Addressing Diversity and Succession in the Financial Planning Profession

Journal of Financial Planning: November 2024

Carina Diamond is the chief growth officer at Gries Financial Partners (www.gries.com) and The 4100 Group Financial Services (www.the4100group.com), leading growth and client relationships. She previously founded Stella Secunda, a succession planning and fintech consulting firm, and served as chief growth officer at Dakota Wealth, where she drove growth and employee engagement.

In today’s evolving society, comprehensive financial advice is essential for all families to achieve financial security and thrive. However, access to financial planning services has historically been limited for underrepresented groups, contributing to the persistent savings and wealth gap in the United States. A related issue is that financial planners as a group are aging, and many report that they lack a solid succession plan. Financial planners can take specific steps to address succession and sustainability by developing a formal game plan to attract and retain younger, diverse talent, in order to provide comprehensive advice to families of all types. This article will address succession planning and its critical role in fostering a sustainable, diverse financial planning profession.

Challenges with Access and Diversity in Financial Planning

There are several reasons why financial planning advice has failed to be accessible to all racial and ethnic groups. First, an emphasis on assets under management (AUM) for client acceptance has been a stumbling block. Many financial planning firms set AUM minimums that underrepresented individuals may not meet. Profitability concerns lead firms to favor larger accounts, excluding smaller, potentially more diverse clients. 

Second, progress in increasing diversity among financial planners has been slow, as evidenced by statistics from the Certified Financial Planner Board of Standards. Clients tend to prefer advisers who share similar backgrounds and experiences, making diversity within the profession crucial for better client–adviser relationships. Women- and Latino-owned businesses are growing rapidly (new businesses opened by Latinos accounted for 36 percent of launches in 2023 (Hale 2024)) but often lack access to essential financial guidance, impacting their sustainability and growth. A study by Kiva claims that 80 percent of women-owned businesses with credit needs are underserved (McAulay 2023). 

There is a broad misconception that financial planning is solely about math and sales, overlooking the broader advisory and support roles involved. For example, there are rich and vital roles in operations, client service, marketing, technology, and compliance that are often overlooked by guidance counselors and parents when advising students on career paths. Misunderstandings about the profession may deter students from pursuing careers in financial planning, exacerbating the existing talent gap and succession challenge. 

In reality, the financial planning profession offers a variety of career paths that can appeal to a wide range of interests and skills. For example, operations professionals help ensure the firm runs smoothly and efficiently while client service representatives build solid relationships and provide ongoing client support. By showcasing these diverse roles and spreading the word about our industry, we can attract a broader pool of talent and dispel the myths surrounding the profession.

According to CFP Board statistics, there are more financial planners over 70 than under 30, highlighting an impending workforce crisis. Financial planning practices often struggle to recruit, train, and retain young professionals, threatening the future sustainability of the profession. Increasing diversity within the profession not only addresses these challenges but also brings a variety of perspectives and ideas that can drive innovation and growth. Diverse teams are better equipped to understand and meet the needs of a diverse client base.

Thinking Outside the Box 

Solutions abound to solve these challenges; you just need to think creatively. Innovating financial planning business models is an impactful starting point. Shifting clients from AUM-based fees to flat fee structures allows firms to serve a more diverse client base that sorely needs solid financial planning advice. Moving toward compensation models that rely more on profitability and potential rather than “eat what you kill” encourages fair compensation. Also, by hiring diverse advisers and other team members, firms can better serve diverse clients, fostering a more inclusive environment.

Creating a flat-fee structure that works for your practice starts with client segmentation. In other words, categorizing clients and service offerings into a few segments allows you to tailor your services effectively. For example, clients just starting out with few assets who sorely need financial planning guidance could pay a low monthly fee (e.g., $250), with a minimum one-year commitment. At this relatively low fee, clients could get access to a junior planner for specific, focused advice such as how much to fund their 401(k) plan and which employee benefits to elect (not a comprehensive financial plan), receive your newsletter, and have access to financial calculators and other tools that you provide. This type of client tends not to be immediately profitable but could grow over time and have the benefit of giving newer planners the ability to work with more clients to gain experience. This option could also work with children of more affluent clients who you want to get into your pipeline of future profitable clients. 

The next tier up could be clients with some investable assets who also might need risk management / insurance products and could pay $500 per month and receive both investment management and comprehensive financial planning. 

The top tier (say, $1 million minimum investable assets) might be charged more traditionally on a percentage basis (say, starting at 1 percent), and that offering might include more in-depth financial, estate, and tax planning along with investment management. 

This structured approach not only ensures that clients receive tailored services based on their needs and financial situation but also allows your firm to cater to a diverse range of clients while maintaining profitability and creating a sustainable business.

Attracting and Retaining Top Diverse Talent 

There are a number of specific actions financial planners can undertake to build more durable staffing models and ultimately increase the likelihood of effective succession down the road. Here are six ways to future-proof your business and attract top diverse talent. 

