Retirement Planning Disruption
In the past several years, major changes in how consumers and financial advisors alike view the world have shaken long-held ideas about planning for a life in retirement. The Covid-19 pandemic, ongoing inflation, and the massive shifts they both ushered in for markets and how we live our daily lives changed our perception of how we interact with others and plan for our future. New legislation from the halls of Congress, such as the SECURE Act, has required professionals and clients to rethink what steps must be taken to avoid running out of money when needed most. And the constant march of progress with advances in financial services technology has presented longtime professionals with new challenges to their client relationships in an increasingly do-it-yourself culture.
As an educational institution on the front line of these landmark industry shifts, The American College of Financial Services and its thought leaders are recognizing the changes and rising to meet them.
“This anxiety about retirement planning has been a long time coming,” said Michael Finke, PhD, CFP®, Director of The College’s Wealth Management Certified Professional® (WMCP®) Program. “As employers have transitioned from pensions to defined contribution plans, individuals bear greater responsibility for turning savings into a lifestyle. We have a new generation of workers, many of whom have saved and invested automatically through target-date funds, who are seeking clarity about how these savings translate into income.”
As the responsibility for funding retirement has fallen more and more to individuals, this has increased the demand for professional advice.
“We now essentially dump a huge pile of money in our clients’ laps and say ‘good luck.’ We expect them to figure out what to do with that money and how to invest and spend it wisely on their own,” Finke said. “Our research shows that ‘understanding how much I can safely spend in retirement’ is by far the number one reason consumers would seek the services of a financial advisor – more than twice the percentage that sought advice to improve investment performance.”
Advisors in the field seem to be picking up on clients’ anxieties. In a survey of representatives from various RIA firms across the country conducted by The College, 71% of respondents said they wanted more retirement planning knowledge to meet the rising demand for these services. The data supports the need for a far more robust focus on retirement from firms and advisors, and one The College’s thought leaders are working to understand through a behavioral and financial lens.
Wade Pfau, PhD, CFA, RICP®, Professor of Practice in The College’s Retirement Income Certified Professional® (RICP®) Program and a field leader in retirement planning and theory, said the practical concerns of inflation, pandemic, legislation, and technology are just the tip of the iceberg – the real issues advisors need to address are psychological ones.
“Covid-19 was a reminder to all of us that life is fragile, and we need to make the most of today: that’s a message that really resonates with those closer to retirement, as well as making younger people think about their futures,” he said. “Our renewed focus on personal health has called into question this widely-held assumption of institutional living in old age: assisted living and nursing homes are no longer the safe places they used to be. Do aging individuals now want to try to stay in their homes as long as possible, which requires more strategic spending and saving? It’s an interesting conundrum.”
Pfau said the most prominent trend he has noticed is that those at or near retirement age are becoming more cautious than they used to be. Uncertainties like fluctuating interest rates, rising prices of goods due to inflation, and drops in bond and stock values have created a “triple whammy” of concerns that motivate people to lock their hard-earned and saved money down – sometimes at the expense of living better in retirement.
“Most financial planning software will tell you to assume a long-term inflation rate of two to three percent, but short-term inflation is much higher than that,” he said. “It’s not a fair comparison, but it makes people nervous about their money and can lead to inopportune decisions.”
Many experts agree that this seems to be the primary modern threat to retirement planning: not running out of money, but the missed opportunities that worry can cause. “Decumulation is much harder than accumulation,” Finke said. “Workers who are diligently saving in their IRA or 401(k) feel they’re working toward meeting a savings goal. But once most get there, they’re uncomfortable seeing the number get smaller to meet the spending goal that motivated the savings in the first place. Of course, you can’t take that money with you, but the fear of running out is so great that people aren’t living as well as they could. They essentially leave joy on the table because they fear losing their nest egg.”
Finke said his research has found most retirees are more comfortable spending guaranteed income such as pension plan money and Social Security, but less so money they have saved up themselves. Political instability, inflation, and general market insecurity top the list of anxieties for most of today’s high-net-worth earners – all concerns connect to how far people’s savings and preparation will go in retirement today. This, however, is where expertise in retirement planning can step in to fill the breach, especially from a personal perspective.
“The best gift an advisor can give a client trying to plan their retirement is the confidence to spend the money they saved – it’s why they saved it in the first place,” Finke said. “Clients need good advice, but even more, they need a comforting voice they trust telling them it will be okay. By specializing in retirement planning, advisors will have an advantage in building those kinds of relationships moving forward and fostering more trust with their clients through that greater level of clarity.”
