The Supreme Court's ruling
"I'm fearful of a decline in enrollment," said Ron Rhoades, the coordinator for Western Kentucky University's personal financial planning program. "We have a profession that has too many underserved minorities, both in terms of the number of financial advisors that we have, but also the number of clients that we have. So certainly, this could adversely impact our ability to attract and foster minorities getting into the profession."
Less than
"Are they serious?"
Corporate diversity, equality and inclusion programs surged in 2020 and 2021 following the death of George Floyd, but that growth already stalled in 2022 as a worsening economic outlook took hold, according to
In the wake of the court's June 29 ruling, advisors like Yohance Harrison, the CEO of Money Script Wealth Management in Cedar Hill, Texas, are questioning how committed advisory firms are to their DEI initiatives.
RIA efforts to promote DEI were "as serious as that first allocation," Harrison said.
"But when the next year comes around [and] the stock price isn't doing as well, now you have to decide how you're going to change your allocation of capital," said Harrison, who is a member of the
The paths that remain
If minority enrollment in colleges falls as Rhoades fears, even sincere efforts from RIAs to recruit more underrepresented advisors may fall short as they wrestle with a shrinking pool of potential applicants.
Firms are going to have to broaden their DEI initiatives if they want to continue increasing diversity in the industry, according to Harrison
"If companies are serious about diversity hires, the person that's doing the hiring needs to be diverse," he said.
Harrison, who worked at Ameriprise Financial Services for over 13 years, said he was frequently praised for the diversity of people he hired. "At one point, I was asked 'What's the secret? How can we improve our diversity hires?' I had a [simple] answer: be diverse."
"I've done a couple of job fairs [for] my firm just to be in the community and you should see the line of black people that I'll have at my firm's booth, just because they rarely see someone like myself in that role," Harrison said.
Advisors are concerned about the implications of the Supreme Court's ruling for future diversity in the industry, but they stress that other avenues remain for firms to bolster their DEI initiatives.
"All the stuff that that one would think of when we see this ruling, I would just say for those who are intentional and care about DEI not to let something like that discourage them, because there's still ways to continue to provide that support to people from underrepresented backgrounds and expand our industry continue to make it better," said Luis Rosa, a co-founder of BLX, an internship program working to increase the number of Black and Latino financial professionals.
The CFP Board remains "committed to promoting diversity and inclusion within the financial planning profession," said CFP Board CEO Kevin Keller.
"Our fundamental values lie in empowering individuals and championing fairness and inclusivity," said Keller. "CFP Board's sixth annual Diversity Summit in November will serve as a forum to discuss the recent Supreme Court rulings and other issues related to diversity, equity and inclusion."
Legal tiptoeing
While last week's Supreme Court ruling is limited in scope to college admissions, RIAs may be adding the cost of potential lawsuits to their considerations around DEI policies.
"This decision . . . will cause advisors, especially advisors who already have diversity and inclusion hiring practices to, at a minimum, visit them for legality purposes," said Max Schatzow, a founder of RIA Lawyers in New York City.
"I don't think [the Supreme Court's ruling] necessarily touches on private employers, but there are numerous laws already when it comes to discrimination by employers in the hiring practice," Schatzow said. "It's possible that those laws and those hiring practices might be next."
Companies were
"All it takes is one person to say, 'Oh, you violated my rights,' and now they're trying to sue that Fortune 500 company, because someone not of color thinks that they didn't get the job because someone of color did because of the internal practices and DEI," Harrison said.
After the recent Supreme Court ruling, the stage is set for more lawsuits challenging the legality of diversity initiatives at private companies, according to Danika Waddell, the founder of Xena Financial Planning in Seattle.
Even in the absence of a new legal precedent for private businesses such as hers, Waddell said she feels the pressure to ensure she is not inviting any lawsuits through her firm's DEI initiatives.
"As a small business, I just have to be very aware of that and potentially have legal counsel review things before anything gets publicly posted," Waddell said. "I think [you're] just having to be really careful and really aware that you're not doing anything that favors people that are more diverse"
Moving forward
Even as firms and university programs navigate the new legal landscape, the push to improve diversity remains.
"Advocates are going to have to work that much harder to continue to move our industry forward," said Rosa.
For many advisory firms, DEI initiatives might have simply been "good PR," Rosa said. "But I feel like the people who are genuinely interested are going to continue to fight the good fight and find a way to continue to make those opportunities available for people from underrepresented backgrounds."
With the support of sponsors like the Charles Schwab Foundation and eMoney Advisor, BLX has placed roughly 50 interns at financial institutions since its inception in 2020, with half of them receiving job offers at the end of their internships.
"It's been really good, you know — small, but hopefully we can eventually scale that," Rosa said.
The work to improve diversity in the industry starts young.
Along with recruiting students from minority student groups, the financial planning program at Western Kentucky University "heavily recruits" minority students from local high schools for an annual, week-long summer camp put on by the program faculty as a way to engage students in the profession early, Rhoades said.
To lower the barrier to entry for students, Rhoades said the university also awards scholarships to minority and low-income students. After the Supreme Court's ruling, Rhoades worries that such scholarships may be challenged.
"A lot of unknowns, from our standpoint," he said.
