Note: This is a guest post written by our intern Tara Fenty.
When was the first time you heard the words “financial planner”? How about “financial advisor”? For me…I think it was nearly a decade ago, due to an unimaginable and sudden loss. As I write this, the intro to The Flash television show comes to mind. It begins with the line:
”for you to understand what I am about to tell you, I need you to…” know a bit about what I have gone through.
The day was March 13, 2013 and it was a fairly typical day. I was at home planning a movie day with the family; my son’s school was offering a donation match at a local restaurant, so we decided to pair that with watching “The Lion King”…a classic, I know. My partner, Antonio, came home and informed me that he was going to go for a ride on his motorcycle with a few friends. We had a small argument because we had already made plans together, but he decided to go on the motorcycle ride instead. Was I upset? Extremely! He grabbed his stuff and left on his bike. That was the last time I saw him alive!
The next few years were unbelievably hard. When the accident occurred, Antonio and I were set to be married in just 36 days. Due to a lot of “putting it off until tomorrow” mentality, we did not have any of the estate planning basics in place. And because we were unmarried, I was not eligible for many of the benefits I would have received had the accident happened after our wedding. However, I learned that there would be certain benefits that our daughter would be eligible for and I wanted to plan for that. Here is the thing: I had no idea how much money she was entitled to or when it was coming. I was given the initial time frame of roughly a few months but it actually took over a year to come through.
I get my first exposure to the financial services industry
In those early days after the accident, I started to do some research and was surprised when I came across the term “financial planner”. I didn’t even know what this meant. According to Investopedia, a financial planner is defined as someone who “works with clients to help them manage their money and reach their long term financial goals”.
After that initial shock of finding out about this whole financial planning world, my next surprise was that not one of the images of financial planners I came across online looked like me…a Black woman. I was trying to come to terms with my new reality, that I would have to navigate survivor benefits while simultaneously grieving. On top of that, I would also potentially have to confide in a complete stranger who looks nothing like me!
Choosing a financial planner is not something that should be taken lightly. You are literally handing over some of your most private and intimate financial details. The information you are sharing includes your own personal money story of how you got to be where you are.
I returned to the question: is it important to have a financial planner who looks like you?
For starters, it can bring a sense of familiarity and peace to you as the client. I imagined working with a planner who notices that my hair budget is rather big (multiple product changes, specialized hair stylists, etc.) relative to their other clients. As a Black woman, I would feel misunderstood. In my culture, our hair is our Crown and it is how we show and express who we are. It is such a huge part of who we are that companies such as Dove have done research and created The Crown Act and the Crown Coalition to celebrate natural, Black hair. But again, if my planner questioned why I need to spend so much money on my hair, I would feel judged.
At the end of the day, as much as we want to work with people who have similar backgrounds as us, that’s often not possible. The most important things to look for in an advisor are of course, things like integrity and competency. But also a level of curiosity that shows the planner truly sees you as a human being and will accept you as you are.
Fast forward a decade and I’m now pursuing this as a career. In the interim, I’ve worked with other survivors who are navigating their potential benefits, while dealing with the loss of a loved one. I know first hand how important this work is and how devastating it can be when you haven’t got your s**t together.
The work of financial planners and advisors is beneficial in so many ways. I learned early on that the industry is not very diverse; at present only about 4.8% of CFP professionals are Black or Latino. I wasn’t sure if this was an industry that would welcome me.
Signs of progress
On the other hand, many companies and organizations are recognizing this deficit and are striving to be more inclusive and diverse. There are organizations such as the BLXInternship program whose goal “is to increase the diversity of the financial planning industry to better reflect the population of our country” (disclaimer: I am a participant in this program, which is how I came to work at Xena FP).
There are firms such as Ellevest and Xena FP (nice plug, I know) that are creating a supportive and welcome environment while prioritizing diversity and inclusion. Although progress has been slow, there are signs of improvement! Last year the CFP Board announced its most diverse class of CFP recipients yet (nearly 15% of the current class of CFPs is “diverse”).
All of this is to say that whether you are a prospective client, or an aspiring planner, the tide is turning. There is a firm or a planner for you, even if they don’t look just like you. You are not alone, even though it may feel as such. Take it from someone who has felt that way in more ways than one.
