Even decades of legal protection don't create diversity

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Fifty years after the Civil Rights Act mandated equality under the law, the ethnic diversity of the nation's financial advisory business pales in comparison to the demographics of the population.

About 64% of Americans are white, according to the 2010 Census; about 92% of advisers are white, according to the Securities Industry and Financial Markets Association.

Some might argue that the population of wealth managers is white because that's where the wealth resides. But even on that measure, the proportion of minority advisers lags wealth demographics.

Non-white Americans hold 12% of the wealth in this country, according to a Demos analysis of Federal Reserve data. Only 8% of advisers are ethnic minorities — and in most firms it's likely less.

Few of the major financial firms break down their adviser populations by ethnicity. One that has been more visible is Edward Jones, and it estimates that it has about 6% minority advisers among its ranks.

Many industry leaders agree that there is a diversity issue, even a considerable problem.

Bernie Clark, head of Schwab Advisor Services, told me last week that he believes the industry needs more diversity among its ranks, especially looking out a decade or two.

The great transfer of wealth that's expected in the coming years from men to women also will extend to ethnicity, he said. The number of minority advisers needs to increase because the client base will become more diverse.

“The reality is the diversification of the pools of assets are going to change dynamically over the next tens of years,” Mr. Clark said. “Then diversity of the advisory industry will become even more important.”

He believes “infiltrating the university structure” and educating more minorities about the financial advice industry and trying to get people accredited earlier will help.

Some think the education should come earlier.

Mac Gardner, a Raymond James adviser in Houston who is a Caribbean-American, blames the national lack of financial literacy and education for keeping most Americans ignorant about financial planning as a whole.

Most people who get exposure to financial concepts and advice when they are young get it through family and those networks, he said. His own father was a bank executive.

Those without a financially literate role model are lost.

“The overarching issue is that the education system is not teaching about finances,” Mr. Gardner said. “You need to hear the story of investing and saving from somewhere or someone.”! ;

More minorities would naturally be led to the financial planning profession if they were taught the fundamentals of finance, he said.

Other than a lack of adequate education, which could be argued is a national issue, not an racial or ethnic one, most people don't point to distinct barriers that keep minorities from the profession. It's not an issue that the 50-year-old Civil Rights Act can address alone. But it is one that needs further examination.

Look for InvestmentNews stories overs the coming months that probe the reasons why minority graduates aren't going into financial planning and whether firm efforts to boost diversity are having an impact. Please share your thoughts on these issues by commenting here or to me privately at lskinner@investmentnews.com.