While the financial advice industry publicly highlights efforts to increase racial and gender diversity, data show the needle hasnt moved meaningfully.

Women account for 14% of financial advisers, according to research firm Cerulli Associates latest survey of the industry.

InvestmentNews data show nearly two-thirds of advisers dont have any people of color in client-facing roles, and only 27% are making attempts to increase diversity through hiring.

[More: Fisher Investments launches diversity task force]

The problem is there are fewer pathways into the industry for women and people of color, as well as unique challenges facing those who do make it in, said Cerulli research analyst Marina Shtyrkov. Some of the reasons are structural and could be addressed with policy changes, while others are more subtle and will require years of persistent, coordinated efforts across the industry.

Changing human behavior and biases is a tremendous undertaking; it has taken decades to develop current perceptions and behaviors, and it may take decades to unwind them, Ms. Shtyrkov said in a statement. In order to create meaningful, lasting change, firms must be willing to make significant modifications to compensation, recruiting strategies, training programs, and leadership.

For example, public perception of the financial services industry as a male-dominated profession that doesnt work with minority communities contributes to keeping people from ever considering financial advice as a career. Even for those who consider it, the industrys focus on sales instead of relationships drive many away, Ms. Shtyrkov said.

Advisers can combat this message by more actively demonstrating financial advice as a career that can positively impact lives. Mr. Shtyrkov recommends firms partner with local non-profits, schools and universities to help spread the message.

Go out into your community and talk about what you do, Ms. Shtyrkov said in an interview with InvestmentNews, noting that many people have never seen an adviser who looks like them. They dont see themselves represented in the industry. Help them understand what the possibilities are.

Diversity goes beyond hiring; firms must also improve retention. The eat what you kill model that demands rookies quickly harvest clients and assets disadvantages people from less affluent backgrounds, Ms. Shtyrkov said. Firm culture, inadequate mentoring and limited training support all contribute to make women and people of color feel unwelcome in the industry.

By removing production or revenue requirements, if only for an advisers first few years, and instead focusing on technical training, such as building financial plans and meeting with clients, firms can better retain a diverse workforce of advisers.

Ms. Shtyrkov also recommended that firms consider adding new advisers to a team to help cushion any revenue losses.

Meredith Moore, founder and CEO of Artisan Financial Strategies, an affiliate of New York Life Securities, agreed that the pressure to produce can keep women out of financial advice, especially mothers.

If they are not on a salary and still have responsibilities at home, how do you balance that? Ms. Moore said, adding that it took years for her own practice to become profitable. There needs to be a longer period of time for people to be able to ramp up [their business].

But the more subtle barriers, such as unconscious bias against women and people of color, will just naturally take longer to overcome.

Slowly, over time, women are getting more comfortable around money, Ms. Moore said. For new people coming into the business, it wont feel like such an outside-the-box industry.

Many diversity initiatives are created in a vacuum and do little beyond pay lip service to diversity, Ms. Shtyrkov said. She believes a cohesive, collaborative strategy across the entire advice industry is more likely to result in change.

[More: Dont relegate diversity efforts as marketing]

Whats really lacking is one organization, one collective movement to bring firms together in understanding which strategies work, what are the successes and what are the learnings, she said.

In addition to positive publicity, diversity can help advisory firms deal with the growing talent shortage threatening the industry.

Cerulli estimates at least 111,500 advisers will retire over the next decade, and nearly a quarter of them dont have a succession plan. Meanwhile, less than 20,000 trainees entered the industry in 2019, and as many as 75% are expected to fail within their first five years.

Making efforts to improve diversity can help firms tap into a larger talent pool of prospective advisers.

Right now, firms are struggling to know where to pull new advisers from. There just arent enough new people coming into the industry, Ms. Shtyrkov said. If we start looking in more places, new places, if we understand what weve done in the past isnt enough for us firms can get more advisers to not only enter the industry but also stick it out.

Improving adviser diversity can also help firms scale their practice and the types of clients they serve, Ms. Moore said. In a white paper, Designing Your Economic Masterpiece In A Mans World, Ms. Moore looks at the fact that women are earning more than ever, but are not receiving the financial education or advice they need.

Ms. Moore also believes mentorship and sponsorship programs can play significant roles in making financial advice more inclusive, forging relationships with new clients and communities, and helping scale a practice.

I believe everybody deserves access to an adviser in some capacity, and youre going to be drawn to somebody that looks like you and shares common values, she said.

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How firms can meaningfully improve diversity, and why they should - InvestmentNews