Under Pfau and Finke’s leadership, The College’s RICP® and WMCP® Programs have developed complementary approaches to the disruptions of modern retirement planning. In WMCP®, students learn the various methods helpful to asset accumulation in preparation for retirement, including ideal investment vehicles and ways to build portfolios that stand the test of time. Then, in RICP®, they learn how to take those assets and efficiently draw them down over time, and gain unique knowledge on long-term care issues, tax considerations, and more. But The College is not just using facts and figures to influence its approach to change how professionals and clients view their retirement planning: it’s also a question of philosophy.
“Historically, account-based strategies have been the most popular in retirement planning: allocate money into stocks and bonds, and then gradually withdraw a certain amount every year at an agreed upon percentage like the ‘4% Rule,’” Finke said. “These days, it’s not all that clear those old rules are still effective, so we like to promote a goal-based planning strategy: start with learning more about your client’s goals and then develop a strategy that works for them and meets those goals. Planning shouldn’t be blind to the reality of how clients want to live, and working through this process with their advisor gives them a better understanding of whether the market will impact a client’s desired lifestyle.”
In the RICP® Program, Pfau has supplemented new and familiar concepts in retirement planning with his research on the idea of retirement income styles. “There’s a growing recognition that any strategy can be viable, but only for the right client,” he said. “Are they comfortable spending from a broadly-diversified investment portfolio? Would they rather use a ‘bucketing’ technique to invest differently for short-term versus long-term growth? Or do they want to build a protective floor first and then build on top of that to protect their essential needs against discretionary spending? It all depends on the client, and advisors must customize their advice for each client. We can’t afford to be stuck in a one-size-fits-all mentality anymore.”
Thought leaders like Pfau and Finke are also constantly updating The College’s programming to coincide with the latest regulatory and logistical changes – and 2022 has been an eventful year. From the myriad changes of the SECURE Act and its recent 2.0 incarnation to elemental retirement planning to the elimination of the stretch IRA and new limitations of withdrawal time horizons for required minimum distributions (RMDs), faculty have been kept busy speaking with industry leaders and conducting research on what the shifts in the planning landscape mean for students, advisors, and the general public. They are already planning to make curriculum changes in response to the passage of the updated SECURE Act 2.0 in 2023.
One change Pfau sees is the need for a more consistent focus on tax planning in retirement income education. “Sequence of returns risk has become a front and center concern. It’s not an abstract concept anymore,” he said. “When the SECURE Act changed the game for IRAs and limited the lifetime stretch withdrawal to a 10-year period, a lot more people became potential candidates for tax jeopardy and losing much of their hard-earned savings without proper planning steps to limit tax deductibility. Now, we’re seeing people in their peak earning years who may be in higher tax brackets needing to consider Roth conversions and other measures much earlier than before if they want to pay taxes at the lowest possible level.”
Pfau said clients with trust holdings with RMDs should revisit their estate planning documents frequently to ensure the trusts are still working as intended. He also noted buffer assets – not part of an investment portfolio such as a bank savings account, cash value whole life insurance policy, or a reverse mortgage that can provide temporary but fully liquid income at times of market upheaval – are growing in importance to consumers. Advisors, he said, should also be talking about these assets if they want to fully future-proof their clients’ retirement planning.
For Finke, one of the biggest disruptions the past few years have brought to traditional retirement planning has been the advent of technology as part of the process – but it’s not all robo-advisors and retirement planning automation. “In our surveys, we’ve asked people how comfortable they are seeing financial advisors via Zoom or other remote conferencing methods,” he said. “It’s become quite popular since the onset of the Covid pandemic, and many advisors have adjusted to this new reality of communication. We find while most clients want to meet with a new advisor in person for the first time, most people are okay with virtual meetings after that and, in fact, prefer it. When you’re using Zoom to meet with your advisor, you don’t have to take the time and inconvenience to travel to see them at their offices, and in some ways, it makes those relationships even easier to maintain.”
