Do clients care about the race or gender of their financial advisors? It depends on who, or how, you ask.
"Research is so great because it does allow us some empirical evidence for some of the anecdotal stuff that we're experiencing and thinking about in real life," said Miranda Reiter, an assistant professor of personal financial planning at Texas Tech University. "But at the same time, I think that we always have to understand the placing of that research."
For Yohance Harrison, the CEO of Money Script Wealth Management in Cedar Hill, Texas, the importance of his identity as a black man to some of his clients is clear. "Out of the hundreds of clients I have, there's a group of them that have told me the first reason they chose me wasn't how smart I was [or my] years in business — they were looking for someone that looked like them," he said.
Just 8% to 12% of consumers say that their advisor being the same race as them is an important factor in order for them to trust them, according to
However, other factors that can be proxies for race, like culture and language, ranked as being much more important for consumers when it came to trusting an advisor. Roughly one-third of clients reported cultural understanding being important and two-thirds reported speaking the same language being important to trusting an advisor, the Edward Jones study found.
Reiter, who has
"It is very difficult to capture how people really feel when we're starting to ask them about discrimination," Reiter said. "If people get the sense that you're asking them if they discriminate or have preferences, they might feel embarrassed about that. We know as researchers that it's a very touchy thing and you may not get what you're looking for."
Clients can be more forthcoming with their preferences when talking to their personal advisors.
"When a lot of prospects reach out to me, it's because of my story, you know, not because, 'Oh, I saw that you're a CFP professional' or whatever," said Luis Rosa, the founder of Build a Better Financial Future in Los Angeles.
Rosa, who immigrated to the United States from the Dominican Republic at 11 years old, said it is important for potential clients to first be able to see themselves in an advisor's story before they can attract them to their firm.
Those similarities can stretch far beyond someone's immediate race or gender, according to Harrison.
"I have a client I'm thinking of specifically, he came from humble beginnings, and the first interaction that he had with a financial adviser . . . he felt that even though they were the same skin tone, even though they went to similar schools, even though they were making a similar income of $300,000 a year, he felt this advisor just couldn't relate to him at all, because he came from poverty and climbed his way to where he was, whereas this financial advisor's dad was a financial advisor and came from money, essentially," Harrison said.
While clients may be hesitant to voice such preferences to Reiter and her colleagues, they are more forthcoming when it comes to their experiences of discrimination. Nearly 40% of Black consumers reported being racially discriminated against by a financial services provider, whereas less than 10% of white consumers reported experiencing racial discrimination, according to
For some consumers from minority backgrounds, a lack of firm diversity may stop them from reaching out for financial advice in the first place.
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"The fact that white males featured predominantly in depictions of employees on firm websites may influence who applies for positions in financial advisory firms," according to the researchers, Kenneth White, Erin Bruce, Eun Jin Kwak and John Grable at the University of Georgia, Megan McCoy at Kansas State University and Kim Love at K.R. Love Quantitative Consulting and Collaboration.
This finding has important implications for firms seeking to create a more diverse workforce, but it also applies to potential clients, according to Danika Waddell, the founder of Xena Financial Planning in Seattle.
"From a client's perspective, not seeing anybody that looks like them when you go to a firm website, and you know, every single person is over 55, white and male, it's like, 'I don't know if they're going to understand me,'" Waddell said.
Waddell, who leads a 100% women-staffed firm, said she believes "it is possible to serve people from different backgrounds, but you have to be intentional, and you have to be sensitive and willing to listen."
