HM Treasury’s Women in Finance Charter, which trade body Pimfa signed in 2017, reflects the government’s aspiration to see gender balance at all levels across financial services companies.
Speaking at the recent launch of the latest review, Nikhil Rathi, chief executive of the Financial Conduct Authority, reflected on how this may become a regulatory issue in the near future, if more work is not undertaken to meet the charter’s aims.
The review found that, despite the effects of the pandemic, the majority of signatory companies had met or were in the process of meeting their targets. But Rathi admitted that the FCA, itself a signatory, fell short of its own 2020 target, saying: “At the FCA, we set ambitious targets: women accounting for 45 per cent of our senior leadership team by 2020, and half by 2025. That we missed our 2020 target by 5 percentage points shows we too have work to do.”
However, the regulator has since led by example, appointing four new women to its executive team, meaning that 10 of the 19 people on the FCA’s board are now women. But gender is only one factor when it comes to diversity and inclusion in financial services.
Citing research by Randstad, Rathi said that fewer than 10 per cent of management roles in financial services are held by Black, Asian or minority ethnic (Bame) people.
Supporting this, the Parker Review reported that there were only 80 directors of colour in the FTSE 250, representing 5 per cent of the total. At the same time, Bame adults are disproportionately represented among the growing number of vulnerable consumers.
As Rathi rightly said, this lack of diversity at the top raises questions about companies’ ability to understand the different communities they serve, and their different needs.
He added: “In our recent guidance on vulnerability, we said that firms – all firms – needed to understand the needs of their customers and be able to respond to them through product design, flexible consumer service and communications. I would question if any firm can adequately respond to the needs of these consumers if they do not have the diversity of background and experience required to overcome biases and blind spots.”
Industry initiatives
This highlights the need for our industry to reach out and find a wider, more diverse recruitment base and the work we have done over this past year with social mobility charity The Brokerage shows that this approach can pay dividends.
Our first pilot masterclass session, aimed exclusively at girls, attracted more than 100 female students between the ages of 16 and 25 – 95 per cent of whom were of non-White British backgrounds and the vast majority were from the sort of socio-economic background where access to professional occupations is harder to achieve.
These groups attended sessions led by a diverse volunteer panel who shared their work/life experiences to show that women could enter the financial world irrespective of their choice of degree or background. We will be developing this programme further.
Regulatory intervention in this space may well come via the senior managers and certification regime, which has applied to all financial services companies – including financial advisers – since December 2019.
Under the regime, the most senior staff at companies are deemed 'senior managers' and must be approved by the FCA before taking on their roles. They must also have a statement setting out their responsibilities, which the regulator must also approve.
Rathi said: “As an employer, we are determined to improve our own diversity and to work on our culture to ensure it is inclusive. As a regulator, we want the same from the firms we oversee and in the markets we regulate. Not because it is a social good – although, frankly, that should be enough. We care because diversity reduces conduct risk and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.”
The warning could not be clearer: as an industry, we need to do more to increase diversity and inclusion. It is not as if we have not known this ourselves for some time, but the FCA is now putting us on notice that it is watching our efforts.
Pimfa’s Authentic Leadership programme launched on February 9 and the third cohort starts in October 2021.
Liz Field is chief executive of Pimfa