However, Finke cautions that advisors cannot become complacent in today’s world with the myriad options that are available to clients to do their retirement planning themselves. “While it may not always be advisable, it’s relatively easy for consumers to go it alone if they want to,” he said. “We as advisors need to show them that we can communicate with them on a different level to prove our value – to find out what they want to achieve, quell their fears, and help them succeed. Technology is here to support advisors, not compete with them. Still, even people who understand they shouldn’t worry about their portfolio returns constantly sometimes need the voice of another human to tell them not to. That’s something technology can’t do for us.”
In looking ahead to the next potential retirement planning disruption, many industry leaders have pointed to legislation or regulatory surprises, from tax reform to needed changes to the Social Security program. Things are never certain in retirement planning, Pfau said, and it is wise to keep an eye open for things that could cause the next shakeup. However, he said he is more optimistic about the future of retirement these days, especially as advisors look to focus more on people-centric relationships rather than purely transactional interactions.
“The situation is getting better. The Inflation Reduction Act has done a lot to lower prescription drug costs and take the financial burden off retirees in other ways,” he said. “The behavioral finance knowledge we preach here at The College also shows tomorrow’s advisors that clients may want different kinds of relationships with them. Some people want to delegate and have a knowledgeable advisor decide for them. Others want their advisor to be a partner in their planning and be more involved and educated about what’s going on. Still, others are what I might call ‘validators’: they’re not ready for a full-service relationship with an advisor, but they want help with a specific planning or money management situation that’s important to them. Advisors need to have different models and approaches based on the different kinds of relationships clients may be looking for.”
In addition to the Inflation Reduction Act, Congress passed the highly-anticipated SECURE 2.0 Act in December, which Pfau and Finke pointed to as another critical piece of industry-shaping legislation. The act continues the government’s reshaping of retirement planning that started with the SECURE Act of 2019 and stands to further the disruption of retirement as many know it.
Among other key provisions, the two SECURE acts increased the age at which consumers are required to take RMDs from their retirement accounts, in part an acknowledgment of the longer lifespan of the average American and also to account for worries about taxation on saved dollars. With RMDs pushed back, many clients will have more time to work with their financial advisor on optimal retirement strategies and may be in a lower tax bracket, meaning they can keep more of their hard-earned savings; however, this also means a renewed focus on tax planning within the retirement planning space advisors would be well-served to prepare for.
Many headlines have focused on the act’s mandatory and automatic enrollment for most employees in their company’s 401(k) or similar retirement plans. By making enrollment in these plans automatic, Finke said his concerns about the government or businesses putting the onus of retirement planning on individuals could be at least partially alleviated, and more employees – especially those working in lower-wage jobs – could be empowered to begin building up assets for their future financial security. It also means a greater opportunity for financial professionals focusing on retirement planning to access a growing demand pool for their services.
Along with these changes, the act also loosens penalties on emergency withdrawals from retirement plans, which have typically come with a heavy tax burden. While it is rarely optimal to take money out of a retirement account early, sometimes the situation requires it. The additional leeway will likely give consumers greater peace of mind in their conversations with financial professionals.
With much of the Washington focus of late on the details of student loan debt, another portion of the legislation allows for employer matching of student loan repayments. With the price of higher education increasing, many young Americans are saddled with crushing debt that hangs over their heads for decades. Experts say offering incentives to employees regarding paying off student debt could also open the door for those same employees to invest more heavily in their retirement plans – another source of increased security and demand for financial advice. All these and more changes will be incorporated into the College’s curriculum, including WMCP®, RICP®, and the Ed Slott and Company’s IRA Success program.
As an authority in the financial services field for nearly 100 years, The College has always prided itself on changing with the times, adapting to new situations and realities like these in the industry, and updating the education it offers to keep up with the latest facts on the ground. It is what faculty members like Finke say sets The College and its programs apart.
“We don’t just teach content: we teach application,” he said. “Having the knowledge of how to build a portfolio or how to plan retirement is just the first step, and this is something up-and-coming advisors are recognizing more and more. Knowing how to talk to clients about these issues and challenges is the key to forming relationships that last into and through your clients’ retirement years.”
Read this story and more in our 2022 President’s Report.
Michael Finke’s Insights
Wade Pfau’s Insights
Five Questions with Chet Bennetts
A veteran of the financial services and education fields as well as the United States Marine Corps, Bennetts holds a master’s degree in family financial planning and is working toward a PhD in personal financial planning while serving as an assistant professor of financial planning at The College and a guest faculty member at the University of Nebraska – Lincoln.
We asked Bennetts five questions about his career, his path to the financial services profession, and what he hopes to accomplish as a faculty member at The College.
