Firms Are Hiring More Diverse Advisors. Can They Keep Them?

What You Need to Know

The advisor industry is recruiting more diverse candidates, new data from the CFP Board shows, but retaining more diverse talent for the long term is not a given.
Successful retention requires a whole-firm approach based on leadership buy-in and clearly defined goals and methodologies.
Firms’ future success will hinge on their ability to secure talent that reflects the changing fabric of American society.

The Certified Financial Planner Board of Standards has made what its leadership calls important progress in attracting new talent from every background, with nearly 30% of advisors who earned their CFP certification in 2022 being women and 15% coming from a racially or ethnically diverse background.

As Kevin Keller, chief executive officer of the CFP Board, told ThinkAdvisor in a new interview, these percentages mark all-time highs for both categories. However, as Keller emphasized, the effort to recruit more diverse candidates is not a complete solution to the advisory industry’s long-standing and much-discussed racial and gender diversity gap.

“We must also be able to sustain this increased diversity over the long term,” Keller said, adding that retention of diverse talent is essential to improving the diversity at the leadership level of financial services organizations, where representation is even more lacking.

That’s why the CFP Board Center for Financial Planning has focused its fifth diversity-focused white paper on research-based retention strategies that can support a more diverse profession. As Keller emphasized, the retention strategies and best practices presented in the new paper have been compiled from independent research, a review of existing literature on the subject and case studies provided by multiple financial services firms.

According to Keller, these case studies offer inspiring examples of how different firms have successfully strengthened retention, and they deserve consideration on the part of any firm with diversity, equity and inclusion goals.

At the heart of the paper, Keller said, is a broad recognition that consumer demand for competent, ethical financial planning has never been higher. Yet today’s advisors are retiring faster than they can be replaced by new talent, and firms do not demographically represent the clients they currently serve or the increasingly diverse clients they can expect to serve in the future.

As such, Keller said, it is essential that firm leaders continue to seek diverse, qualified talent, but it is equally important for them to implement strong retention strategies that will sustain the profession’s (slowly) growing diversity in the long term.

The Essential Elements of Retention

According to the new report, senior leaders must define and explain the “why” behind organizational efforts to create a culture of retention, including how it aligns with the firm’s values and what they hope to achieve.

Step One is assessing the firm’s existing culture to determine where it stands in relation to the desired future state — and being brutally honest about the current state of affairs. As Keller noted, this can be an uncomfortable exercise, especially at highly successful firms that are used to viewing their operations and organizational structures in a purely positive light, but it’s well worth the effort.

The paper proposes that every step of a firm’s recruitment process, from writing job descriptions to onboarding new hires, should be developed or reimagined using an “equity lens.”

This entails crafting clear and detailed job postings and expanding recruiting networks to help firms source more diverse candidates. Other essential elements include creating deliberate interview processes that involve diverse panels of interviewers and consistent, skills-based rubrics for evaluating candidates.

None of this is work is overly esoteric or complicated, Keller said. It just takes commitment and consistency, and a willingness to admit and address the issues that exist in any given organization.

Management Matters

Naturally, an employee’s relationship with their manager is critical to their decision to stay with or leave a company. As the saying goes: Great talent joins companies and leaves managers.