It's no secret that the finance industry has historically been dominated by white men. But can it remain that way? As a Black man with over 16 years in investment management, one adviser doesn't think so.
Ian Fuller, co-founder and partner at Westfuller Advisors, started his investment firm with
"Firms that lack diversity miss this significant opportunity to add such multi-dimensional value to the investment advice industry and the clients they serve," says Fuller. "Westfuller fundamentally believes diversity adds immense value, ultimately driving better financial and business performance over the long-term."
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But it seems much of the finance industry hasn't fully caught on.
According to the U.S. Bureau of Labor Statistics, Black talent only represents 7% of the workers in this sector. Hispanics make up 6% and Asians make up 8%, while white people account for over 82% of the industry. In addition, Deloitte found that women only make up 5% of CEO positions and hold 21% of board seats.
But business performance and diversity are noticeably related. According to the Harvard Business Review, the success rate of acquisitions and stock launches was 11.5% lower for partners that came from the same school background than those from different schools. Partners with the same ethnicity reduced their success rate by up to 32%.
EBN spoke with Fuller about what the finance industry stands to lose if it doesn't prioritize diversity and how leaders can do better.
Why do firms that lack diversity have worse investment outcomes?
If you espouse the idea, which is supported by a wide body of research across subject areas, that broader and diverse perspectives generate the very best ideas, then it's clear that a lack of diversity will have adverse impacts on investment outcomes over the long term. Simply put, a lack of diversity across leadership and investment teams shrinks the pool of innovative ideas and lived experiences that can foster the very best investment approaches, investment opportunities and investment outcomes.
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Why do industries like wealth management struggle to open their candidate pools?
It seems many employers make the mistake of doing the same thing, yet hoping to achieve different results. After more than 30 years of attempting to improve diversity in the investment advice industry, we still have a profound problem.
Implicit bias certainly plays a significant part — diverse candidates don't add value, diverse professionals can't thrive in such a demanding industry, diverse professionals lack the networks of capital and so on. But even beyond such obvious and pernicious forms of bias, the field has failed to create a successful framework for both talent recruitment and, just as importantly, retention. How do we support diverse candidates to thrive in the industry? What is the pathway to leadership and decision-making roles? How do we create professional environments in which diversity and new ideas are welcomed and celebrated? How do we support true meritocracy in the professional sphere and not the oft-seen nepotism through backdoor professional deals concealed as merit? By no means do I have all the answers, but I suspect enduring solutions can be found in the answers to some of these questions.
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How can employers begin to pivot from their outdated hiring practices and acknowledge biases they may have — conscious or unconscious?
Well, as with any issue, the first step is acknowledging the problem exists. Many organizations have found significant success by engaging in self-evaluations often formally through initiatives such as racial equity audits that support a deep and rigorous analysis of organizational biases and barriers to diversity, equity and inclusion. Implicit bias training and other forms of organizational remediation are often the next steps towards enhancing DEI practices.
Lastly, I believe setting transparent and accountable goals alongside clear success metrics on both hiring and retention can begin to structurally shift systems in the industry. From what I've observed, the organizations with the best improvements in DEI practices have engaged in some or all of these initiatives.
What does the world of finance stand to gain if it prioritizes diversity?
Quite frankly, the world of finance will be better off with diversity as an integrated feature of organizational strength and success that advances superior outcomes for people and the planet. In a highly competitive, global context, the world of finance needs culture, talent, and strategy where the best ideas drive organizational performance and superior investment outcomes. Organizations with strong diversity are best positioned to lead the industry into the future we need.
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Diversity can also support the transformation of the finance industry into a force for good — an industry that can support the use of capital and innovation to solve the world's greatest problems, from health equity and affordable housing to climate solutions, rather than financial engineering solely in pursuit of the highest profits for shareholders.
