Here’s why the personal finance industry needs more Black financial planners

Certified financial planners go through rigorous training to offer financial guidance for their clients and CFPs are often considered the gold standard of financial planners.

But very few are Black.

According to the CFP board, Black certified financial planners make up only 1.8% of certified financial planners, or just 1,652 in a total field of 92,000.

There are many barriers keeping Black financial planners from seeking accreditation, which ultimately hurts many Black Americans who may be less likely to seek out financial planners who don’t understand their unique financial needs or experiences.

“I want to be a financial planner for the rest of us,” said Lazetta Rainey Braxton, a CFP and president of 2050 Wealth Partners. “I have Black clients who are often first-generation wealth-builders that are part of the sandwich generation taking care of their parents and children.”

Barriers to entry

To become a certified financial planner, there are a series of steps to take. Applicants must have a bachelor’s degree in any field and complete CFP Board coursework, after which CFP applicants can sit for the test.

The 10-hour pass/fail CFP test has 170 multiple-choice questions and is offered three times a year in March, July, and November. The test pass rate is only 58% as of November 2021, according to the CFP Board, and the standard registration fee for the test is $825, which can be cost-prohibitive to many Black applicants.

“Being able to have the time and the resources to pass the exam is very challenging,” said James Brewer, CFP, the founder of Envision Wealth Planning. “We don’t need an easier test, we need to help people pass the test.”

Additionally, CFPs must complete 6,000 hours of professional financial planning or 4,000 hours of apprenticeship experience, which can take up to three years.

“It’s a tough profession,” said Brewer. “Before I’m a CFP, I need you to believe in me enough to invest your money. Not many Black CFPs have friends with $250,000 to invest with them.”

Braxton agrees that the commitment, lack of pay, and professional connections during the three-year professional experience requirement may keep Black students from applying to be CFPs.

“Getting three years of experience in the field can also be a challenge. You pass the test, then you have to find people who will train you to get your certification,” Braxton said. “How do you get the experience when you need a network?”

Black CFPs can help more diverse financial planning clients

The Federal Reserve found that the median Black net worth was $24,100, just a fraction of white wealth at $142,500. Because of systemic barriers they face, Black Americans are often left out of building financial security. A Black CFP who understands the challenges they face better overcome them.

“I want to serve underserved populations. When I talk to people, I can get into their stories,“ Brewer said, noting that minority clients often tell him: “I’m glad I met you.”

Black clients may have cultural differences about money that make Black CFPs easy to empathize with clients while also advising them, Brewer said.

“They may be supporting their whole family. For Black people, there’s a cultural expectation that we got to have the ride, we got to have the clothes, we have to live in a neighborhood that puts us in debt,” Brewer said.

Braxton also reaches out to Black clients that don’t have the generational wealth that white clients have and are often overlooked by other financial planners. She also advises Black CFPs to offer seminars to teach potential Black clients about financial planning.

Not only do Black clients need financial planning from CFPs they can relate to, but Brewer also noted that clients of all races can benefit from having financial planners from diverse backgrounds. For instance, many white clients sought Brewer out after the racial reckoning of 2020 that started after the murder of George Floyd.

“There has been a post-George Floyd movement. I’ve seen an increasing number of people seeking out an African-American financial advisor,” Brewer said.

Progress made, but more changes needed to add more Black CFPs

The certified financial planning field is improving its diversity with Kamila Elliott, the first Black head of the CFP Board of Standards.

Even though there is a small number of Black CFPs, there was a 10% increase in 2021. The CFP is also adding diversity and inclusion programs to attract more minority students to consider financial-planning careers.

Brewer noted that there is still a cultural bias that needs to be addressed when clients imagine what a CFP looks like — from both white and Black clients — the latter of which may be more risk-averse and require more time to build trust.

“I come into the room and clients are often surprised to see a CFP that looks like me,” Brewer said. “Black clients may have trouble building trust with me because I give them advice that may be counterintuitive to the financial advice they received from other advisors.”

Brewer said that even though it’s challenging for Black CFP’s, the field is worth entering once they have resources. He recommends Black students take finance classes in college and take internships with financial planning firms to gain knowledge of the profession.

He also recommends that applicants take the CFP test after getting their undergrad degree to make sure they don’t regret investing three years in the profession while in college. He advises potential CFPs to work as a Registered Investment Advisor so they can earn money while going through the CFP process. They should also join the Association of African-American Financial Advisors organization to find mentors in the industry.

Braxton also wants the industry to have more outreach programs to attract more Black CFPs.

“I've seen quite a few scholarships, particularly with the CFP Board having conversations with some of the financial firms,” Braxton said. “I do appreciate more advertising with people of color so you can see what you can be.”

Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago.

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