Why diversity, equity, and inclusion matters in financial planning

Here’s an eye-opening statistic: according to the CFP Board Center for Financial Planning, less than 3.5% of all the 80,000 CFP® professionals in the United States are Black or Latino. This lack of diversity in the realm of financial planning is problematic for various reasons that we’ll address in this post.

‍Understanding the barriers to DEI in the financial services industry

Before we dive into why diversity, equity, and inclusion (DEI) is vital for the financial services industry, let’s explore why there are barriers, to begin with. While there’s not a single, all-encompassing explanation, there are a few factors that can be attributed to the lack of diversity in the financial planning world:

• The Black and Latino communities lack awareness of financial planning and the CFP® certification process—a cycle that’s likely perpetuated by a lack of opportunities for financial education. The same survey by the CFP Board Center for Financial Planning found that 58% of Black and Latino prospective financial planners have never seriously thought of becoming financial planners.

• Many financial firms don’t have diverse or equitable hiring practices. They also tend to have requirements that make it challenging for people of color (POC) to enter the financial services world. For instance, employees at financial services firms frequently get paid through a draw, which is an advance payment that must be repaid through commissions earned within a short period of time. This puts a lot of pressure on the planner to have an existing network of clients, which minorities entering the industry for the first time usually don’t have.

• The CFP® certification itself is also a blocker to diversity. The CFP® exam costs $595 to take (but can be much more in international locations). This doesn’t include the review materials and classes you need to prepare for the exam, ranging from $400 to over $1,400. In addition to the costs, the exam itself requires months of preparation and is 10 hours long. Afterward, you need 6,000 hours of relevant work experience—whether that’s full-time or part-time—to get your CFP® certification. These high associated costs and time-intensive requirements aren’t within reach for many people.

Why representation matters in financial planning

But why does any of this matter, anyway? Does it actually make a difference whether or not there’s diverse representation in the financial planning industry? The answer to these questions is a resounding yes. Here’s why representation matters in financial planning:

Diversifies your client base

Everyone has different experiences, perspectives, and ideas when it comes to money. By having CFP® professionals who represent a diverse range of backgrounds, you’re giving existing clients the option to work with someone who can relate to them on both a personal and professional level. Not only that, but you’re also likely to attract a diverse clientele. A survey found that planners of color have the advantage of attracting clients of color. In fact, 59% of respondents agree that Black financial planners have an advantage with Black clients, and 69% agree that Latino financial planners have an advantage with Latino clients.

Addresses economic inequality

Economic inequality is a massive problem in our society. According to the Federal Reserve, White families have accrued eight times the wealth of Black families and five times the wealth of Hispanic families—primarily from receiving more gifts and inheritance. Black and Hispanic families are also far less likely to have retirement accounts compared to White families. More representation among CFP® professionals can address this gap by encouraging more POC to seek financial help. These clients can then receive the education, recommendations, and support they need to better manage their money and build wealth. While a more diverse financial services industry certainly isn’t the end-all-be-all solution to economic inequality, it can make a significant impact.

Leads to better performance

Diverse, equitable, and inclusive teams perform better—and there’s an abundance of research to prove this. For instance, for every 10% more racially or ethnically diverse a company’s senior team is, earnings before interest and taxes (EBIT) are found to be nearly 1% higher. It’s easy to see why diversity is correlated with better business outcomes. Bringing together different perspectives leads to more creativity, better problem-solving, and fresh ideas. Inclusion is an integral part of this equation as well. 93% of employees agree that a sense of belonging drives organizational performance. Workplace belonging can also lead to an estimated 56% increase in job performance, a 50% reduction in turnover risk, and a 75% decrease in employee sick days. At Origin, we strive for our planners to be as diverse as the employees we serve, which is why over 25% of our CFP® professionals are women or POC. It’s also why we allow people to request planners they feel comfortable with and personally identify with. However, we know there’s so much more we can do. Stay tuned in the coming months to learn more about a project we’ve been working on. If you're interested in incorporating financial wellness into your DEI strategy, reach out to us.