Everyone will by now be conscious of debates about diversity and how strides forward are being made in most sectors – to such an extent, that the relative quiet of the financial services industry is noteworthy and points to an urgent need to identify the scale of the issue and introduce substantive changes to redress the obvious inequalities.
This troubling issue has, belatedly, risen to the fore in recent weeks, as the Financial Conduct Authority (FCA), Prudential Regulation Authority, and Bank of England made a joint announcement of the commission of a Discussion Paper.
The report will delve into the sector’s diversity shortcomings, and seek recommendations to create “a resilient financial services sector, which brings together and responds to different views and perspectives, so that concerns can be raised and decisions are challenged effectively”.
It is the latest in a long line of initiatives looking to kickstart progress.
For instance, the FCA itself has favoured a carrot over stick approach of late, implementing positive benchmarks for listed companies with solid diversity records in lieu of the more typical quotas for diversity among staff and management.
On the other side, the relatively slow progress of the Women In Finance Charter highlights that lacking diversity is not only a structural issue – it is also about working cultures and environments.
The five year review into the Charter found that it had precipitated an aggregate increase in representation of women in leading roles in financial services; detailing an increase from 14% to 22% executive committee roles held; with board representation increasing from 23% to 32%.
This certain but gradual ascendancy shows there is no lack of will on the part of sector bodies to amend the issue, but the targets were typically set far higher – this is not a problem we can collectively tackle overnight.
While it is certainly positive to see progress, the slow pace of change raises questions about the efficacy of these wholescale sector measures.
Female representation in senior management positions standing at just 32% is, clearly, insufficient – yet there is little indication to date that voluntary charters or discussion papers will bring this to a genuinely equal balance.
The case for urgent action
It goes without saying, but must be clarified – the raw figures alone only go so far in illustrating the scale of the challenge.
For instance, discrepancy of opportunities for women is one important area of focus, but there is an even more pronounced lack of prominence among ethnic minorities.
A major study issued by Randstad in 2018 found that fewer than one in ten jobs in the sector are held by people from the BAME community (an arguably contentious term, though one used within the report itself).
The need for broad change and reconsideration of where opportunities are afforded, and why, is urgent.
There is the obvious human argument for this – a sector which attracts, welcomes, and supports individuals regardless of cultural background, gender or ethnicity will naturally become a healthier one.
This stands above all as the key motivating factor behind the need for change.
Businesses are also likely to find their balance sheets in a healthier position as a result.
Data produced by McKinsey suggests firms that rank highly on ethnic diversity are 33% more likely to achieve higher than average profits.
Meanwhile, the previously cited Randstad study suggests the UK economy would gain £24 billion annually if BAME individuals could progress in their careers at the same pace as their white colleagues.
Of course, these incentives should be considered of, at best, tertiary importance.
The imbalance of opportunities to enter, and to progress in careers, is structural, and therefore requires both a review of the sector as a whole, but also granular consideration of individual firms and teams.
It stands to reason that, whatever the makeup of a team, a supportive and encouraging culture will allow for a more productive company; one that has a much better chance of attracting top talent and retaining valued employees.
At Market Financial Solutions, we have tried to champion this. Indeed, the diversity within our teams, and the guiding principles which underpin them, are a foundational source of pride.
Our company as a whole has a near-even split of men and women, with women holding nearly two-thirds of management positions. A further 42% of our staff come from ethnic minority backgrounds, including senior managers and directors.
The pandemic stands as a robust example of the benefits of an inclusive and diverse culture. While the uncertainty and market volatility induced by the pandemic rumbled on, we were able to draw upon a breadth of experience, nous, and creativity to rise to the challenge.
It is our sincere belief that if we had a narrower set of backgrounds and characteristics among our leadership team, the pandemic would have posed a far greater challenge to our operations.
Moving forward as a sector
The issue, then, turns to the practical steps each firm can take to address diversity in their organisation.
Of course, the first step is to conduct a serious review of hiring practices, existing range of diversity among teams, and historic career progression rates between different demographics.
Once areas of particular need are identified, a range of measures to redress discrepancies can be implemented.
For instance, firms may set ambitious targets for ensuring their workplace represents a meaningful breadth of society and look to anonymise CVs when hiring to eliminate bias.
As mentioned before, striking up the right culture is the critical factor.
This will vary by team; some may look to afford employees who are parents the flexibility to manage childcare more effectively around their work, or review and extend maternity and paternity provisions.
For others, it will involve celebrating a wider range of cultural holidays together as a team – not just Christmas.
In all cases organisations should aim to establish a culture that can challenge exclusionary language and practices freely, and extend a substantive equality to individuals regardless of culture, gender or ethnicity.
As highlighted in the figures available for gender and ethnic minority representation, there is still a great deal of work to be done.
While reports and charters provide a useful benchmark for the rate of progress, it is clear that the credibility of these measures as a solution to issue is somewhat lacking.
The onus should be on employers to take proactive action to address issues within their business – and there is an urgent case for these internal conversations to take place now, with a view to immediate action.