1. Offer year-long internships for talent acquisition. Training an intern only for them to leave three months later and then onboarding a new intern can be a draining cycle. Offering year-round internships provides both parties with more time to assess if it’s a good fit before committing to each other. The intern also can learn more during that period, getting to know your team, clients, and business needs, setting them up for success in your firm and for future roles. 
2. Collaborate with universities for diverse skill sets. Partnering with local colleges and universities to recruit students with varied skills, such as communication and technology, can enhance the capabilities of financial planning teams. Partnerships may be established in a number of ways. I suggest identifying the department chair in the finance department, a business college dean, career services, and/or the development (fundraising) office. These are all excellent ways to get the conversation started. Offering to speak at a career fair or coaching event may be an excellent introduction to student leaders as well. Colleges offering financial planning often have student-led FPA chapters and are frequently seeking speakers and guides.¹ Joining an advisory board or council at a local college or university is another entry point. Insider tip: Know that a financial contribution may be required to participate on these boards. An additional benefit may be networking with like-minded professionals, some of whom could be client prospects or even future employees!
3. Conduct educational outreach to high schools. Engaging with local high schools may fulfill students’ financial literacy education requirements and also spark early interest in financial planning careers. A call to the guidance department or any teachers you may know can be a great starting point. If you know anybody on your school district board of directors, they could be an additional point of entry. High schools are always seeking fresh and engaging speakers to address their students. Think about a simple and fun exercise you could do with students. The National Financial Educators Council and Intuit both offer free resources that may be used for teaching high school students about financial literacy, which is a great introduction to a career discussion. The SIFMA Foundation’s Stock Market Game is yet another tool that students often find engaging and exciting.² Keep your eyes open for career days as well. 
4. Start a scholarship to spread the word to underrepresented groups. Scholarships promoted to underrepresented groups can help attract diverse talent to the financial planning profession. Practices may vary by university, but an appropriate starting point for a conversation is often the development (fundraising) office or alumni affairs. A scholarship may be a one-time contribution (such as a one-time $5,000 gift) or an “endowed” arrangement (often $50,000 or more) where funds are invested by the institution and a certain percentage (e.g., 5 percent) is given as an ongoing scholarship. Some financial advisers offer a scholarship with an internship, which can be a meaningful way to get to know a student and their potential. Note that practices vary by institution. Some schools will allow the donor to participate in vetting students for the scholarship, which is a great way to meet students who are potential future employees. Insider Tip: Even smaller amounts such as a one-time $1,000 donation can be meaningful to a student. Scholarships may be made in your individual name or the name of your business, which can be a great conversation starter with both students and their parents. A side benefit is that clients often appreciate seeing their financial adviser giving back via a scholarship. Inviting your scholarship recipient to visit your office and perhaps attend a staff and/or client event can be a very impactful experience for that student as well as all involved. In my experience, clients love to see that adviser is playing an active role in the community. 
5. Participate in diversity programs and education. Attending programs like Diversitas, a program operated through the University of Akron to bring more diversity, equity, and inclusion to the wealth management industry, can raise diversity awareness and promote inclusive practices within firms. Exploring other resources such as www.theFare.org and the BLX Internship Program (www.blxinternship.org) can educate you about the important efforts from other industry firms and spark your own efforts. Signing up for their newsletters or following them on social media can be a great way to generate new ideas for your firm and stay connected with diversity efforts nationwide. 
6. Engage and network with diverse professionals. Engaging with diverse professionals broadens perspectives and fosters an inclusive professional network. Next time you’re attending an industry networking event or conference, rather than simply hanging with your friends or colleagues, take a chance and strike up a conversation with an attendee who doesn’t look like you. You may find you have more in common than you ever imagined. Over time, you may even find ways to help each other as you develop that relationship. Consider joining an organization or club that caters to other cultures. It doesn’t have to be financial-planning related. If you’ve always had a hankering to learn how to cook a certain kind of food, learn a new sport, or explore a new hobby, take a chance and attend a course by yourself. Being open and slightly uncomfortable may place you in the perfect situation to meet someone different from you. Put yourself in new situations where you will meet different people. Be sure to respect differences and communicate clearly and be aware that we all have unconscious biases. 

Advantages of Inclusive Practices in Financial Planning

Addressing diversity and succession in the financial planning profession is vital for ensuring the accessibility and sustainability of financial planning services. Embracing diversity of both people and job roles is a sound business decision that can drive growth and innovation. The industry must commit to broad, systemic changes in business and staffing models and actively promote inclusivity and talent development. By fostering an inclusive culture, we can ensure that the financial planning profession thrives and effectively serves all populations.

Promoting diversity and inclusivity within the financial planning profession is a moral imperative and a strategic advantage. Diverse teams bring many perspectives and experiences that can lead to better decision-making, more innovative solutions, and stronger client relationships. We can build a more resilient and inclusive financial planning profession that benefits everyone by proactively implementing the above initiatives before it’s too late.   

Endnotes

1. Visit www.financialplanningassociation.org/networking/fpa-nexgen/student-communities for a list of universities that have a student community or to establish a new community at your school. 
2. See www.stockmarketgame.org/.

References

CFP Board. n.d. “Why the Center.” www.cfp.net/cfp-board-center-for-financial-planning/about/why-the-center.

Hale, Kori. 2024, April 3. “The Unstoppable Growth Rate of Latino-Owned Businesses in America.” Forbes. www.forbes.com/sites/korihale/2024/04/02/the-unstoppable-growth-rate-of-latino-owned-businesses-in-america/.

McAulay, Sophie. 2023, March 8. “Access to Finance Is Critical to Help Women Entrepreneurs Around the World Improve Their Earnings.” n.d. Kiva. www.kiva.org/blog/access-to-finance-is-critical-to-help-women-entrepreneurs-around-the-world-improve-their-earnings.