STANDING ON THE SHOULDERS OF GIANTS By Gerson R. Guzman
I am optimistic. I came of age in California at a time when Latino culture became increasingly interwoven into the tapestry of American life. I graduated from high school in 1994. Two years prior, salsa had officially surpassed ketchup as the most popular condiment in America. Latin food, music, and culture are now as American as, well salsa and a three-taco combo at your favorite late-night eatery. Yet in an era where Señorita follows Despacito as the most streamed song on the charts, and the “Latinization” of American culture is undeniable, we still have much to achieve.
Although the Latino population is projected to be more than 20% of the US population by 2025, Latino wealth is still projected to be less than 3%. Average wealth per Latino household is only $108,871, compared to average household wealth of $543,702 among all non-Latino families (Federal Reserve Bank of St. Louis). According to Axios, Latino professionals have the widest gap between the labor force and executive positions — bigger than that of any other minority group. Latinos account for nearly 18% of the U.S. labor force and own 1 in 7 small businesses, but they occupy just 4% of executive positions and less than 3% of Fortune 1000 company board seats.
So why am I so optimistic? Maybe it is my immigrant experience that allows me to see the world not only for what it is, but to appreciate how far it has come, and what it can be. As Henry Cisneros, a trail blazer in his own right, noted in his examination of Latino contributions to American history, “The next generation of Latino leaders will also have unprecedented national and global leadership responsibilities in every sector of U.S. life: government, business, the arts, religion, philanthropy, science, medicine, sports, entertainment, and education.” I have the honor of standing on the shoulders of those American Latino leaders that have come before us and looked out into a future full of possibility and promise – of not what is, but what can be. We have made substantial progress and will continue to do so.
In a seminal 2003 study, published 4 years after this organization’s founding, the New America Alliance noted that American Latinos had hit the financial services industry’s glass ceiling with a resounding thud as we were under-represented in management and ownership positions. At the time only 30 asset management firms, five private equity funds and 15 brokerage firms were owned by Latinos. Latinos were the majority owners or managers of only a handful of the nation’s 9,000 banks and savings and loans. Twelve years later, at our Wall Street Summit we celebrated the success of NAA member firms, recognizing those that had surpassed $1 billion in assets under management. At the time, NAA members managed over $60 billion in aggregate assets. Those NAA diverse asset managers (with 25+% diverse ownership) represented almost $45 billion of aggregate assets under management. At the time, in private equity alone, NAA Latino asset managers represented over $10 billion in aggregate assets under management. Today, member firms, including Palladium, Valor, Varadero, LM Capital, Kabouter, Ativo, are not only viewed as successful diverse-owned platforms, but leaders within their asset classes.
Progress has been made. In an oft cited report from the Knight Foundation published in 2019, firms owned by women and minorities manage just 1.3% of assets in the $69 trillion asset management industry, though their performance is not statistically different from the industry as a whole. As a society we have been shaken from our stupor and now recognize the inequities that arise from not having capital flow into underserved communities. As a country some of us were shocked into action by the 2019 El Paso shooting, the deadliest attack on Latinos in modern American history. Others have taken their message to the streets following the murder of George Floyd. Those tragedies were followed by the violence against the Asian American community that challenged our nation’s fundamental premise that we are all equal and protected under the law. These past 18 months have shaken us to our core when we could not ignore seeing the disparate impact of the pandemic on communities of color. Corporate America, public leaders, and all of us are now paying attention and calling for action on the critical issue of capital creation in those diverse communities. Progress will be made.
Since its founding, the New America Alliance’s mission has been to increase equity, diversity, and inclusion before those terms acquired the urgency they now have. Our members leverage their success and influence as leading money managers to increase the availability of investment capital for women and minority-owned firms, and to accelerate diverse leadership in entrepreneurship, corporate America, and public service.
It is that commitment to our mission intersecting with that societal recognition that gives me the optimism to see what is possible. We help each other. Twenty years from now, we hope to see another Knight Foundation report where there will be more diversely owned firms led by Latinos and Latinas, and they will manage significantly more than 1.3%of assets in the multi-trillion asset management industry. Our member firms are grooming the leaders of tomorrow within their own firms. Today’s analysts and associates at those firms, are the partners and managers of tomorrow. As diversity increases within the ranks of the financial services industry, we will see the emergence of a new generation of general partners taking leadership roles or spinning out to start firms of their own. We help each other.
This year we launched our Pathway Fellowship Program offering real world experience to students who would not otherwise have exposure to careers in business and finance. The students were able to work in firms led by Latinos, Latinas, and other diverse managers and visualize what they might accomplish with education and a little hard work. This provided them a safe environment to ask questions and learn. Many of our fellows did not grow up in communities or environments where they were surrounded by professionals in financial services. Their daily conversations did not revolve around current and topical business events. However, many of our NAA member firms were founded or are led by Latinos who share similar backgrounds and understand that asking the most basic of questions is not indicative of a lack of talent or skill, it simply reflects a lack of exposure and a hunger for knowledge. We, as a community, are mentoring and grooming the next generation of finance professionals and asset managers.
That should make us all optimists.
From a business perspective, why am I optimistic? It has been said by economists that periods of recessions are followed by periods of expansion. There may be disagreement as to when the COVID-19 recession will be over, or if it is already over, but there are some points we should remember. Recessions change the competitive landscape in most industries; thus, it is suggested that companies should focus on the future and play offense while also trying to control costs and play defense. The best time to prepare for expansion is during a recession because during a recession, assets are cheaper, and talent is cheaper and more available. One cannot lose sight of the long-term and what must be done.
Another point to remember is that small and emerging firms, diverse firms -- particularly women-owned companies -- generally have experienced a lack of ready access to capital, their owners, and managers are forced to operate in a capital constrained environment. This experience has engendered a sense of resourcefulness like many other business owners. Those managers more adept at surviving past economic downturns have a better chance of surviving future downturns than their peers and sometimes are more adept at seeing the burgeoning opportunities. There are always opportunities in this great country of ours.
All of us are an integral part of the financial services family – the NAA family – where teamwork is essential. We help each other.
If you notice a flock of geese flying, you will notice a traditional “V” formation. There was a study conducted by two engineers to determine why the geese fly in that particular pattern. The results are revealing.
Each bird, by flapping its wings, creates an uplift for the bird that follows. Together, the whole flock gains something like 70 percent greater flying range than if they were journeying alone.
In addition, the geese take turns in leading the flock – when the front bird becomes tired, she flies to the end of the formation and the next bird takes over the leadership post. So it is today, we are stepping in for the leaders of the past and grooming those that can take over for us in the future – to continue to build wealth and human capital in our communities.
It’s the same with us. When we combine our efforts, our talents, and our creativity, we’re far more productive than when we all go in different directions.
And that – NAA Familia – is why I am optimistic about the future.
Gerson Guzman, Co-Founder, Ceiba Capital Partners; NAA Chair of the Board