Many industry observers believe Ken Fisher’s reportedly distasteful comments at an industry conference last month shone a harsh spotlight on the toxic side of wealth management — despite industry claims of working on improving diversity and inclusion.

The backlash to Fisher’s apparent sexist remarks has been swift and loud, with many advisors criticizing him for his language and almost $3.3 billion in redemptions from Fisher Investments in the past few weeks, according to news reports.

“The industry is evolving, and it’s all of our responsibility to be catalysts for the positive change we want to see. This is a great opportunity for us all to check our own biases, and to be encouraged to speak up as allies in support of diversity, equity and inclusion,” says Kathleen Zemaitis, SVP of advisor diversity and inclusion at LPL Financial, when asked what lessons the industry could take from this recent event.

The issue of diversity has festered for a long time, and at the very basic level is reflected in the constitution of the advisor community, researchers say. According to research firm Cerulli, at the end of 2017, women financial advisors accounted for only 14.3% of industry’s advisor headcount.

Bureau of Labor Statistics figures show that in 2018, of the full-time employees under the personal financial advisor category, 146,000 were women compared to 268,000 men.

Diversity is not just a checkmark that firms need to look good on paper, but actually makes great business sense.

Scroll down to see the pay and population differences between men and women financial advisors

Experts believe that as women become more educated and comprise a growing share of those who control wealth, having more women advisors would be beneficial.

“We know today that more women are controlling the wealth in their households, women are more educated, they have higher-earning careers today. And we want to make sure that we’ve got the financial advisors that they want to work with. And in some cases, they’re looking for a financial advisor that looks like them. And so, we need to make sure that whether it’s females or other diverse groups that we’ve got financial advisors that represent who it is that they want to work with,” Kristen Kimmell, RBC’s new head of advisor recruiting, told FA-IQ in an earlier interview.

Is hiring diversely the same as being inclusive?

Most broker-dealer firms are attempting to consciously hire more diverse groups of advisors. But while hiring more diverse advisors is a start, it’s not the silver bullet that will single-handedly fix the industry’s diversity woes, researchers warn.

“Culture is very ambiguous. It’s more subtle. It can also be a more insidious influence on how diversity flourishes or does not at a firm.”
Marina Shtyrkov
Cerulli Associates

If hiring alone could make the industry more inclusive, Fisher, who has been in the eye of this storm, might not be making the headlines he has, say industry experts. Recently Fisher highlighted his firm’s diversity in an op-ed for his local Camas, Wash., newspaper.

“We take pride in our culture of inclusivity: 85 percent of our total firm-wide employee base reports to Executive Vice Presidents who are women, people of color and/or identify as a member of the LGBTQ community,” wrote Fisher.

But experts say hiring more diverse talent is different from ensuring a safe and supportive working environment for that population.

“I think diversity is kind of who we are, who the people are, and the inclusion is what we do, how we create that environment where people feel supported. And I think that’s the question that you’re getting to and that is something that we talk about at RBC,” says Kimmell, who is looking to hire more women advisors.

“Recruiting is very important. But the second part of the equation — and I would say arguably even more important — is retention. And it’s ensuring that you are creating — actively every day — a culture that not just values diversity and inclusion, but it’s a core belief of everybody at the firm,” says Marina Shtyrkov, research analyst at Cerulli Associates.

And that’s where the challenge lies, according to Shtyrkov, because “culture is very ambiguous. It’s more subtle. It can also be a more insidious influence on how diversity either flourishes or does not at a firm. People have unconscious biases, they have, again, these really embedded beliefs that can be difficult to untangle.”

Most firms have networks for diverse advisor populations to promote inclusion.

You can’t really take an industry that’s been non-diverse and then change your firm overnight. You have to make sure you’re hiring diverse and those diverse candidates are getting promoted.
Paul Reilly
Raymond James

“We have a number of employee resource groups that we allow to help create that kind of connectivity,” says Kimmell. “We have a women’s association of financial advisors, helping female financial advisors across the country. We have also a new women’s empowered ERG group.”

“Our program was built from and is constantly enhanced by feedback from our advisors. We proactively seek their input, and have established an Advisor Inclusion Council, consisting of a demographically diverse representation of LPL advisors and program managers in partnership with LPL home office leaders. This Council offers insight that impacts the strategy and implementation of efforts to make LPL the most inclusive place for advisors in the industry,” says Zemaitis.

Shtyrkov feels the conversation needs to also involve male allies for it to have meaningful impact.

“There’s value to having a community that’s just for women. But I think also being cognizant that we’re not leaving anyone behind when we’re having this conversation, and that we’re including men in the conversation, we’re including potential skeptics in the conversation,” says Shtyrkov.

The difficulties of becoming diverse

While progress has been made in wealth management, there’s still a long way for the industry to go, home office execs say.

“There’s always an opportunity for more to be done to improve diversity and inclusion in our industry. The issues weren’t created overnight and they won’t be solved overnight. But sincere effort and consistency are key to seeing any real change,” says Zemaitis.

Kristen Kimmell

Though Raymond James would not comment for this story, it has, in the past, voiced similar concerns.

“You can’t really take an industry that’s been non-diverse and then change your firm overnight. You have to really … make sure you’re hiring diverse and those diverse candidates are getting promoted in a fair and hopefully representative way,” Raymond James' CEO Paul Reilly said in a call with reporters in May this year.

For one, hiring women advisors is also not as easy.

Reilly admitted on that call there are challenges to hiring diverse candidates since the talent pool is so heavily skewed against them.

“We always pride ourselves on leaning on female advisors. But when you’re recruiting from an industry that has less, it’s hard to increase the diversity because the candidates are lower, no matter how hard you try. So, there’s always challenges but we’re committed to getting there,” Reilly said.

The talent pool of women advisors may be smaller because fewer women see financial advice as a career option.

“The primary roadblock that firms are encountering is this double-edged sword of lack of familiarity and misconceptions about the industry,” says Shtyrkov, explaining that women do not often consider a career in financial advice because they “may have never met a woman who’s a financial advisor. They may have trouble seeing themselves in the role because all of the examples of financial advisors they see, whether it is recruiters, their families, financial advisors in the media and commercials, are often men.”

In response to such challenges, RBC launched a video series a few years ago focusing on women and various career paths that successful women RBC advisors took to getting there. The firm launched another video series last month, showcasing diverse advisors and their stories.

Challenges for women advisors

Perception is not the only shackle holding back women advisors from entering and thriving in the industry.

Shtyrkov says structural barriers “like compensation and culture can certainly play a role, [like a] lack of mentorship, or insufficient mentorship — especially from advisors who are like them and may be more likely to have faced the same challenges.”

A lack of women poses a problem for the incoming generation of women advisors as well.

“It’s just far more likely that a new female advisor is going to have a male mentor or a male boss, or even a team of men that she’s working with rather than a woman,” says Shtyrkov, adding “for example, if she’s a single mother or a caretaker in another sense, a woman [manager] might be more likely to understand her specific and unique challenges than somebody else who hasn’t walked that path.”

Gender pay gap is another big hurdle. According to BLS data, median usual weekly earnings for women personal financial advisors were $1,207 in 2018 as compared to $1,647 for men.

And in an industry where the pay structure is incentive- and production-driven, making it hard for any newcomer, women are likely to avoid taking that financial risk, says Shtyrkov.

“I think women in particular are less willing to take on the risk -- the personal risk to them, the financial risk to have variable compensation, whether it’s commission-based or fee-based. But the lack of a kind of that security of knowing that you’ll have income as you’re trying to build up your business and your practice, that is particularly challenging for women because they’re more likely to be caretakers,” says Shtyrkov.