Asset management has a diversity problem. While the issue is thankfully rising up the agenda, women, ethnic minorities and a host of other diverse characteristics remain woefully under-represented across the industry, especially in senior roles.
Finance is by no means an outlier, and the situation reflects deep-rooted inequalities in wider society. Women, especially women of colour, are more likely than men to have been laid off or furloughed over the last year. Two in five mothers have considered taking a step back in their careers due to the challenges of juggling parenting with remote working during the pandemic.
Despite worthy rhetoric at the executive level, in many ways we are moving backwards on diversity in the workplace. According to a McKinsey study, 27 per cent of companies put all or most diversity and inclusion (D&I) projects on hold in 2020 as other priorities came to the fore when COVID-19 hit.
This is short-sighted, morally and commercially. For one thing, these companies are losing out on fresh ideas and perspectives that could help them bounce back from the crisis. Consider a recent study from the Boston Consulting Group, which shows firms with diverse leadership teams are better able to commercialise new ideas, boosting their earnings. The study found the positive effects are additive, implying the more dimensions of diversity that are represented – race, gender, social class, sexual orientation, neurodiversity – the greater the positive impact on performance. In other words: the more diversity, the better.
Organisations that fall behind on these metrics will struggle to attract new talent and customers, and asset management is no exception. Asset managers need to make sure their teams have the range of skills and perspectives required to build sustainable, resilient businesses that thrive long into the future. This will be impossible without diversity. Those in senior positions have a responsibility to lead the way, but everyone in the industry can make an impact by challenging outdated practices and championing a more inclusive organisational culture.
Given the role asset managers play in holding investee companies to account for issues such as diversity, getting our house in order is imperative to avoid accusations of double standards. Institutional investors and consultants are starting to ask tough questions about diversity among asset managers, who also need to ensure they are satisfying the needs of an increasingly diverse client base. After all, the UK’s millennial generation hails from a wider range of backgrounds than their predecessors. Managers and advisers who lack diversity will look increasingly out of touch as they seek to engage with this cohort.
They may also find themselves on the wrong side of regulation. In a speech in March 2021, Nikhil Rathi, chief executive of the Financial Conduct Authority, said “firms that fail to reflect society run the risk of poorly serving diverse communities…at that point, diversity and inclusion become regulatory issues”.
Ripping up the rule book
So how can the investment industry increase the diversity of its workforce? The structural issues that create the conditions for inequality will take a long time to fix. Many of the industry’s ongoing D&I projects rightly focus on efforts to improve access at entry level, such as internship and early-career programmes. These are important initiatives and should help us reach people who had been made to feel like a career in finance wasn’t for them.
But there is a wealth of talent already present in the market that is being overlooked. Asset managers should not be afraid to change their traditional recruitment methods if they want to find – and retain – these candidates.
First and foremost, the notion of the quick “like-for-like” hire should be done away with. One of the main reasons asset management remains overwhelmingly white and male is that the industry has continually sought to fill senior vacancies at speed by recruiting staff with a similar profile to previous incumbents. This approach may make things easier for hiring managers and minimise disruption in the short-term, but it lacks ambition and significantly narrows the field of potential candidates.
Job advertisements will often specify a certain number of years’ experience in an equivalent role, filtering out a swathe of talented people in more junior positions who are ready to step up. While experience is always useful, it may not be the most relevant criterion in a fast-changing industry.
Requirements for sales roles, for example, are rapidly being transformed by shifts in the behaviour of clients and technology that offers new ways to interact with them. Similarly, these roles require far more technical knowledge than they once did. A more inclusive and effective approach would be for hiring managers to determine the needs of the business, both now and in the future, and recruit on the basis of the skills required, rather than looking for past experience.
The language used in advertisements is also important. Academic research shows certain words with masculine associations – such as “competitive” or “assertive” – are off-putting to women. And while men will apply for jobs for which they meet only 60 per cent of the criteria, women are less likely to put themselves forward unless they are confident they are 100 per cent qualified, which suggests advertisements should be focused and to the point, rather than outlining reams of prerequisites.
Hiring for ‘add’, not ‘fit’
Another important consideration is the partner asset managers who choose for the recruitment process. Collaboration with external recruitment agencies and headhunters may be necessary, especially when it comes to filling senior positions.
When working with such firms, asset managers should apply the same rigour as they do when engaging with the boards of the companies they invest in. Just as they carry out due diligence on investee firms to ensure they are meeting certain financial or environmental, social and governance criteria, asset managers should choose recruitment partners that share the same values, as reflected in their D&I and hiring policies. Headhunters will often refer to Rolodexes of candidates with whom they have existing relationships, for example, and should be encouraged to look beyond the usual faces in assembling a diverse longlist.
Once candidates have been identified, it can be helpful for managers to reach out and engage with them about the role before interviews begin. In a recent hiring process, we found many highly qualified minorities, including female candidates, dropped out early on, due to a sense of loyalty to their current employer and concerns about the difficulties of changing jobs during the pandemic, for both personal and professional reasons. (This is not surprising, given working mothers have taken on more additional childcare responsibilities than fathers during COVID-related lockdowns.) Taking the time to speak with potential hires to explain the opportunity is one way to ensure they feel comfortable in moving forward.
When it comes to the formal interview stage, the panel should be as diverse as possible. Consciously or not, hiring panels often look for a “cultural fit”, which prioritises conformity over difference, and a diverse panel helps mitigate this bias. Rather than “fit”, we should really be looking for “cultural add” – a skill, quality, or perspective the team is currently missing.
A strength-based interview process is also helpful in this regard. Unlike past experience-based interviews, strength-based interviews encourage candidates to speak about their skills, interests and motivations. When done well, this opens up a discussion that gives both parties a better sense of the talents, values and perspectives the candidate could bring to the company. Further adjustments to the format can make interviews even more inclusive: providing questions in advance can be beneficial for neurodiverse candidates, for example.
Changing the culture starts with every one of us
Two further points are worth mentioning. First, shifting the approach to recruitment isn’t about filling quotas – although these are sometimes necessary – but implementing processes that should organically result in a more diverse range of candidates. The motivations of minorities can differ and hesitation to apply for a role may not equate to a lack of interest. We need to lean in, understand, adapt and personalise the recruitment journey to each candidate.
Second, if adopting these methods to tailor the recruitment process places extra demands on hiring managers, so be it. If asset managers are serious about finding the best person for the role, which in turn will improve the diversity of their teams, they should be prepared to do the legwork.
I can say from experience the effort is worth it. Too often, the discussion around the lack of diversity in finance is framed in terms of abstract numbers and statistics. But for those of us who don’t fit the stereotype of an asset management professional, it can be a painful aspect of our working lives. Trying to find your way in an industry that offers few role models or opportunities for progression can feel wearying.
To ensure everyone can reach their potential, we need an organisational culture that values difference. Leadership based on empathy and curiosity will be important in driving this change: line managers should be looking to identify what every individual needs to thrive, rather than adopting a blanket approach. But each of us has a role to play in implementing practices that favour cultural “add” rather than “fit”.
We can all listen more closely and try a little harder to learn from one another. In a high-pressure environment, the importance of these “soft” skills often gets overlooked in the frenzy to meet deadlines – but they will be crucial if we are to nurture the talent needed to meet the challenges of the future.
Thankfully, more and more people now recognise the need to shift the culture of asset management so everyone feels able to contribute and achieve their potential. A great deal of work still needs to be done before the industry is truly representative of wider society, and there is no quick fix. Rethinking recruitment is a good place to start.
Apiramy Jeyarajah, head of UK wholesale at Aviva Investors