It’s past time to diversify the financial services industry

Last month, philanthropist Mackenzie Scott announced her largest-ever donation: $436 million to Habitat for Humanity. Donations of this scale have made Scott one of the most visible philanthropists in the world, but our hyper-focus on her individual gifts obscures the changing face of philanthropy and keeps white donors at the center of the field.

The world of money—from philanthropy to wealth management and financial planning—isn’t prone to change or diversity. America’s most visible philanthropists are mostly white men, as are the people tasked with managing their money, despite the fact that America’s communities of color are growing in political, financial, and cultural size and power. Yet, philanthropic and financial institutions don’t reflect those changes.

Last year, the Certified Financial Planner (CFP) Board of Standards found that 83% of CFPs were white and 77% were men. By comparison, Black Americans made up just 2% of the industry, while Hispanic Americans came in at 3% and Asian Americans and Pacific Islanders (AAPI) at 4%. What’s worse, this is considered diverse for America’s financial planning sector. Between 2020 and 2021, the number of Black financial planners grew by 10%, and 15% more Hispanic CFPs entered the workforce. While any sign of diversity is encouraging, 9% CFPs of color isn’t a cause for celebration. It’s a challenge for America to do better.

While Black, Hispanic, and AAPI CFPs remain far and few between, the influence and affluence of BIPOC communities are growing year over year. As a result, people of color now have the funds to invest in philanthropy that they didn’t before. That’s an important opportunity for the US to change the field of philanthropy; And if we don’t reform America’s finance industries to better support this growing class of donors, we risk losing it. Too often, philanthropists of color are tokenized—or not represented at all—on the boards of nonprofits and donor networks, which has material consequences on what gets funded and who gets hired.

With support from the Donors of Color Network, I recently interviewed 113 high net-worth people of color in the US to explore where and how they donated their money. One pair of respondents was an African American couple who are active community members in their town. Despite working with several local nonprofits, the executive director of one organization overlooked them for a fundraising event when they offered help: The director assumed that their home wasn’t large enough for the event and asked for donations under their financial capacity. This couple lives in one of the wealthiest ZIP codes in America, sent all their kids to private schools, and worked in a name-brand American corporation for their decades-long careers. The nonprofit missed out on the opportunity to deepen a critical relationship.

Changing this culture reform requires within nonprofits, but the wealth management and financial planning fields can also be part of the solution. By hiring more people of color to their own boards and leadership positions, these firms can change their strategic priorities, hire more CFPs of color, and in turn better understand donors of color.

The need for fresh ideas and faces in philanthropy can’t be understated. With racist activities like voter suppression, book bans, and hate crimes on the rise, the values ​​that are supposed to distinguish America—equality, fairness, and justice—are on the line like never before. Protecting them means investing in new solutions from donors of color who have the life experience and vision we need. The more we support donors of color, the greater outcomes we’ll see in advancing social justice.

That’s not just wishful thinking. Our findings from the donor survey reinforced what I already suspected: Donors of color have the power to shake up the world of philanthropy and fix the broken institutions preventing our country’s growth.

Let’s start with where BIPOC donors put their money. Our conversations revealed that donors of color are generous givers, donating between $4,000 and $17 million each year. Together, the annual donations of those surveyed came to $56 million. When asked to rank their donations, the majority of donors cited education as their top philanthropic priority, closely followed by racial and social justice.

This ranking is important. As America’s racial and social justice will attest, organizations in their field are drastically underfunded by the mainstream philanthropic sector. From 2017 to 2019, for instance, just 10% of the $14 billion donated to K-12 education funded racial equity initiatives, and less than 1% went to policy change, civic engagement, and policy advocacy.

We need to do better, and empowering donors of color is the first step. Already, 31% of Asian American households and 19% of Black households gave to racial and social justice causes in 2020. By comparison, white families donated just 13%. Our research also found that BIPOC giving is neither episodic nor a response to times of crisis. It’s regular and sustained giving, born out of a lifetime of race-based discrimination.

Right now, our nation’s leading financial services providers are depriving this committed and growing class of donors of the institutional support and services they deserve. Like any high net worth individual, donors of color need support to manage their philanthropic giving—but not the support of any financial planner. They need someone who understands the BIPOC experience, what it looks like, what it feels like, and how it impacts generations of Americans. The key insight from this research is this: You cannot raise money from—or grow business relationships with—people you do not see.

If we want to see America live up to its full potential, we need to rethink the hiring, promoting, retiring, and retention practices in financial planning, wealth management, asset management, and other related fields. At the same time, we need to learn how to support an diverse and complex group of donors so they have the resources to succeed.

Engaging wealthy people of color as donors, philanthropists, clients, and customers is no longer optional. The financial services sector can meet this moment, but it’s going to require a deep look at who sits in the C-suites and on corporate boards. These changes will both streamline philanthropists’ charitable giving and attracting more donors of color to the financial services sector, kicking off a chain reaction that benefits everyone. It’s going to take a lot of work, but by prioritizing these changes, the financial planning industry has the power to change what philanthropy—and our country—look like.

Hali Lee is the lead author of Philanthropy Always Sounds Like Someone Else: A Portrait of High Net Worth People of Color. Hali is also a Founding Partner at Radiant Strategies, a boutique consulting practice that aims to change the subject in philanthropy.

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