How did you come to be involved with The College?
After serving in the U.S. Marine Corps, I was a Colorado native living in a small town in Nebraska where no one shared or knew my name. I needed to stand out among other financial services professionals, and designations seemed the answer. No one around us had their CFP® mark, so I took The College’s program to prepare for the exam. During that time, I realized how well The College’s other programs, like the Chartered Financial Consultant® (ChFC®) and the Chartered Life Underwriter® (CLU®), dovetailed with what I was doing, so it seemed like a waste not to earn those too. Soon I was leading a merger of practices and becoming a top-performing advisor and manager in the company, and I made it a point to create study groups for my new advisors to earn their CFP® marks and ChFC®s as well.
Working for The College is a dream come true for me. I always wanted to join academia, and I looked up to College experts like Michael Finke, Wade Pfau, and Ed Slott. I’m blown away by this opportunity to collaborate with them, especially regarding behavioral finance and how helping someone achieve financial well-being assists them throughout their lives.
As a veteran-turned-advisor, what do you think makes military members and veterans well-suited for this field?
A few key tenants of military service are knowing yourself and your weaknesses and seeking improvement to succeed. When you apply that to the financial services realm, the solution is largely what we do here at The College. We give people a chance to stand out among their peers and for their clients, and we offer an appealing challenge that speaks to the team-building strengths of service members and veterans.
In my view, the perseverance and ability to overcome adversity most military members share is what gives them an advantage in a field like financial services, and I think more service members and veterans would do well to join our industry. You can still help people and make a difference in your community and people’s lives while enjoying the benefits of higher pay, a more flexible and comfortable lifestyle, and less physical danger of course.
Since beginning your work toward a PhD in personal financial planning, what have you learned that other advisors should know?
When we ask people what their sources of stress are, the biggest ones are usually money and relationships – and if you dig deep, relationship problems are often caused by money. Humans don’t handle stress very well. We have coping mechanisms, many of which are unhealthy and only make the problems worse.
As a financial services professional and veteran, I see that daily in our society. While the VA offers various physical health services to address issues like PTSD, financial stress was never a core part of the conversation. I found the academic community wasn’t talking about it, so I decided to focus on the issue of financial empowerment specifically.
How do The College’s CFP® Certification Education Program and ChFC® Program work together to enhance advisors’ skills?
When you take the CFP® exam, you’re telling people that you want to be part of an organization and a body of financial services professionals who hold themselves to a higher standard of excellence. You’re using the exam to prove a set of technical expertise you hold to serve clients ethically. The difference between that and other certifications is how you apply that knowledge.
A ChFC® still has the same base level of knowledge but may apply it differently based on the niche they want to serve. That’s shown by our ChFC® Program having all the same requirements as our CFP® Certification Education Program but with one additional course specifically focused on specialized knowledge and application. We take the core concepts that the CFP® mark entails and show people how they can apply that knowledge in ways that matter to them.
Do you have any pieces of advice for today’s up-and-coming financial professionals?
You’ll never know everything; the moment you think you do, everything will change. Formal education and designation programs are extremely important because they give you a broad knowledge base, but continuing education and keeping your expertise up-to-date are how you stay on track.
The benefit of learning from The College is that we have all this accumulated knowledge and expertise right here. Using that will make you much more successful than trying to do it alone. Don’t get ready to get ready: go do it and dive into the field while at the same time working on a designation or certification. You will build confidence in yourself while becoming more successful in your practice, creating more confidence to power the rest of your career.
An Advocate for Financial Education for Veterans
“We were among the first teams inserted into urban areas, and we were involved in door-to-door combat,” he said. “We were told to expect at least 30% casualties and nearly everyone would probably be injured. In the end, those estimates were pretty accurate.”
Bennetts was among those wounded during the campaign, and after being medically discharged from the military, he occupied himself with other pursuits: entering the financial services profession and starting a new career, as well as a new family. However, years later he got a piece of news that once again spurred him to act on behalf of his fellow service members and veterans.
“As of November 2018, I had lost more of my Marine brothers to suicide post-service than in actual military combat,” he said. “That was a real wake-up call for me, and I couldn’t understand why nobody seemed to be discussing this problem from the lens of how personal finances might play a role.”
