Results matter in business, and that applies to diversity, equity and inclusion (DEI) initiatives. If we are to have any hope that DEI will take hold, particularly in small business like most retirement plan advisers (RPA) firms --, it needs to be apparent how DEI can help with the bottom line.
Indeed, in a time of change and opportunity for retirement plan advisers because of the convergence of wealth, retirement and benefits at work accelerated by the Covid pandemic, we believe that advisers that do not focus on diversifying their workforces and partners will be at a disadvantage.
In his book “The Medici Effect”1, Frans Johannsen explains how diversity can help people and organizations be more innovative and creative. In a time of what feels like overwhelming change and opportunity for retirement plan advisers because of the convergence of wealth, retirement and benefits at work accelerated by the Covid pandemic, we believe that advisers that do not focus on diversifying their workforces and partners will be at a disadvantage.
Johannsen provides practical lessons on how diversity results in innovation. He posits that the greater the diversity of ideas, people and industries, the more impactful the innovation, explaining how the confluence of burqas and bikinis, ice and hotels, and termites and architecture has resulted in breakthrough business ideas.
For example, he notes how a Muslim woman who moved to a beach town in Australia created the burqa bikini to be with her family, and it became a revelation not just for Islamic women, but for those concerned about the sun. The ice hotel became one of Sweden’s top tourist attractions, and an architect in Africa built an office building that used termites’ cooling techniques, resulting in a 90% reduction in the use of electricity, which had been in short supply.
With the war for talent raging, employers are eager to provide innovative financial benefits at work spearheaded by their defined contribution plan to attract new talent and retain key employees. New options like student loan repayment programs, emergency savings plans along with health savings accounts (HSAs), and managed accounts that are included as investment options under defined contribution (DC) plans, are becoming more popular. In our view, the best financial wellness program is one that guides an employee to select the most effective benefits at work, which in turn, will help employers understand which benefits to offer.
The challenge that the DC industry faces, along with coming up with solutions that provide retirement income, is how to help workers who cannot afford or do not want traditional wealth management services. The answer may lie in a combination of data and tech that enables a new type of adviser or financial coach. The need and opportunity are here and now, but breakthrough innovative thinking is required -- which is where diversity can help.
With COVID as the catalyst, more people are comfortable interacting virtually, providing opportunities to cost-efficiently “meet” participants where and when they want. But that’s just a start--advisers need to understand the mobile app environment and how to leverage data like consumer websites and wealth tech for the masses.
All of which reinforces the value of diverse as the client base in terms of age, gender, ethnicity, culture, industry and understanding of technology, especially mobile tech—in relating to a diverse client base and coming up with new ways to address the needs of plan sponsors and their underserved workers. Which might mean that larger groups like DC aggregators and wire houses will have an advantage because of their greater worker population as well as HR professionals to help attract and retain talent.
While larger organizations like DC aggregators and wire houses have an may have advantages of scale and resources, smaller RPA firms can stay competitive around diversity—by assembling a network of diverse partners, whether benefits brokers, RIAs, bankers, attorneys and/or tech firms to help create solutions. Such efforts can help move past old solutions to address new challenges effectively.