I recently read an article about the gender wealth gap, which stated women retire with a quarter less wealth than their male counterparts. I’ve heard stats like this before, and it did not come as a surprise. We all know that women make 77 cents on the dollar to what a man earns for equivalent jobs (and that’s white women; Black/Latinas make even less at about 63 cents/58 cents, respectively).
What did surprise me, was the statement that “women tend to be in roles with less compensation in stock and may not negotiate as well for non-salary compensation that often gains value over time”. Now this caught my attention. Of course, it makes sense that women’s earnings over the course of a 40-year career would be less than a man’s but it never occurred to me that equity compensation plays such a big role.
Let me tell you: I. HAVE. THOUGHTS. First, I wanted to do some more digging into this issue. I found reporting from 2018 which showed that 16% of women receive some kind of equity comp to 24% of men. The value of the average equity grant is $104,902 for a man and $23,361 for a woman. Compound that over a career and the numbers are staggering.
Carta, which manages the stock plans for many companies, reported in 2021 that of all equity compensation that is granted, only 27% goes to women. The remaining 73% is awarded to men.
Gender wealth gap vs gender pay gap
The issue of the gender wealth gap is even more complex than the gender pay gap. Not only do women make less, but they may be more conservative investors, or generally invest later than men of the same age. The study points out that the difference is more stark at higher income levels than lower income levels. In other words, for people who are making minimum wage, the relative net worth isn’t significantly different for men vs women.
And this doesn’t begin to consider the issue of race. Needless to say women of color receive even less equity compensation than white women, with Latina women coming in last with regards to all other race/gender categories.
Per Carta: “Together, Black and Latinx people make up 29% of the U.S. labor force—that is, Americans who are working or available to work. But they make up only 16% of employees who hold equity. What’s more, these 16% of employees collectively hold only 9% of the total value of employee equity. Twenty-nine percent of America’s workers holding only 9% of employee equity is concerning.”
Some of this is due to Black, Latinx folks AND women occupying roles at lower levels in their companies. Only 7% of people in the C-suite are Black/LatinX. While 24% of people in the C-Suite are women, only 14% of founders are women.
You may be asking “What the heck can we do about it??”
One of my goals with Xena Financial Planning is to educate the people I work with about what types of equity comp exist, which type(s) they have/what they mean and what is reasonable to negotiate. I’ve written about negotiating before, and not surprisingly, I have pretty strong feelings about the subject.
First, I think it’s really important to acknowledge that not everyone is in a position to negotiate on anything. Women of color in particular are much more likely to have a job offer retracted or face other retribution from the hiring manager if they try to negotiate their comp package. I’ve been known to say “you have nothing to lose” (when negotiating) or “it can’t hurt to ask.” But the reality is, that’s not 100% true. If you’re desperate for a job, you’re more than likely not going to take the risk that comes with negotiating.
That said, there are a lot of ways to approach it and I’ve had quite a lot of success personally and with friends/clients.
My top suggestions for negotiating:
-Do not go into a negotiation with a threatening or accusatory tone. Imagine that you and the hiring manager are on the “same side of the table” and you’re trying to find the best possible outcome for all parties.
-Do. Your. Homework. I cannot stress this enough. It’s extremely poor form to just ask for money without any basis. You should know what a reasonable range of “total comp” (INCLUDING equity!) is for the role. There are ways to gather this information: from speaking to recruiters, searching sites like glassdoor or salary.com and my favorite (for tech roles): levels.fyi.
-Don’t show your cards too soon. In other words, if a hiring manager asks for your salary expectations, DO NOT TELL THEM. There are clever ways to deflect this question (you might say “I prefer to get into salary negotiations after we’ve established if this is a fit”) but you may very well be giving them a number that is on the low end. Let the company make the first move when it comes to dollar amounts.
-Role play or practice with a friend as much as you need to in order to boost your confidence.
This is not a silver bullet to the problem of the gender wealth gap. Companies can and should do everything they can to ensure women and men of all races are paid comparably, including equity packages. The move towards increased pay transparency should go a long way to helping with this. But negotiating and advocating for oneself is certainly an available option that is worth considering. In the meantime, I’ll keep pounding this drum and doing whatever I can to help my clients build their wealth.
Note: I recognize that the data doesn’t mention non-binary folks at all. Carta said they don’t track that at this time but in the other sources, there was no mention of non-binary people at all. If you have data that reflects the inclusion of non-binary people, I’d love to see it!