The Financial Conduct Authority occupies a unique position in financial services by being both a regulator and an employer.
So it is not enough just to focus internally and decide to have a diversity and inclusion policy.
The regulator has to set an example, and show by that example how other companies in the financial services should conduct themselves.
It is the role of Georgina Philippou, chief operating officer at the FCA, to achieve that, and to do so she chairs numerous committees, including the executive diversity committee, which sets internal D&I strategy, as well as leads by her own example.
She says: “We are a regulator. If you look at all the work we do – the Senior Managers and Certification Regime, threshold conditions, and conduct rules – you will see that culture runs through that, and an important part of that is integrity, and an important part of that is diversity and inclusion.
“There’s only one financial services regulator, and the power that we have is not just in terms of formal regulatory powers in taking disciplinary action, but also the power that we have as an employer.
“It’s important to lead by example, particularly as we’re going to go externally and talk to firms about D&I in the context of their cultures.”
Targets
Looking internally, the FCA has a number of targets for diversity on their senior leadership team.
Their targets are that 45 per cent of the team identify as women by 2020, and 8 per cent of the team identify as being from a black, Asian or minority ethnic background by 2020; by 2025, they hope those figures will reach 50 per cent and 13 per cent respectively.
As of September 2019, the SLT was 41 per cent female, and 9 per cent BAME, although across the wider organisation, it is about 50 per cent female and 28 per cent BAME.
Why are the targets for BAME at senior level so low?
She says: “We want to set something that’s ambitious; we want to do the job well but we didn’t want to set impossible targets, because it would lead to very bad behaviours.
“We set something that’s ambitious and doing something that’s hard, and more closely represents the population of the UK.”
In fact the FCA, which has just published a paper on the importance of diversity and culture in financial services, has some interesting innovations in terms of bringing people from a diverse background through the organisation.
For example, the regulator is experimenting with diverse recruitment panels when hiring for a new role or a promotion, even if thatmeans bringing in more junior people, who will necessarily receive the right training.
And the FCA has a programme for more junior people, especially those from a BAME background, to “reverse mentor” a senior colleague.
All of the senior leadership team are “encouraged” to have such a sponsor, and many of them do, including Ms Philippou. She says: “My conversations have opened my eyes to his lived experience, and the challenges that he’s had.
“Programmes like that run for a year, and we have decided to continue the relationship, and we both find it really fruitful.
“I get an insight into the challenges that he’s had, and he gets an insight into how the senior leadership works, and how we put together the D&I strategies.
“It’s had an impact on my day-to-day behaviours.
“When we have these conversations about cultures, we tend to think it’s only high level strategic plans, but a lot of culture is day-to-day behaviours — we are measured more by those than big strategy.”
A big part of the process is to make people feel they belong. She says: “People use the phrase ‘diversity and inclusion’ as if it’s one word; diversity is one word and inclusion is another.
“Inclusion is when you bring people in from diverse backgrounds, do you have the right environment that allows them to thrive?
“That’s where our focus is. Do all of our colleagues have the opportunity to do good, stretching, challenging and important work?”
Recruitment
But aside from the more subtle, everyday changes the FCA can instil, there are very practical steps it is taking to bring in more diverse candidates.
For example, where practical, it will allow jobs to be done part-time or allow other flexible practices, and it will also de-gender its advertisements.
Ms Philippou says: “Using words like ‘ambitious’ and ‘strategic’, might be words that attract male more than female applicants; ‘caring’ might make the job appear to be more suitable for women than men.”
The regulator has also dropped the requirement to have a 300 word free-form essay, on why one would be suitable for the job, as this does not suit some cultures, and it has focused less on academic qualifications.
At graduate recruitment level, it goes out to a broader range of universities, outside the traditional Russell Group: “We are trying very hard to attract Stem [Science, engineering, technology and mathematics] applicants; 44 per cent of our applicants on our Stem programme are women, that’s a considerable achievement”.
These are people who would be working on the FCA’s tech teams such as data strategy, or cyber security.
“As a profession it’s becoming more attractive to graduates and by implication it’s becoming more attractive to female graduates, but we are keen to get good gender diversity in these roles.”
Culture
But the process of making the FCA, and by example, the rest of the financial services sector more diverse, is not simply for doing a social good, or even for representing the population at large more accurately.
It is about good decision-making and positive culture.
She says: “Firms do ask us the question: ‘Why are we talking [to them] about diversity and inclusion?’
“We explain that we think diversity and inclusion is part of culture. We think poor diversity and inclusion could be indicative of a wider cultural issue.”
It is about psychological safety; you need to have a culture where it is safe for everyone to speak up.
“Senior leadership teams get it; boards get it. I think it’s about them leading by example, so that it starts to become part of the way the organisation does business.
“There are numerous studies that show that diversity is good for the bottom line.”
Could it ultimately lead to fewer blow-ups in the future, which have in the past led to the FCA picking up the pieces?
She responds: “I think it must follow that the organisation that is diverse and inclusive would [incline] to good culture; good culture drives good behaviours and good decision-making, so it must follow.”
Ms Philippou has been chief operating officer for four years, and a regulator since the early 1990s.
So as a female, she might have felt as if she especially stood out, calling out risk-taking City men (and they were largely men) to task.
She says: “I think it’s changed a lot since I started in regulation.
“I still frequently find myself the only woman in the room, and in the context of talking about diversity and inclusion, I’ve got my own lived experience to draw on. We’ve still got a long way to go.
“When I look at boards as a whole, I think they get it, but I do think we’ve still a long way to go.
“Key to it will be the pipeline coming through: that’s what’s going to make the difference.”
Melanie Tringham is features editor of Financial Adviser and FTAdviser.com