Now The College’s CFP® Certification Education Program and Chartered Financial Consultant® (ChFC®) Program Director, Bennetts says it’s been long established that service members on the battlefield won’t be as effective if they’re preoccupied with a toothache or something else physically wrong with them – but financial well-being is just as important as physical well-being to maintaining combat readiness.
“It’s just as problematic, and maybe even more so, for a service member to worry about how they’re going to pay their car insurance or afford their mortgage payment,” he said. “The biggest sources of stress for people are usually money and relationships, and if you dig deeper into many of those relationships, the cause is often still money. I found the academic community wasn’t discussing this in the context of preventing veteran suicide, so I decided to go back to school to confront this issue more seriously.”
While Bennetts said programs by the VA to address physical and mental health problems for service members and veterans, including PTSD, are incredibly important to maintain the well-being of those individuals, financial health is often left out of the conversation. In addition, statistics show that over 20 veterans die by suicide daily in the U.S. on average, demonstrating a significant need for more services to support them. Bennetts says “financial empowerment” is an important part of that equation.
While studying for his PhD in Personal Financial Planning through Kansas State University and still focusing on the issue of financial well-being for military members, Bennetts says he was presented with the opportunity to be part of a select group of student veterans who would be able to propose legislation based on their research. He applied for and was awarded one of the Veterans of Foreign Wars’ (VFW) Student Veterans of America (SVA) Legislative Fellowships, earning the privilege of traveling to the nation’s capital in Washington, D.C., and presenting his findings to those in positions to take action on them.
“All the fellows had different ideas to present,” he said. “One student was working on issues surrounding veterans’ housing insecurity. Another dealt with National Guard members’ life transitions if they were called in to deal with a natural disaster. Mine had to do with financial services, financial counseling, and its integration into PTSD treatment. This was the VFW’s national legislative advocacy week, so there must have been at least 500 of us as VFW members participating from every state and territory going to their individual representatives and pitching their proposals to elected officials.”
It appears Bennetts’ proposal caught the eye of the VFW’s Legislative Affairs team, who brought it to the rest of the organization’s leadership.
“I think they realized I wasn’t a 20-something reading off a script and that I was passionate about this issue and knowledgeable on it,” he said. “Before I knew it, it went from me only meeting with people from Kansas and Nebraska to getting a list of every event happening that week and being encouraged to attend as many of those as I could.”
Over the course of several days, Bennetts estimated he met with over 15 elected officials from nine different states, including Senator Bernie Sanders (D-VT) and Senator Jerry Moran (R-KS), a current member of the Senate Committee on Armed Services. And then, things went another step further.
“They asked us to come to the White House for a meeting,” he said. “I was astounded. We had to complete security clearance requests and meet with the president’s Special Advisor on Veterans Affairs. I got to talk with her and her team about how certain record-keeping practices at the VA were stopping us from getting a clear picture of the actual well-being of our veterans. I even became part of the testimony to the Joint House and Senate Oversight Committee for Veterans Services Organizations (VSO). I’m still processing all of it, to be honest. It was a whirlwind but also an amazing experience.”
Bennetts says he plans to continue his advocacy on financial empowerment for military members and veterans and that he’s been inspired by the entire Washington experience.
“When I reflect on the last four to five years of my life, there’s been a lot of uncertainty, especially regarding my journey toward my PhD,” he said. “That week without a doubt relit my fire to keep going, and it was an honor to be part of the conversation.”
Leaving a Legacy
Peter Browne, Howard Cowan, and Maury Stewart pictured left to right.
The American College of Financial Services has been blessed with dedicated alumni and donors that have devoted their professional and personal resources to ensure the future success of The College. These College champions understand the impact of a College education and how it prepares our students to do great things in an industry and world that needs them.
Peter C. Browne, LUTCF®
A life of service and professionalism that exemplified Dr. Solomon Huebner’s client-first philosophy.
Peter C. Browne, LUTCF®, was a longtime leadership volunteer, loyal donor, and consummate champion for The College. He served on The College’s Board of Trustees and was a past chairman of The College’s Foundation Board. He was serving on the President’s Roundtable and actively working to deepen the partnership between The College and Ameritas that he tirelessly cultivated during his career with Union Central, which then merged into Ameritas Life.
Peter’s passion for The College and Union Central was best exemplified through his leadership to help establish the Union Central Larry R. Pike Chair in Insurance and Investments at The College in 2002. Through the evolution of our partnership with Ameritas, The College was able to create the Women in Financial Services scholarship with Women in Insurance and Financial Services (WIFS) in 2021.
