Nearly 45 million U.S. households will transfer a total of $84.4 trillion in wealth to heirs and charity through 2045, a transition also known as the Great Wealth Transfer, according to Cerulli Associates. The majority of this wealth, or $72.6 trillion, will go to heirs, with the remainder going to charity.
The U.S. is entering a period when money will be in the hands of individuals who have never had this level of wealth before. Concurrently, within the next three years, 39% of the population will be racially and ethnically diverse. By 2045, today’s minorities will be the majority.
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The question on the horizon is this: Have financial services companies and advisory firms recognized and shifted their agendas to meet the growing need of diverse financial advisors and clients? Clients and consumers across the racial spectrum value diversity, equity and inclusion and are very vocal about it on social media platforms, for example.
Organizations that ignore the “changing face of wealth” by not having diverse talent represented in various areas of their firms (teams, leadership and clients) run the risk of not participating in this emerging market and leaving money on the table.
Here are some ways that financial services companies can benefit from implementing thoughtful diversity, equity and inclusion, or DEI, initiatives now:
— Why diversity, equity and inclusion efforts now?
— Distributing resources equitably.
— 4 ways advisory firms can do more in DEI.
Why Diversity, Equity and Inclusion Efforts Now?
In the spring of 2020, as the global pandemic began, the public became aware of the murder of George Floyd, a Black man, by a police officer in Minneapolis. That event and other catalysts put companies under pressure to practice what they preach in terms of DEI, and many organizations and companies were compelled to stop giving “lip service” to DEI efforts. They started developing well-thought-out initiatives to support marginalized communities.
In October 2022, Lincoln Financial Network, the retail wealth management affiliate of Lincoln Financial Group, held its first annual African American Financial Professional Network (AAFPN) Conference at the Warwick Hotel in Philadelphia. The event is designed to support the needs of Black financial professionals and clients. The AAFPN aims to attract more Black financial professionals to Lincoln Financial Network and to help define new strategies for supporting multicultural clients.
The AAFPN’s stated mission is to leverage, exchange, activate and develop (LEAD) a community where multiple perspectives, backgrounds and talents are valued and supported. The event’s opening session, “The Power of Lincoln, the Plan and the People,” resonated with advisors who recognize that people need a plan to be successful in organizations, and that diverse advisors have been left out of that equation. Lincoln has made a few strides in this area: Ellen Cooper, CEO of Lincoln Financial Group, is the first woman to run Lincoln in 117 years, for example.
During the session, Matt Grove, executive vice president of Life & Annuities for Lincoln Financial Network and David Berkowitz, president of LFN, discussed their commitment to supporting racial justice by developing processes and talent practices that support Black financial advisors, as well as how these initiatives will help strengthen Lincoln.
“I wanted to do more and be in alignment with a role that was in focus to who I am and initiatives that were important to me,” says Samantha Hunter, event organizer and head of multicultural markets. Lincoln has eight DEI commitments that govern decision making, she says. “If we’re starting or stopping an initiative, if it doesn’t funnel up to one of the eight initiatives, then we must ask ourselves why are we doing this?”
“One of those commitments is recruiting more diverse advisors, being intentional about bringing in more women and more advisors of color. Every department is a part of that goal. It’s everyone’s job,” says Hunter.
LFN’s objective is to inspire Black people to pursue opportunities in financial services and to increase the overall number of Black financial professionals in the industry. In addition to generating awareness, the network supports new and experienced Black financial professionals in the growth and development of their practice through strategic partnerships and mentoring. Another component is providing financial wellness education to Black communities.
The two-day conference was designed to give Black financial advisors information, strategies and tactics to help them be successful in their practices. Often diverse advisors don’t get the practice management support needed to be successful as their business grows. What’s needed in years 0-3 is very different in years 7-10, and without the right preparation advisors can feel as if they’re not doing the job right.
Distributing Resources Equitably
Generally speaking, top-level resources are often spent on top-producing advisors who are already successful, and those who could use the help aren’t given those same opportunities. A change here wouldn’t be a handout, but rather, a hand up. It’s a balance between continuing to support those who’ve experienced high levels of success, so they can continue to thrive; and committing to develop those advisors who haven’t had access to the same training, experiences, mentorship and relationships.
Resources to support those who haven’t had access is critical if companies want to see a return on their investment. “So, we’re talking about doing the right thing. And we’re talking about giving everyone a fair and equitable opportunity,” says Hunter.
So, what can your company do to help change the narrative? As a stakeholder in the financial services industry, your employees and associates will want to know your position on the DEI conversation. Here are some ways to implement change:
4 Ways Advisory Firms Can Do More in DEI
Recognize that everyone plays a part. Think strategically about your own role and where you fit in the DEI conversation. Gone are the days of hiding behind corporate landing pages that offer support through words alone. The financial services community and public at large is going to require more, and they will ask what you are doing.
Be open to the DEI conversation. The planning should involve all levels of leadership and staff with actionable steps planned. Don’t leave the conversation with unclear next steps.
Broaden your understanding. Find out about the levels of diversity and how you can positively contribute. Consider working with a consultant or team of multicultural and diverse professionals who have the perspectives and experience to help you build the right initiatives in your firm.
Assess your company culture. Culture is more than the clothes people wear. It is the thread that weaves through the company to make it stronger. Firms who see the value of diverse threads will begin to create a competitive advantage that is both attractive and resilient.
Culture is an organic element that includes the rules of how to get things done, how people are treated and their behaviors. When DEI efforts are not genuine, people know it. So, developing a strong culture requires hard work.
Serving both diverse talent and an increasingly diverse clientele is critical to firms’ growth. Financial services companies and advisory firms who commit to doing the hard work and pushing through potentially uncomfortable conversations will be rewarded. That’s because they will be stronger and better able to represent a diverse outlook, have influence and make an impact in their community.
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How Thoughtful DEI Initiatives Can Benefit Financial Advisory Firms originally appeared on usnews.com
