Journal of Financial Planning: November 2025
Richard Chen is the founder of Brightstar Law Group (https://brightstarlawgroup.com), a law firm serving the regulatory and corporate needs of investment advisers including advising on investment adviser registration and compliance matters, firm ownership and employment matters, commercial agreements, mergers and sale transactions, succession planning, and private fund launches.
Succession planning has been one of the trickiest challenges facing owners of RIAs. Many firm founders devote decades to building a practice that reflects their values, culture, and client service philosophy, only to reach a point where they must consider who will take their place when they step down. It’s a deeply personal decision that forces owners to weigh both economic realities and legacy concerns. Increasingly, however, one idea is gaining traction: that firms should consciously consider diverse employees as potential successors or equity owners when transitioning their businesses.
The concept of diversity in ownership isn’t just about appearances or catering to social norms. It can strongly impact whether an advisory business can be resilient, adaptable, and capable of thriving in a rapidly changing marketplace. By intentionally broadening the pool of future owners to include women, people of color, and other underrepresented professionals, firm founders can set their firms on a stronger long-term path. Below we highlight six compelling reasons why diversity should influence an RIA owner’s succession planning considerations.
1. Evolving Consumer Expectations
The RIA consumer base is changing. The United States is growing more diverse each year. According to U.S. Census Bureau projections, by 2045, the United States is expected to become a “majority-minority” nation, with no single racial or ethnic group holding a majority. Younger generations of investors are far more multicultural and gender-balanced than prior generations. A 2022 Deloitte study found that 48 percent of Gen Z identify as racial or ethnic minorities, compared to only 28 percent of baby boomers. Many of these younger investors also expect to see themselves reflected in the professionals managing their wealth. An RIA led only by owners who come from one narrow demographic risks falling out of step with clients’ evolving expectations. By contrast, a firm that embraces diverse ownership conveys the powerful message that the firm understands the client and is prepared to cater to their diverse needs. This can become a competitive differentiator at a time when standing out in the crowded advisory marketplace has never been harder.
2. Opportunity to Enhance Firm Performance
Planning for diversity can help with attraction and retention of employees. Succession planning isn’t just about replacing one owner with another. It’s also about building a firm culture that motivates talented employees to stay and grow. Giving employees a pathway to ownership is one of the most powerful retention tools an RIA can deploy. A 2021 McKinsey & Company study found that companies in the top quartile for ethnic diversity in leadership were 36 percent more likely to outperform on profitability. Similarly, employee engagement surveys show that employees are more motivated and loyal when they see opportunities for advancement and equity. For women, minorities, or first-generation professionals in wealth management, ownership can feel like an unattainable goal. By opening equity pathways to these groups, firm founders communicate that advancement is genuinely based on contribution and capability, and not legacy or personal networks. This can inspire loyalty, drive productivity, and make the firm a magnet for ambitious professionals who see a clear future within the practice.
3. Facilitating Innovative Thinking
Considering diversity in succession planning can promote diverse viewpoints and perspectives. RIA founders often underestimate how much their personal worldview has shaped firm strategy. Decisions around investment philosophy, marketing approach, client service model, and even community engagement tend to reflect the founder’s own background and perspective. That isn’t inherently negative, but it can create blind spots. When ownership becomes more diverse, leadership decisions benefit from a wider range of perspectives. Research by Boston Consulting Group found that companies with more diverse management teams reported 19 percent higher revenues due to innovation. This is particularly relevant for RIAs, where new client service models, digital tools, and outreach strategies are constantly evolving. Varied viewpoints don’t dilute the firm’s culture. Rather, they enrich it and make it more adaptable.
4. Impact on Valuation
Considering diversity in succession planning can enhance a firm’s enterprise value. One of the quiet truths of succession planning is that buyers place a premium on sustainability. A firm that looks like it may struggle to connect with the next generation of clients, or that is overly reliant on one personality, may not command the same value as a firm that is visibly positioned for continuity and growth. By building a diverse ownership group, a founder can demonstrate to potential acquirers, clients, and regulators that the firm is serious about longevity. A 2020 McKinsey study found that diverse executive teams are more likely to achieve above-average profitability, suggesting that diversity is not only good for culture, but also for enterprise value. This can reduce key-person risk and create more optionality for the founder when it comes time to monetize the founder’s equity.
5. Connection with Clients and Prospects
Diversity within the firm can promote more client trust and connection. One of the greatest anxieties for any RIA founder is whether clients will remain with the firm after the founder steps back. Clients, particularly next-generation children of long-time clients, don’t just want technical competence from their advisers. They also want to feel understood. When an ownership group reflects the diversity of the client base, it’s easier to establish that sense of connection and trust.
Imagine a multigenerational family with members spread across different cultural and professional backgrounds. If the ownership and leadership team of the RIA reflects some of those same backgrounds, clients may feel reassured that their wealth will be stewarded with sensitivity and awareness. This makes the transition of client relationships from founder to next-generation owners smoother and less likely to result in attrition.
6. Preserving Firm Legacy
Considering diversity in succession planning can promote the legacy and impact of the founder. Many RIA owners want to be remembered not only for building a profitable firm, but also for building one that mattered. Transitioning ownership to a diverse group of employees can become part of that legacy. It demonstrates vision, generosity, and a commitment to building something larger than oneself.
Founders who make this choice often find that their story resonates beyond their firm. It can inspire other advisers to rethink succession. It can provide a model for how to align business continuity with social progress. And it can give the founder deep personal satisfaction knowing that the firm’s next chapter will be richer, more inclusive, and more attuned to the clients it serves.
Of course, choosing diverse employees as next-generation owners isn’t simply a matter of goodwill. The process still requires careful structuring, and economic considerations must be carefully weighed and considered. Training and mentorship must also be part of the equation so that new owners are fully prepared to take the reins. However, these are practical challenges that every internal succession faces, regardless of who the successors are. With deliberate planning, these hurdles can be overcome, and the rewards, in terms of firm resilience, client satisfaction, and enterprise value, can be well worth the effort.