Peter received The College’s President’s Award in 2010 and was awarded the Solomon S. Huebner Gold Medal in 2013, The College’s highest honor, and was a member of The College’s Loyalty Society and Legacy Society.
Peter was a past NAIFA National treasurer, president of NAIFA-NY, and president of GAMA. Serving for over 60 years in the life insurance industry, he was honored with countless industry awards and recognition, including the 2015 John Newton Russell Memorial Award — the highest honor bestowed upon a living member of the insurance and financial planning industry. He spent his time and resources to ensure that life insurance professionals had access to the knowledge to grow and has left a lasting mark on the profession.
Howard Cowan, CLU®, ChFC®
Industry leader and mentor that always made time to share his ideas and insights on how to strengthen and grow The College.
Howard Cowan, CLU®, ChFC®, was the Founder and President of Cowan Financial Group, which he formed in 1985 and ran until he retired from the organization in 2009. Over Howard’s illustrious career, he mentored countless general agents and career agents and was recognized with many prestigious industry honors, including the Massachusetts Mutual Life Insurance Company’s highest honor, the National Chairman’s Trophy, for an unprecedented 20 years.
Howard always made time to share his ideas and insights on how to strengthen The College. Howard served on The College Foundation Board for eight years and was a member of the Insurance Review Committee. At the time of his passing, he was a member of The College’s President’s Roundtable, a President’s Circle member, Loyalty Society member, Legacy Society member, and major capital campaign donor to The College. His other awards and accolades included the Masters Club, Leaders Club, GAMA Master Agency Award, GAMA First In Class, Master Agency Growth Award, and
GAMA Hero Leadership Award.
Maurice L. “Maury” Stewart, CLU®, ChFC®, CLF®
A longtime leadership volunteer, donor, and champion for The College and an advocate for life insurance and the financial services industry.
In 1950, after serving our country as a pilot in the United States Air Force, Maurice L. “Maury” Stewart, CLU®, ChFC®, CLF®, started his career with Penn Mutual as a general agent selling life insurance in Topeka, KS.
Because of the transformational impact of his contributions, Maury was a member
of The College’s 2012 Hall of Fame and the 2017 Solomon S. Huebner Gold Medal Winner.
In addition to being a lifelong learner and a former faculty member at The College
and attaining many designations, Maury encouraged the establishment of the
Charles E. Drimal Professorship in Estate Planning. In 2008, he was honored with
the establishment of the Maurice L. Stewart Lecture at The College in partnership with
Penn Mutual. The annual lecture addresses issues critical to the practice of leadership
development and has featured a series of renowned speakers.
Maury’s values and passion for leadership are also reflected in The College’s Chartered
Leadership Fellow® (CLF®) designation. While holding the then named George Joseph Chair in Management Education, Maury substantially strengthened the development of the CLF® Program. As a guest lecturer for many years, he shared his enthusiasm and wisdom with generations of CLF® students, building their competence as managers and leaders.
The Legacy Society
The Legacy Society honors those individuals who have informed The College of their estate gift intention or funded a life-income gift or life insurance policy that will support the future of The College. We are grateful for these individuals who are living out their philanthropic goals through their legacy.
To learn more about how you can support the future of The College through an estate gift, please reach out to Carol Parlin Prushan at carol.prushan@theamericancollege.edu or 610-526-1389.
Diversity, Equity & Inclusion Insights
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 WealthSM; 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.
The President’s Report 2022: Disrupting the Norms
The President’s Report is an annual publication, carefully crafted by our Marketing & Communications Department, that serves as a testament to the hard work of our leadership volunteers, faculty, and staff.
This year's report showcases several of The College's strategic initiatives well underway that are expanding opportunities for financial professionals, leaders, underserved communities, and consumers. You can read about our work to democratize financial education, diversify financial services, and widen perspectives surrounding special needs planning.
You'll learn how retirement planning is evolving and how our programs are at the forefront of this revolution in thought. We also introduce you to independent advisory firms leveraging our programs to disrupt traditional business and service models. Additionally, we share a celebratory update on our progress in transforming The College's culture.
And, if you prefer to watch than read, you'll enjoy interviews with several of our esteemed faculty and staff as they update you on their disruptive plans to benefit society. I hope you feel inspired to share this year's report with your family, friends, and networks.