How can we make wealth management more inclusive?

The global wealth management  industry is constantly evolving, which means there are always new opportunities – and challenges – for professionals to encounter. One of these is diversity and inclusion within the sector.

Within asset management alone, the market is overwhelmingly male. In fact, a 2019 report by Incisive Works put the split at 82% male, with men also having considerably longer histories in the industry – 42% of them have spent 20 or more years within finance, compared to 26% of female colleagues. Similarly, the market is made up of a white majority, with BAME advisors making up just 10%. Compare this to further research that shows just 67 of the 1,400 fund managers in Britain are run by women alone or in female-only teams (while 1,176 men operate alone or in male-only teams) and the inclusivity challenge becomes much clearer.

At Hanover, we’ve seen this develop over the years and we are now seeing a clear drive by our clients to actively encourage and promote a more diverse and inclusive team of financial planners. But how can we get there?

Changes to qualifications – and perceptions

Before the Retail Redistribution Review (RDR) in 2013, you needed a relatively simple suite of six papers – or equivalent – to be qualified to deliver financial advice. This saw the market boom with advisors, many of whom would not be able to provide advice under today’s much stricter regulations. There were advisors who went to Russell Group universities and took the highest levels of qualifications, training for years to provide the right advice, working alongside those who left school at 16, took a basic suite of papers and traded on their sales skills. 

While neither of these routes are necessarily the ‘right’ one, the RDR standardised the level of qualifications and training required to be legally able to provide financial advice in the UK, ensuring that every advisor now has a base level of education (level four diploma). This has boosted knowledge and skill levels within the industry, but it also resulted in the loss of advisors who couldn’t or wouldn’t re-qualify and do further exams to meet the new regulations. As such, we’re left with advisors who have high levels of technical knowledge and qualifications as well as the confidence often associated with sales culture. Many of these are middle-aged white men, but we’re now seeing the industry move towards a more inclusive and diverse landscape, both for advisors and those seeking financial advice.  

Barriers to entry

While the new qualifications can be quite time-consuming and costly, the financial planning industry by and large isn’t too difficult to get into as long as you’re prepared to start with entry-level roles. Most organisations have study support schemes to enable team members to achieve the qualifications required to deliver financial advice, and the organisational structure of most wealth management and independent financial advice businesses offer clear routes from Financial Services Administrator through to Chartered or Fellow of the Personal Finance Society Advisor. However, barriers become more apparent when an individual wants to make the step into the advice world from a role such as Paraplanner, Relationship Manager or Administrator. The RDR means that for the benefit of their clients, financial planning firms should now seek out people with relevant experience, and for the most part, this means direct involvement with financial planning environments. 

It becomes a slightly simpler transition with some experience and the relevant qualifications to move towards more specialty advice roles. However, we understand that for our clients it can be difficult to take a chance on an unproven rookie who may never produce fees. To remedy this, some are taking progressive steps and creating CF30 Paraplanner and Paraplanner-Advisor roles, bridging the gap between paraplanning and financial advice. The role of a Paraplanner is to support an Advisor and process much of the administration and paperwork associated with giving advice. The CF30 license is in place for them to slowly get exposure to the advice world and complete simple business tasks with lower levels of risk to the company. Effectively they are still performing an administrative function essential to the business (paraplanning), whilst showing signs they can provide revenue. This seems a clear way to introduce more people to the industry and help to generate more diversity amongst advisory teams.

The benefits of diversity 

A diverse team of financial advisors means more inclusivity among the people accessing and receiving advice, which can only be a good thing. Everyone has a need for advice, yet few people in the general population seek it out because of the negative perceptions around the ‘old boys club’ of financial planning. If we have more diversity amongst those providing advice, customers will likely see themselves reflected in these advisors and feel more comfortable accessing their services. Businesses have the opportunity to present different personality types to clients who may feel more comfortable having intimate conversations about their personal finances with someone other than the stereotypical advisor – therefore potentially winning more business.

The majority of those within the sector believe that improvement of workplace diversity within their firms is either ‘important’ or ‘very important’, according to the Incisive Works study. Interestingly, while women are more risk averse when it comes to investing, research shows they return an average of .81% more than male investors over a three-year period. This shows a clear demand for the right type of financial advice being provided to more people, and a more diverse body of financial advisors seems like an obvious way to do this. 

Outside of the male/female divide, we’re also seeing more organisations expanding their talent pools and searching for clients outside of their traditional barriers, whether this is relaxing their stipulations around university education or actively seeking out people from different backgrounds and social groups. Research proves that diverse teams  lead to better innovation and improved financial performance, so those firms who fill their teams with financial advisors from different walks of life will likely reap the rewards down the line.