Diversity has become a growing focus for a variety of industries in recent years. But while some sectors have begun to make headway in creating inclusive work environments, the male-dominated financial advice industry arguably has some catching up to do.
The notion of changing the traditional makeup of an industry is by no means an easy task, especially when its very nature was based on roles traditionally reserved for men.
Considering the fact the concept of women handling their own income was not officially legislated for until 1990 – when the government introduced independent taxation – it makes sense that the advice sector, which tends to skew to older practitioners, has not moved as swiftly as others.
But the nature of financial advice has changed almost as quickly as attitudes to gender. In the years prior to the Retail Distribution Review (RDR), when advisers relied on commission payments for recommending certain products, the industry was very different in structure.
Danny Cox, chartered financial planner at Hargreaves Lansdown, says the lack of diversity among financial advisers is in part due to this legacy. Mr Cox says: “If we go back 20 or 30 years, financial advice was much more about sales than it was about advising, and that’s more naturally a type of role that a man would take, rather than a woman at that time.
“But also, on top of that, if you were working for a large national firm as a financial adviser such as a bank, it’s often harder to have the same flexible working schedule as you might have if you were working for yourself.”
Published a few months before the RDR, the Institute for Leadership and Management’s 2012 research paper Women in Banking revealed that 76 per cent of women felt that “opportunities for working flexible hours or working from home would be a benefit”.
Encouraging participation
Most efforts to widen participation in financial services have, understandably, focused on larger industries and organisations. HM Treasury’s Women in Finance Charter, launched in March 2016, asks businesses to consider how they should address diversity issues. Signatories must have a senior executive with responsibility for gender diversity and set targets for women in senior management positions (see Box 1).
Robo advisers Nutmeg and Scalable Capital are two of the handful of smaller firms to have signed up, alongside a host of banking, insurance and fund management giants.
The Women in Finance Awards, an “awareness initiative designed to identify and celebrate role models and advocates in financial services and business”, does focus in part on the achievements of female financial advisers.
Praseeda Nair, spokesperson for the awards, says the category “recognises women who are leading the charge for opening up the world of money management, mortgages and investment to women”.
Ms Nair adds: “The only way to break old habits [in the financial advice industry] is to challenge out-dated workplace culture, whether it’s lad banter at work, machismo culture that makes shared parental leave near impossible, or tokenism in hiring women just to tick boxes.”
A new generation
Increasing industry diversity is likely to stem from younger advisers joining the profession. In this regard, the government’s apprenticeship levy may help to give adviser training programmes a boost. As of 6 April, companies with a “pay bill of more than £3m” have to contribute to the levy each month, charged at 0.5 per cent of individual firms’ annual wage bills.
Sian Fisher, CEO of The Chartered Insurance Institute (CII), suggests the levy will provide more opportunities for those who “don’t necessarily want to go the academic route”.
“With a lot of the training schemes, there’s quite a lot of energy in engaging with higher education colleges where there are diverse groups. It’s not just the usual suspects. There’s now something more definitive to go and talk to younger people about. I think it’s really helping the dialogue.”
However, not long after the launch of the apprenticeship levy, the government’s Education and Skills Funding Agency revealed it would be pausing its procurement process for up to 98 per cent of employers not eligible to pay the apprenticeship levy, in order to assess funding distribution and oversubscription issues.
Rebecca Stevenson, a trainee adviser at Ark Financial Planning in Manchester, was one of a number of budding advisers to have missed out on training due to the aforementioned changes.
Just a week before the Personal Finance Society’s (PFS) Aspire trainee programme was about to start in early May, Ms Stevenson was told, according to an email sent to her, that “despite considerable efforts and trying every possible angle, it has proved impossible to solve [funding issues] in time for the May start dates” due to a freeze in government funding.
Philip Stevenson, Ms Stevenson’s father and a chartered financial planner at Ark Financial Planning, is also frustrated by the lack of training and support for would-be advisers, as well as small to medium enterprises like his own.
Mr Stevenson says, “We took on a graduate trainee 10 years ago, which was unheard of in the industry at the time. The support we had for getting him qualified was non-existent. In the last 10 years, the average age of an IFA has gone up, the number of new recruits in the industry have gone down, and the number of women in the industry has gone down.”
Benefits to business
While many still view diversity as a social issue alone, studies have shown that real efforts towards creating inclusive work environments can produce extremely lucrative outcomes for businesses around the globe.
According to consultancy McKinsey’s 2015 report ‘Why diversity matters’, firms in the “top quartile for racial and ethnic diversity” across 366 public companies in the UK, US, Canada and Latin America were found to be “35 per cent more likely to have financial returns above their respective national industry medians.”
Despite being in agreement with the McKinsey report and others like it, the CII’s Ms Fisher believes that focusing on larger companies means that improving diversity in an small and medium-sized enterprises (SME) context tends to be left out of the equation.
She says: “It almost lets SMEs say: ‘Well, that’s alright if you’re British Airways, but it’s much harder for me’, as it were. But a section of the McKinsey report talks about how powerful diversity has always been in entrepreneurship, which effectively is what a lot of the planning market is. It is people’s own businesses.
“So if you made it work for yourself, and then you turn around and say you can’t now support other people with diversity, then you’re potentially going to be holding your business and the entrepreneurs of the next generation back.”
Specific benefits for the advice industry would likely include the ability to attract a wider range of business. Younger advisers are seen as aiding efforts to work with a new generation of clients, and the same philosophy should apply to a diverse workforce.
So far, the financial advice sector, which is visibly dominated by older males, has not developed its own ways of reporting levels of representation in terms of race, sexual orientation and gender.
However, there are a number of professional networks in the industry specifically for under-represented communities. Link, the LGBT Insurance Network, has been running since 2012, and regularly engages with a number of firms to help employers become more inclusive.
The CII – one of the 122 signatories of the Women In Finance charter – has also been instrumental in promoting diversity across the board. In addition to considering how language alone can be a barrier to inclusivity, the Institute plays an active role in supporting diversity initiatives.
Ms Fisher concludes: “Often the historical way that the language of financial services works sounds as if it’s non-inclusive, but actually if you talk to the advisers personally, they’d say it’s not a problem.
“At the CII, we spend a lot of time trying to join up the diversity networks that sit within individual companies because often they get a lot of energy to start with, but then after a while they start to wonder what they could do better. But they often don’t know about each other, whereas because we’re the professional body, we get to know most of them.”
