Diversity & Equality Are Crucial for Finance — Here’s Why.
by Sherry Hao, Controller, U.S. Money Reserve
Creating a diverse and equitable workforce is of the utmost importance in any industry, but it’s particularly relevant in the financial space. Finance has been far too white, male, and heterosexual for far too long, and it’s high time the changes that have taken place in other industries make waves in the financial space.
While this challenge is a difficult mountain to climb, it’s imperative that leaders continue to push forward with diversity, inclusion, and equality in the financial space. Here’s why it’s so crucial for the long-term health, growth, and sustainability of the financial sector and the global economy.
Understand the Current Financial Environment and its Lack of Diversity and Equality.
First, it’s important to understand what the current environment in the financial sector is like. In spite of continued efforts to diversify and bring in people of different gender identities, backgrounds, sexual orientations, and races, the truth is that the finance sector continues to remain homogeneous.
According to a study done by Oliver Wyman in 2020, the percentage of women in leadership roles in finance has doubled since 2003, but the current level is still in the low 20% range. A story at Investopedia argues that there are several reasons for the continuing lack of female representation in the financial industry. One reason they cite is that because there have been so few women in the space for so long, there are few female mentors who can act as examples for other women in the space. Another factor is the well-known lack of work-life balance that is inherent in the financial arena. Most in finance work long hours, and for women, who most often end up taking on the brunt of child-rearing and caretaking, this kind of work-life “balance” just doesn’t work.
The picture is even bleaker when it comes to diversity of race, ethnicity, gender identity, sexual orientation, background, or beliefs in the financial sector. As an example, among financial advisors, only 3.5% are African-American or Latino, according to Investopedia. In addition, it also reports that boards of directors and corporate leadership are primarily white and male, with diversity metrics typically not tied to compensation. Add to this the fact that a report from The U.S. House Committee on Financial Services found that the proportion of employees of color at top U.S. banks matches the percentage in the overall population — but that most of these employees are entry-level and not part of senior management. CNBC notes that there has been progress in diversification on Wall Street but points out that there’s still a very long way to go. For example, the linked story notes that the percentage of black talent at senior levels of management at top institutions is in the low single digits.
All of this adds up to a serious problem for the financial industry. After all, we serve a diverse population who come from all kinds of backgrounds, races, ethnic makeups, religions, and sexual identifications. Why shouldn’t those working in finance also come from similar diverse backgrounds? It may seem like an utterly daunting task to uproot such long and deep history of exclusion and homogeneity in the space, but it’s vital that leaders continue to work hard to bring diverse gender identities, sexual orientations, races, ethnicities, backgrounds, and beliefs to the table.
Diversity and Equality Make Good Business Sense.
Most importantly, diversity makes good business sense. I’ve written about this topic before, and it’s clear that diversity encourages much better teamwork and creativity, too. During difficult times like these, it’s vital to find creative solutions for the kinds of financial issues we’re seeing today — and having a diverse workforce really helps.
The U.S. House Committee on Financial Services report on diversity and inclusion in finance summarizes a collection of studies that support this idea. It shows that companies with the highest level of diversity in terms of racial and ethnic composition and gender identity display significantly greater profitability than their counterparts.
If you were to distill the real value of diversity down to its core essence, you’d find that having a diverse workforce is profitable. If you can gather the best minds and creative people in the world in one room, you can imagine that the solutions and innovations they come up with will be some of the best out there — and that will always translate to a solidly performing bottom line.
Diversity and Equality Create Happier Employees.
If one employee gets preferential treatment, better benefits, or more bonuses because of their background, race, ethnicity, gender identity, or religion, other employees will take notice. Not only is this illegal, but it significantly impacts morale. If leaders can offer better benefits and equal opportunities for the entire workforce so that everyone can work better and find a better work-life balance, then it’s more likely that employees will stick with your company, and you’ll be able to hire better, more diverse talent in the future. One good diverse and equitable hire begets another one.
This is especially relevant during these days of the great resignation and as we enter a post-COVID world. More employees are going to demand more flexibility to take care of loved ones and family members. They want more opportunities for flexible work and remote work, as well as better healthcare coverage. Providing this equitably to the entire workforce is vital to ensure that the financial world stays as diverse as possible. Ignoring these changing demands from employees will mean that leaders and their companies are left in the dust.
There’s also evidence that employees are happier when they are surrounded by people who don’t necessarily come from the same background. Humans are social animals, and working alongside people from different nationalities, gender identities, sexual orientations, religions, backgrounds, and beliefs can open lines of communication and creativity that haven’t been tapped before. It’s shortsighted to think that only white males can (or should) work in finance. Our financial workforce should be as diverse as the populations they serve. Anything less is a disservice.
Equality and Diversity Means Adding Diverse Voices.
One of the major problems that continue to plague the financial business is the fact that most recruiters, executives, and HR professionals continue to pull candidates from the usual places. That leads to a homogenization of the voices, thoughts, educational backgrounds, and experiences in the financial business.
Think of it this way: Top-level business schools cost hundreds of thousands of dollars. That means every candidate is almost exactly the same diversity-wise — typically white, male, and already very well off because those are the people who can afford to take the time and spend the money on those kinds of experiences and educations. Right?
But what if those looking to fill spots on their employee lists went outside those boxes? Other schools are just as good as the traditional Ivy League institutions, and business leaders have a greater chance of getting a candidate who is more neurodiverse and sociologically diverse from other schools, which means those employees will bring different perspectives to the table. That can be an incredible boon to a business looking to evolve, change, and grow as consumer and client demands change with the times.
Sourcing from non-elite colleges and universities is a vital step all financial companies need to take in order to ensure that they are pulling the best and the brightest. After all, a degree from Harvard doesn’t necessarily mean someone has the best credentials or skill set for the job you need to fill. Reaching outside the standard boxes is essential to ensure equality and diversity in the financial space, and it helps companies better serve their clients and customers. Why? Because it means that these people come with different backgrounds, experiences, and perspectives, which can be incredibly valuable as we all try to navigate the changing finance world and keep up with the global economy.
The Bottom Line on Why Diversity and Equality Are Crucial for Finance
It should go without saying that diversity and equality are crucial for finance, but it always helps to call out the places where business leaders can do better. Being sure to involve a diverse set of employees makes the business stronger, helps bolster long-term growth, allows a company to evolve and meet a changing market, and helps bring a variety of diverse voices to the table. Offering equitable pay, perks, and time off to all employees — regardless of race, ethnicity, gender identity, sexual orientation, background, or beliefs — helps level a playing field that has been far too out of balance for way too long. It’s high time that executives make real progress in hiring diverse people into their ranks to ensure the longevity of their financial business. Without that, business will stagnate, growth will suffer, and companies will be left in the dust by those who are willing to evolve with the times and bring in people who reflect the makeup of consumers, clients, and customers all over the world.