By Laura Hanichak Gregg, Director of Practice Management and Advisor Research, FlexShares
Diversity, according to research from McKinsey & Company may be correlated with both profitability and value creation. Deloitte’s research suggests that diversity and inclusion may not only impact performance, but also brand and corporate purpose. To reap the rewards of gender and other types of diversity, however, financial advising firms may need to adjust their recruiting mindset.
In our latest study, FlexShares reached 529 advisors to understand how their firms were managing the challenge of building teams, including the recruitment and retention of diverse workforces. A majority 55% of firms said that increasing diversity of staff was not a strategic priority. The top three recruiting drivers across firms of all sizes were
- Anticipating future needs
- Keeping up with trends
- Employee aging (towards retirement)
We also learned that larger advisory firms are more likely to prioritize hiring new employees to anticipate future needs, keep up with trends, and replace aging staff. Smaller firms, on the other hand, tend to hire for succession planning and to keep up with the workload.
There are quick, surefire ways for companies lacking diversity to undermine their efforts towards change. One of the most common: neglect to match diversity recruiting priorities with their business strategy. Respondents to our survey were asked about the importance of a list of initiatives to their firm’s ability to align with the future of the industry and grow. When ranking diversity areas, gender emerged as a top area of importance. However, attracting and hiring more diverse talent along with hiring more professionals re-entering the job market (or changing careers) ranked among the least important. And, yet 36% of the advisors listed women and 44% listed baby boomers among the markets they serve.
The second way is to rely mainly on personal networks for recruiting. Sometimes the presence of inherent bias in this practice may not be intentional or even readily obvious. Nonetheless, the structure of personal networks often hinge on factors such as race, gender, and socio-economic class as our social and professional networks tend to mirror ourselves in these and other areas.
For example, a firm may strive to mainly recruit only from the alma mater of its top managers or target a shortlist of elite universities. This strategy is not likely going to get the diverse pool of applicants that branching out could offer. Yes, elite schools can produce top talent, and managers know how the programs from which they graduated prepare students for the workforce. There is a great deal of bias, nonetheless, that goes into who graduates from certain schools. This bias can be driven by race, gender, class, or even simply geography, and admission criteria may have little to do with whether a graduate will be a great employee.
Firms who want to get unstuck may want to think outside of personal and business networks for recruiting. Tapping into job fairs, tradeshows, and other forums where you may find a more diverse pool of candidates. You may also want to consider reaching out to CFP program directors at area universities to find a deeper and more diverse pool of candidates. Consider candidates that don’t have a financial background but are in the business of helping people and may, therefore, have top communication skills: teachers, psychology, or social work majors.
Remember, diversity attracts diversity and this may foster inclusion. It’s tough to be the sole representative of the team of marginalized identity. Don’t stop with a cultural event or showing off a new hire or two. Work continuously on keeping your team diverse and inclusive to help ensure the time and money invested in recruiting pays off.
We invite advisors to use our research to better understand how and why to build a more diverse business. FlexShares believes that diversity of thought, age, gender, race, sexual orientation, and disability will give advisors a competitive edge in the coming decade and beyond. To hear lively conversations on this topic with industry experts, subscribe to The Flexible Advisor Podcast. You may also subscribe to receive alerts when new briefs are posted or download our latest research on this topic now.