the same thing, but refer to three separate concepts that are related.

  • Diversity Simply put, it refers to including people with different demographic characteristics, such as race, gender, sexual identity, and disability.
  • capital Refers to companies that offer a variety of resources that consider the differences in privilege and power.
  • inclusion It refers to whether people are participating in decision-making and feel they have a say.

These three concepts are used to assess a company’s inventiveness and innovation.

What advisory firms can do more with DEI

For financial advisory firms, DEI means connecting consumers to qualified and diverse financial advisors or having a diverse staff.

For example, Lincoln Financial Networks, a retail wealth management group, operates a network that connects consumers with black and Latino financial professionals through digital platforms. The company claims its platform promotes financial well-being by reducing isolation among these groups and thus expanding access to financial advice. The group also held a professional development session. There are also internships, such as the BLatinX Internship Program, which aims to encourage Black and Latino people to become Certified Financial Planners.

But overall, proponents suggest the industry still has work to do. According to an interview with Kevin Keller, CEO of the CFP Board of Directors’ 2022 Financial Planners Committee, the industry is focused on diversity rather than equity and inclusion. diversity summit. Others at the meeting called for greater transparency in employment practices.

The aforementioned 2021 SEC Asset Management Advisory Committee report made recommendations to address the lack of diversity and transparency regarding diversity practices in the industry. It recommended that the agency establish measures to strengthen recordkeeping and further investigations, as well as require more detailed gender and race disclosures.

For individual companies, it is often recommended to develop a company-specific mission, strategies and ways to measure goals, with buy-in from employees and leaders.

Examples of DEI initiatives in practice

So how are some of the top companies approaching DEI?

Investopedia reviewed publicly available information from some of the largest companies and commissioned research from several companies on the Top 100 Financial Advisors list.

Leading financial advisory firms have issued statements on the DEI, including issuing periodic reports on the DEI initiatives they are pursuing.

  • For example, in its 2022 report, BlackRock called DEI a “business imperative” and claimed it had achieved internal goals for gender, ethnic and racial representation.
  • By way of comparison, Vanguard also highlights its efforts to attract and retain a diverse staff and publishes a profile of the race and ethnicity of its workforce.
  • Fidelity has similarly touted an employee-led community investment program, claiming that 43% of new hires in 2022 will be people of color and that the company has spent $350 million on “diverse suppliers.” ing.

How are other companies tackling diversity?

make it your “why”

“As a female-majority black-owned business, we leverage our cultural competence skills to deliver truly compelling, comprehensive financial planning advice and a hospitable environment for both employees and customers. By creating it, we are redefining the traditional structure of mainstream RIAs,” writes Lazetta Rainey. Braxton, founder and CEO of Lazzetta & Associates, an Investpedia top 100 financial advisory firm, responded to inquiries about the firm’s DEI practices.

She said diversity, equity, inclusion and a sense of belonging were central to why she founded the company in a country becoming a “racial mosaic.”

“We celebrate weaving the ‘why’ into our internal and external practices that span employee training, career paths, company handbooks, team gatherings, prospect introductions, client meetings and company retreats. ” Braxton wrote.

Work with Diverse Suppliers

“We make a deliberate effort to include diverse candidates in our vacancies and select our employees through a fair and consistent recruitment process,” said Plancorp, an Investpedia top 100 financial advisory firm. Chief Investment Officer Peter Lazaroff said.

PlanCorp is also looking for women- and minority-owned businesses as suppliers, Lazarov said.

Don’t Focus on “Efforts”

“I disagree with how most companies view the DEI,” said Kirk Chisholm, wealth manager and principal at Innovative Advisory Group, another Investpedia Top 100 financial advisory firm. said in an email.

Chisholm’s company actually eschews certain initiatives, which he believes is the wrong approach to increasing diversity.

“Practically, people who belong to an underrepresented group in the financial services industry should not be seen as missing opportunities. Lack gives a competitive advantage over others who do not belong to that representative group.” “People prefer to associate with people similar to themselves. If we see it as an opportunity rather than a problem, we will achieve more.”

Benefits of DEI in the workplace

DEI’s well-known benefits include improved employee morale, lower turnover, and increased competitive advantage. And often proponents emphasize profitability, known as the “business case.” Many projections suggest that “diverse” firms outperform and outperform non-diverse firms, largely by fostering innovation by traditionally underrepresented groups. I’m here. The upturn is said to spill over to the broader economy, with some prominent projections that increased diversity could bring in trillions of dollars more.

However, there is also general skepticism about how genuine most DEI pledges are. Companies are quick to talk about their diversity efforts, but many are slow to make superficial changes, writes Salvador Oldrica, CEO of translation service Spanish Group LLC. . In the case of Ordrica, companies can “cynically” use diversity as a way to get credit for small changes (also known as “slowness”).

Large companies tend to justify DEI by emphasizing its utility in business performance (rather than, for example, making moral claims that DEI promotes equity within the organization). But the DEI’s business case may actually hinder inclusivity, and at least one study suggests that emphasizing profitability in this way may actually be less profitable for the underrepresented group it’s trying to attract. It turns out that the attractiveness of the company fades.

Even well-intentioned efforts can have thin evidence. Research suggests that many of the DEI industry recommendations, from unconscious bias training to workshops, have limited effectiveness at best and can cause backlash at worst. For example, one meta-analysis of hundreds of ‘reduction of prejudice’ interventions found that only ‘a few’ were effective.

There are also concerns that some corporate investments could end up volatile. Many companies are laying off his DEI expert in the wake of the deteriorating macroeconomic environment. Among them are many big technology companies such as Twitter and Amazon, which show that DEI positions have a much higher turnover rate than other positions.

Measuring DEI in the workplace

Recently, there have been calls to make the DEI more data-driven. That process includes identifying DEI goals and using metrics to track progress. This is one of the responses to criticism of the DEI that suggests the industry is not backed by evidence. But companies can also track whether their policies are having the desired effect.

What are DEIs?

DEI stands for Diversity, Equity and Inclusion. These are a set of concepts aimed at testing the innovation of companies.

What are the benefits of workplace diversity?

In the workplace, adopting DEI is said to give companies a competitive advantage, reduce employee turnover, and improve employee morale.

Why is the DEI important for nonprofit organizations?

According to the National Council of Nonprofits, an organization that provides resources to nonprofits, adopting the DEI creates “room for positive outcomes to flourish.”


Business interest in DEI has skyrocketed since 2020, and public opinion of DEI is largely positive. However, corporate pledges may not be stable, and his DEI recommendations in practice are not necessarily supported by evidence at this time. In any case, there is demand for his DEI initiative, which is well-crafted and measurable in financial advice, and proponents claim it can help address structural hurdles such as racial wealth inequality. are doing.

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