The Long Game to Diversify an Industry

President and CEO of The American College of Financial Services, George Nichols III, acknowledges that while little overall progress has been made to-date, he remains optimistic that now remains the time for lasting change to occur.

“I don’t think we’ve seen the numbers many folks were hoping for at this point in time. But I don’t think there’s been any change in the interest or commitment from companies to say, ‘We’re really going to try to make a difference this time,” said Nichols about recruiting and retaining diverse financial professionals. While some would argue that a change in CEO sentiment has not been enough, Nichols counters that it remains a significant difference from the pre-2020 era.

“If you think about the real big push around DEI years ago, it was actually a result of court mandates. It wasn’t like someone woke up one day and said, ‘You know what? I think we need a more diverse workforce.’ It was lawsuits that were brought against companies, whether it was over wages, promotions, or other things, by Blacks or other minorities wanting a fair shot. Just imagine that I’m doing this because I’m told I have to do this, as opposed to I want to do this,” said Nichols.

Nichols views diversifying financial services as a long game, with marketplace disruption being the primary catalyst. “When you think of DEI and the progress that we’ve got to make, it is a long game that we’re going to have to play,” said Nichols “Most people think that when we talk about diversity, we just talk about Blacks. No, we’re not. We’re talking about women. We’re talking about veterans. We’re talking about Hispanics. We’re talking about the disabled.”

Since launching the American College Center for Economic Empowerment and Equality® and the Four Steps Forward initiative in 2020, Nichols has worked with hundreds of organizations and had countless conversations with CEOs regarding DEI. As a result, Nichols attributes slow-moving progress to several variables, including the speed of workplace growth, unyielding corporate cultures, and DEI not being recognized as a business imperative.

Stalled Workplace Growth 

With CEOs’ renewed interest in DEI coinciding with COVID-19 and a bear market, the past two years have not been optimal for workplace growth. 59% of CEOs instituted hiring freezes due to the pandemic¹, and at the close of 2022, Bloomberg published a list of Wall Street companies that announced they were cutting jobs and instituting hiring freezes to combat decreases in revenue and looming recession fears.²

“If you are saying you’re going to grow your personnel in terms of more diversity, well, either you’ve got to grow your business, or you’re actually moving people out,” explained Nichols. “For us to really look at providing numbers that I think would show that we’re making a great deal of progress, it’s going to take some time. Just think about it: less than 3% of the executives in financial services are Black. When you even look at women as financial advisors, for them to be 50% of the population, they only make up about 30% of advisors. For them to get to numbers that represent where populations are, I think we’ve got a long way to go. Let’s be realistic about what our growth can be.”

A Tale of Two Corporate Cultures

Growth in diversity may be measured by looking at the numbers, but ensuring new hires from underserved communities feel they belong, can be their authentic selves at work, and trust they will be treated equally remains a roadblock for DEI efforts. As identified in a 2021 study published by McKinsey & Company, a “trust deficit among Black workers toward their companies” remains a top 10 challenge.³

“Think about it. What we’re saying is I’m going to bring in a few people, maybe female, maybe people of color, maybe people that have a different sexual orientation, and we’re going to bring them into an organization, and we’re going to be just fine. No, you’re going to be different because you’re bringing in a different set of individuals that don’t meet what you have traditionally done,” said Nichols. Nichols recognizes organizations have been reluctant to culture change, and often leaders are ill-equipped to influence effective change management. “I don’t think companies are really talking about the change management component of this, nor are they talking about culture.”

Another misstep Nichols observed is that organizations focus on one culture when they have two. “I’ve recognized that on the cultural piece, you have to deal with the fact that there’s two cultures. There is the culture you have with the masses of your employee base, and then there’s a culture at the top.”

Nichols advises CEOs to be intentional about cultural change themselves. “What I tell CEOs all the time is don’t go to your leadership team and say, ‘Do as I say, but don’t pay any attention to what I’m doing.’ You have an opportunity to hire people. Are you doing it? When you tell me that we should hire more, well, when you’re making the ultimate decision, are you making sure that our candidates and the person we hire are diverse? Are there positions that you can create that could be tailored to a diverse candidate?”

A Business Imperative

Nichols said he is done trying to convince CEOs of the business case for DEI, despite the research pointing to increased profit margins and employee productivity. “I’ve talked to a number of CEOs who say, ‘You know, George, I just don’t know that I can fully buy it.’ First of all, they’ll say, ‘You know what? We’ve been making money for the last 100 years. You’re telling me we will not make money unless I hire a diverse workforce? I don’t get that,’” stated Nichols.

While CEOs may overlook the strategic business case and tend to focus on the importance of DEI initiatives for employee morale, Nichols said they can no longer ignore the business imperative.

“We talk about how it’s going to be a majority-minority country in 2030. I think that is a disruption, and you’re going to have to think about how you engage in that,” said Nichols. “If you look at your workforce and you look at your consumer base, and you can’t respond to that, that’s a disruption because you’re going to have a hard time.”

Nichols said the financial services industry is ill-prepared to serve women, who are anticipated to inherit $30 trillion in Baby Boomer assets by 2030, and younger generations who grew up in diverse environments and expect the companies they work with to be equally as diverse. “If we’re transferring money to women, or if we’re transferring money to a much more diverse group of people and they’re not attracted to your organization, that’s a disruption,” said Nichols. “It’s actually not the disruption of the diversity. It’s a disruption of you failing to see what is happening in the marketplace.”

Nichols commented once CEOs start to recognize DEI as a business imperative he is hopeful initiatives will be incorporated into strategic planning and progress will quicken. “The same way you’ve improved your technology, the same way you’ve improved your profits, the same way you’ve improved your strategy, the same way you’ve improved the culture, be intentional, and that’s the way it’s going to work,” said Nichols.

Nichols is proud of the progress The College has made in two years to narrow the wealth gap and diversify the industry. Beginning with Black America, the Center for Economic Empowerment and Equality® has introduced several key initiatives including: a new consumer financial e-learning experience, Know Yourself, Grow Your Wealth^SM; the Black Executive Leadership Program; and the 16th annual Conference of African American Financial Professionals (CAAFP), which drew 1,000 attendees in 2022.

“In addition to being very proud and excited about the progress that we have made and the road that we’re on to make a difference in these communities, we’ve actually been  recognized, which is validating the success and the progress that we’re making,” said Nichols.

The College won a 2022 WealthManagement.com Wealthies Award for Industry Research Provider for its Black Women, Trust and the Financial Services Industry study and three 2022 ThinkAdvisor LUMINARIES, including one for Community Impact in recognition of Know Yourself, Grow Your Wealth®.

“It’s pretty exciting when we feel good about what we’re doing, but there’s a recognition of an independent outside source that says, ‘Yep, we think you earned this as well,’” said Nichols.

Read this and other stories of industry disruption in the 2022 President’s Report.