Time for Change: The Lack of Minority Leadership in Finance
Diversity. A word that we have been hearing a lot as of late. Recently, we have even seen high profile organizations like the CFP Board, release much-needed research about how “diverse” the financial planning profession really is. Although those numbers weren’t the greatest, a lot of people are happy that conversations have at least begun surrounding the lack of minority leadership in finance.
Unfortunately, I feel that as an industry we have fallen short with “inclusion” and I would like to point out some ways on how we can begin to improve that.
Minority Leadership in Finance: Seeing Is Believing
Oftentimes, it is human nature for us to need to first see someone in a position that we desire to be before we try to accomplish that same goal ourselves. This very reason is why Inclusion is needed from top-down.
Out of curiosity and some of my own prior experiences, I decided to do a little research. I wanted to know exactly how many minorities were Principals (actually owners indicated in the firm’s ADV) within the state of Georgia at some of the top Registered Investment Advisory firms (RIA).
Conducting this research was very labor-intensive as I had to physically look through each firm’s Form ADV Part 1, but the results were well worth it. (Data compiled March 2019)
To ensure that I had a good sample size, I took the top 25 rankings from five publications (Financial Times, SmartAsset, FA Magazine, Atlanta Business Chronicle, and InvestmentNews) that were published in 2018. This gave me a total of 29 firms, most publications had a lot of overlapping firms.
Of the 29 firms, four of them where owned by another corporation which made it difficult to see the firm’s ownership. Therefore, we were brought back down to 25 firms.
Within the final 25 firms, there was a total of 164 principals and of which only 4 were minorities, that is 2.4%. What really drove home the point for me, only one principal was African American which represents less than 1%.
If you happen to be an African American client-facing advisor like myself, then none were in those roles.
As an industry, we need to do a better job of showing minorities that we have made a seat for them at the table and the glass ceiling is no longer there. Nothing shows that more by seeing someone that looks like you in a position that you dream to be in one day.
The Maynard Jackson Strategy
In 1973 Maynard Jackson was elected at age 35 as the first black mayor of Atlanta, Georgia. One of his greatest accomplishments as Mayor was significantly increasing minority business participation within the city of Atlanta. Two of those projects were Atlanta’s transit system called MARTA and what we all know today as the World’s Busiest Airport, Hartsfield-Jackson International Airport.
To create inclusion, Maynard required that 25% of all city contracts would be set aside for minority firms. This instantly changed the minority community as they had a legitimate shot at 25% of a project initially valued at $450 million dollars.
As a result, Maynard increased minority contracts from less than 1% in 1973 to roughly 39% in 1978.
Hopefully, in 2020, making sure we are including minorities within c-suite or ownership roles, doesn’t have to take all of Mr. Jackson’s strategies. Personally, I do believe that more firms will rise to the challenge and make sure that they are considering more minorities within ownership roles.
Now let’s take a look at this from the perspective of a minority advisor seeking employment. There are a few things that you can do to ensure you avoid the glass ceiling.
Check ADV Part 1
Make sure to check and review the firm’s form ADV Part 1. This will let you know how the current ownership structure is divided out and who is ultimately the decision-maker.
Pathway To Ownership
Most RIA firms nowadays should have in writing what it will take for you to become one of the owners of the firm. Oftentimes, you will obtain ownership by either bringing in a certain amount of business or simply raising funds to buy-in.
Unfortunately, if the firm you are seeking employment through does not have a clear written path to ownership, you can’t be afraid to move on. The sooner you are settled in with a good firm, the higher your chances are at succeeding in this industry.
As we become more aware of the lack of top-down inclusion as an industry, I feel that our overall diversity numbers will improve, as other minorities will have more opportunities to see people who look like them that are #winning.