How Planners’ Bias Hurts Hiring Efforts

Journal of Financial Planning: November 2021


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The number of CERTIFIED FINANCIAL PLANNERS™ hit an all-time high last year, and as the financial planner ranks have swelled, so has representation of women and people of color. However, the starting place is so low that despite the share of Black and Latino CFP® practitioners increasing at five times the overall rate in 2020, they still account for just 4 percent of CFP® professionals, according to the CFP Board.

The industry is making a concerted effort to improve representation, but a 2019 report from researchers at the Wharton School at the University of Pennsylvania found that even when companies have a dedicated diversity and inclusion initiative, if hiring managers don’t actively check their biases, they can hinder their own efforts.

The report, written by Judd Kessler, Corinne Low, and Colin Sullivan, and published in American Economic Review, created an experimental tool for measuring how interested an employer was in hiring a candidate. Unlike the “resume audit” method, which sends identical resumes with randomly assigned names to employers, the incentivized resume rating method asks employers to rate resumes with randomly assigned characteristics such as university, GPA, and internships, and a name that suggests the hypothetical applicant’s race and gender.

The researchers found that although 90 percent of firms in the study said they considered diversity in hiring decisions, there was no aggregate preference for women or minorities in their hiring. The report revealed a socioeconomic bias as well, as resumes with prestigious internships, which are typically unpaid, were more appealing than those that listed work experience, giving wealthier candidates a leg up over those who couldn’t afford to work for free.

Business owners might unconsciously hinder their own hiring efforts by assuming a candidate won’t accept an offer if one were extended to them, and preemptively disqualifying them from consideration. Employers were more likely to assume women and minorities would turn down an offer, the researchers found.

Growing the Profession

Planners have a powerful opportunity to develop the next generation, noted Travis Walker, an adviser specialist at Allianz Life.

“I’ve worked with advisers that it’s not a stretch to say that they have turned people’s lives around when building out their practice; some person who may have started out as a secretary in their office, they eventually got their securities license, started building a book of business with them,” Walker said.

Walker is chair and a founding member of an employee resource group at Allianz, Black Employees Learning Opportunity and Networking Group (BELONG), and serves on the board of GRACE, the firm’s Global Race And Cultural Ethnicity network for international employees.

What to Do

Develop objective hiring criteria. “We don’t necessarily recognize the way our decision making is clouded by factors that we don’t want to be taking into account,” Low explained in an interview. The research found that firms discounted the same criteria on resumes from women or minority candidates. Hiring managers may be inclined to think those candidates earned a prestigious internship or were hired at a top firm due to another diversity initiative, thus devaluing that experience, Low suggested. “As much as possible, try to slow down and use objective criteria. For example, ‘We rate any internship at a top-tier [investment] bank a six out of six,’” she said.

Plan your process. Low and her colleagues found that hiring managers exhibited more bias against women and minorities when they became fatigued and started rushing through their evaluations.

“The best thing we can do is to try to take us out of that snap decision-making framework,” Low said, by using objective criteria or algorithm-based tools to eliminate unqualified candidates. She warned against making algorithms too restrictive so they don’t screen out candidates that are actually a good fit. “It’s very typical to have internships before your senior year. Those are typically paid, while the internships people take before their junior year are typically unpaid,” she said. “What we found is that employers basically treated that [unpaid internship] as missing experience.”

Evaluate the entire recruiting funnel. From where they recruit new planners to the criteria used to disqualify candidates, employers might introduce bias at any point in the recruiting and hiring funnel, Low said. She recommends that planners “recognize that you’re going to be introducing bias there and ask how you can correct it. Be thoughtful about each stage [of the process].”

Recognize your limits. When people make quick decisions, they rely on assumptions based on what they already know. “We rely on historical data to make that quick decision, and in the historical data, financial planners have been men,” Low said.

“We need to assume that human decision makers are biased, and then ask how we put those flawed decision makers in the best possible environment for them to make the best decision.”

Take a stand. Allianz’s Walker encourages planners to think about how they are approaching hiring.

“If you do have a growing practice and you do have associates, at that point, I think you need to be deliberate and unapologetic about who you staff and how you staff,” he said. “Knowledge is responsibility. If you know something, now you have to make a decision; what are you going to do about it? If you know better, you have an opportunity to do better.”

Serving Clients

The other side of having a diverse workforce is the impact it has on clients. Creating an inclusive practice is a big part of planners’ ability to make their clients feel welcome when they come to their practices or sit in meetings with them. When planners have meetings with clients who have a markedly different experience or background from their own, they should take some time to understand cultural differences that affect the way people make decisions, Walker said.

“That’s not any different than how you would approach anyone,” he said. “If I walk into anyone’s living room, I need to know things about them. I need to be observant. You have to carry that into any meeting that you have.”

To build strong relationships with clients, planners should focus on the “practical things: listening to the client, asking questions,” he said. “Everything’s a relationship right now, whether it’s a spouse or a business relationship. People want to be heard and understood—not even necessarily agreed with, but at least heard and understood.”

Planners need to proactively seek new avenues for reaching clients.

“If you sit back, rest on your laurels, and try to service the same pool that you’ve been in since time immemorial, you’ll be fine for today, but we all know that that’s changing. Literally the grounds are shifting beneath our feet. So we need to be more proactive about that and treat anyone with authenticity and honesty.”

He continued, “We’re not all that dissimilar. Retirement is a reality for everyone.” Individual goals might be different, but “either way, the constant through their retirement, however you choose to define that and how somebody wants to live in retirement, is that it’s a reality for everyone.”

Using that shared concern as a connection point, planners can “get in there, figure out what motivates them, what moves them.” With their planner’s expertise, clients can begin to see that saving enough for a comfortable retirement “isn’t a problem, it’s an opportunity.” 

Practice Management