How RIAs Can Avoid Discrimination in Hiring

Discrimination is present in the hiring process whenever a company bases their hiring decisions on factors other than the candidate’s qualifications. Registered investment advisors (RIAs) that operate their own small businesses can be at an inherent disadvantage when it comes to defending their hiring practices, and may be more likely to make a mistake that leads to an instance of discrimination.

An RIA’s human resources department, for example, may not enjoy the same depth of experience as larger corporations, and, as a result, may be more likely to make a mistake. Moreover, because RIAs don’t have a large firm backing them in the event of legal action, one compliance issue can end up threatening the entire business' survival.

Key Takeaways

  • A financial advisory business, like any other, is subject to legal and regulatory rules around fair hiring and anti-discrimination.
  • When hiring, be sure not to ask illegal questions about things like children, age, marital status, or citizenship.
  • Treat all job applicants the same and ask them the same open-ended questions instead.
  • Take notes and document the hiring and interview process so that if a claim of discrimination arises, you can show that you followed the rules.

What the Law Says

Under laws enforced by the Equal Employment Opportunity Commission (EEOC), an employer can’t base hiring decisions on stereotypes or assumptions about an applicant’s race, color, religion, sex (including their gender identity, sexual orientation and/or stage of pregnancy), national origin, age (if they are 40 or over), disability, or genetic information, including family medical history. In addition, employers must provide “reasonable” accommodation—such as a sign language interpreter—to a job applicant who has a disability, provided the accommodation doesn’t cause the employer “significant difficulty or expense.” These are federal laws—individual state and/or citywide employment discrimination laws may also apply to a respective business.

While federal anti-discrimination laws apply to businesses with at least 15 employees, it’s important to acknowledge that all applicants have the right to sue or file a complaint if they believe a company used unfair hiring practices—no matter how small the company is. As such, it’s vital that RIA firms of any size spend the time and effort to develop and implement fair hiring practices. Here are some important guidelines to keep in mind.

Create Detailed Job Descriptions

Analyze the duties, functions and key skills related to a position. Then, create relevant and objective qualification standards for each, and apply them consistently to all candidates. Be sure to detail education and experience requirements, and ensure that they “make sense” for the position (e.g., entry-level positions probably shouldn’t require an advanced degree). Asking for more qualifications than a position will realistically demand can eliminate potential candidates—and be viewed as discrimination.

You should specify if skills are expected on the first day of work, or if they’ll be educated in trainings on the job. When in doubt, reach out to other companies for feedback. You can also read their job descriptions online to review their qualification requirements for similar positions.

Ask all Applicants the Same Interview Questions

Before interviewing anyone, create a list of questions based on your analysis of the position. Ask each candidate every question on the list, bearing in mind that your follow up questions may differ depending on the responses. Be sure to ask about previous work experience, as well as on-the-job scenarios and any questions that will help you evaluate the candidate’s qualifications.

Open-ended questions work well because they encourage candidates to talk, provide details and demonstrate their communication skills. Behavior-based questions are also helpful because they prompt candidates to hypothesize how they would respond to realistic workplace scenarios (which can help you evaluate their judgment and decision-making skills). Examples of both types of questions include: 

  • Tell me (or us) a little about yourself.
  • What are your biggest weaknesses?
  • What are your biggest strengths?
  • Why do you want this position?
  • What is your most significant professional achievement so far?
  • Why do you want to leave your current position?
  • What is your leadership style?
  • Tell me (or us) about a complex issue you faced in a previous position and how you solved the problem.
  • Explain a difficult decision you had to make in a previous position. What made it difficult and what was the outcome?
  • What questions do you have for me (or us)?

Don’t Ask Illegal Questions

It’s against the law to ask questions related to race, color, religion, sex (including gender identity, sexual orientation and/or stage of pregnancy), marital and family status, national origin, age, disability or genetic information, including family medical history. In most cases, you’re not permitted to ask questions related to arrests and convictions that have no connection to the position, as well as direct questions about discharge or non-U.S. military service. It’s also a good idea to avoid questions about organizations, clubs, unions, societies and lodges the applicant may belong to since responses can indicate the applicant’s race, sex, national origin, disability, age, religion, race or ancestry. Examples of illegal questions include:

  • How old are you? What year were you born? When did you graduate from high school?
  • Are you a U.S. citizen? (It is legal to ask a candidate if they are legally eligible to work in the U.S.)
  • What arrangements will you make for child care while you’re at work?
  • Do you have a disability?
  • Have you ever been injured on the job?
  • Are you married? Are you pregnant? Do you have any children? Do you plan to have children?
  • Are you a member of the local country club?
  • Where do you go to church? Who is your pastor?

Be aware that a candidate may bring up topics you want to avoid. For example, someone could say, “I have three kids in elementary school, so I’ll need a flexible schedule.” It’s okay to make a brief and generic statement about your company’s policies—for example, in this case, whether your company offers flexible hours – but then move on to the next topic.

Take Thorough Notes

Thoroughly documenting each candidate’s answers is an important way to review important details when making hiring decisions, and it serves another important purpose: It can help protect you if a candidate makes a discrimination claim. Before starting the interview, inform the candidate you’ll be taking notes to capture their experiences and skills so that you can review them later. This can help make the candidate more comfortable since they won’t have to wonder what you’re writing down.

Because it’s challenging to write down everything a candidate says during an interview—especially while keeping good eye contact and remaining engaged—jot down just the main points.

For example, if a candidate responds to the question, “Tell me about a time you went above and beyond the requirements of your job,” write down a few words about the background, the action the candidate took and the result. Don’t make any notes about the candidate’s race, color, religion, sex (including gender identity, sexual orientation and/or stage of pregnancy), national origin, age, disability or genetic information, including family medical history.

Ideally, a manager, colleague or employee will join you during each interview. Having this “witness” can help prove that the interview was conducted fairly if a candidate makes a discrimination claim.

The Bottom Line

Small businesses like RIA firms can be at a disadvantage when it comes to avoiding discrimination during the hiring process. The human resources department (or hiring panel) may not have the same depth of experience as larger firms. As a result, they may not have mastered the art of avoiding illegal questions—and steering candidates that are offering too much information back to safe topics. RIAs also don’t have a large corporation backing them in the event a discrimination suit is filed, which can make it difficult to weather the claim, financially speaking. Because of this, it’s important to spend the time and effort to create a hiring process that is fair and focused on non-discriminatory hiring practices.