In this article for IFA Magazine, Tiba Raja, Executive Director, Market Financial Solutions explains why she believes that it should not take a discussion paper to highlight the need to improve upon diversity in the financial services sector – nor should it be about boosting profits.
It is well established that there is a diversity issue in the financial services sector. Indeed, our industry is hardly alone in failing to have equal, fair representation of both women and ethnic minorities not just within businesses but at senior levels.
Sadly, however, it is an issue that floats in and out of people’s consciousness – it often requires a report, an awareness event, or a particular campaign for the topic to gain suitable attention. One such example came earlier this month, when the Prudential Regulation Authority, Financial Conduct Authority and Bank of England announced they would be delivering a jointly authored Discussion Paper exploring “diversity and inclusion in the financial sector”.
These are three of the UK’s largest and most important financial institutions. As such, their decision to delve further into the subject of diversity – and how to ensure the financial services sector can improve its record in this field – is something we should welcome.
It raises interesting questions, though, such as how to demonstrate the value of diversity and, more importantly, how to tackle the problematic lack of it in the finance world.
The need to accelerate change
We can start by saying in no uncertain terms that progress is required. Indeed, there will be plenty of readers who dismiss the aforementioned discussion paper as a floaty PR exercise.
After all, there have been many initiatives along these lines in the past that have not yet come to fruition. For example, hundreds of banks, lenders, investment firms and insurers are signed up to the voluntary Women in Finance charter, which commits firms to link pay to gender targets. However, the charter’s annual review in 2021 showed that there was, on average, 32% female representation in senior management among charter participants last year – a meagre year-on-year increase of less than 1% since 2017.
Regarding ethnic minorities, a 2018 report from research firm Randstad revealed that fewer than one in ten management jobs in the UK’s financial services industry is occupied by people from a minority background.
There is, therefore, a clear need to drive through change at a greater rate. The benefits of doing so would be far-reaching – although there are many ways one could quantify that.
Randstad’s report, for example, claimed the UK economy would benefit to the tune of £24 billion if ethnic minorities achieved the same rate of career progression as their white British colleagues. Meanwhile, numerous other studies have underlined how business productivity and profit can be boosted through improved levels of diversity (see this paper from McKinsey).
However, for me, it can seem crude to talk about diversity in terms of ‘the bottom line’. Business and economic benefits may well follow, but there is a much simpler argument for improving diversity: the fundamental right to ensure that there are equal opportunities for people regardless of their background or profile.
How to foster diversity
Naturally, this brings us to the question of how to improve diversity within the financial services industry. And, in truth, I believe this is something that must take place within individual businesses – leadership teams must embrace the challenge of driving change, rather than looking for industry bodies to lead the way.
At Market Financial Solutions (MFS), we are extremely proud of our diversity. We have 50 employees, with a roughly even split between men and women (weighted slightly towards the former), with the latter making up 62% of the management team. Moreover, 42% of our staff are from ethnic minority backgrounds — including founders, directors and senior managers.
We do not measure the benefits in terms of output or profit. Yet we do see that we are far better when it comes to employee retention than many of our competitors – but, for us, this is something that underlines the more important point, which is that we strive to create an environment wherein people are happy, supported and comfortable being themselves.
From our experiences at MFS, we have seen a number of changes help us foster an environment that allows diversity to flourish. For example, we celebrate a wider range of religious holidays as a team — like Ramadan and Diwali, not just Christmas. There is flexibility for employees who have to work childcare into their schedules, and there is a keen focus on the language that is used in all internal communications, ensuring no group feels alienated or overlooked.
Ultimately, employees must have the freedom to properly express themselves, rather than feeling they must conform to a status quo. Businesses, therefore, need to put in place the necessary practices, processes and frameworks so team members can speak openly about concerns or present new ideas.
Indeed, this has been one of the most recognisable benefits for MFS during the pandemic; our diverse leadership team has ensured we have had a variety of perspectives on how to overcome the challenges that Covid-19 has presented. Moreover, it has helped in the way that we communicate with clients and work with investors – put another way, having a diverse team makes us better at coping with diverse challenges and a diverse range of clients.
To use the cliché, having a more diverse team provides us with a broader horizon. It gives us more ideas for how to best deliver our services, and helps to provide a more inclusive, open space in which people can work.
It should not take a discussion paper to highlight the need to improve upon diversity in the financial services sector, nor should it be about boosting profits. Businesses must instead embrace it as a critical responsibility that ought to foster appropriate cultures, and allow people from all backgrounds to flourish as they grow or reshape their teams.
Tiba Raja is an executive director at Market Financial Solutions (MFS), one of the UK’s leading independent bridging lenders.