Achieving diversity in the financial advisory workplace can help propel firms to leadership positions, according to Carla Harris, Montclair, N.J.-based vice chairman for wealth management at Morgan Stanley.
“Thirty years into this diversity conversation, people still say we need to prove the business case for diversity,” Harris said at the CFP Board’s 2018 Diversity Summit in New York last week.
The business case is “pretty obvious” for Harris.
“Every industry is competing around innovation. You need a lot of ideas to get to that one innovative idea to attain and maintain a leadership position,” Harris said.
Having a diverse set of people in the workplace ensures ideas are truly fresh and varied, insists Harris, who adds it’s not enough to have just one token representative to call a diversity initiative a success.
“You got to have more than one,” she said. “You have to be intentional … magnify the possibility.”
At the same conference, Andy Sieg, New York-based head of Merrill Lynch Wealth Management, said achieving diversity is a “commercial imperative” for the financial advisory industry, specifically the businesses and advisory practices.
Women have $14 trillion in investable assets and many women are financial decision-makers in U.S. households, according to Sieg. He added that the GDP represented by Latinx, African-Americans and the LGBT community is $1 trillion in the U.S.
Sieg also gave the example of Atlanta, Ga.-based Rod Westmoreland in Atlanta – who he said is “the #1 advisor in Merrill Lynch” – who hired an African-American female commercial banker, the first black representative to his team.
Harris shared in Sieg’s observation that millennials “really do want to see” representation in the workplace.
“Thirty years ago, it was normal to see six white guys at the top,” she said. “If you want to have employees of choice, they have to see diversity at the top.”
Millennials have gone to universities where they have seatmates who are African-American, Asian, Latinx and when they don’t see that representation in the workplace, “that’s what exclusion looks like to them,” according to Harris.
Harris acknowledges that realistically it will take time before there can be widespread diverse representation at the top of financial advisory firms. And that’s why there should be swift action now, she said.
“It takes about 10 years to bring someone from entry level to the top. But the need for innovation is high … as quickly as 18 months,” she said, referring to the length of time from thinking of an idea to its execution.
Harris said firms must guard against the diversity version of “organ rejection,” referring to the body's tendency to reject organs after transplants. Harris said firms “must over-invest” in the success of minority hires resulting from their diversity initiatives to ensure they are not rejected by the workplace.
“That has to be the mentality,” she said.
If the minority hires are not well supported within the firm, then if they fail, the failure will just be attributed to the individuals not being good hires, defeating the purpose of diversity initiatives, Harris said.
One way to prevent the organ rejection phenomenon is to “have accountability in the middle,” she said, referring to middle management.
“We are in financial services. It’s a Type A personality industry,” Harris said. What’s important is the carrot on a stick.”