Written by Apiramy Jeyarajah, Head of UK Wholesale at Aviva Investors
For too long, the investment industry has relied on staid recruitment methods that maintain the status quo. By doing things differently, we can improve diversity and future-proof our businesses, says Apiramy Jeyarajah.
Asset management has a diversity problem. While the issue is thankfully rising up the agenda, women, ethnic minorities and a host of other diverse characteristics remain woefully underrepresented across the industry, especially in senior roles.
Finance is by no means an outlier, and the situation reflects deep-rooted inequalities in wider society. Women, especially women of colour, are more likely than men to have been laid off or furloughed over the last year. Two in five mothers have considered taking a step back in their careers due to the challenges of juggling parenting with remote working during the pandemic.
Despite worthy rhetoric at the executive level, in many ways we are moving backwards on diversity in the workplace. According to a McKinsey study, 27 per cent of companies put all or most diversity and inclusion (D&I) projects on hold in 2020 as other priorities came to the fore when COVID-19 hit.
This is short-sighted, morally and commercially. For one thing, these companies are losing out on fresh ideas and perspectives that could help them bounce back from the crisis. Consider a recent study from the Boston Consulting Group, which shows firms with diverse leadership teams are better able to commercialise new ideas, boosting their earnings. The study found the positive effects are additive, implying the more dimensions of diversity that are represented – race, gender, social class, sexual orientation, neurodiversity – the greater the positive impact on performance. In other words: the more diversity, the better.
Organisations that fall behind on these metrics will struggle to attract new talent and customers, and asset management is no exception. Asset managers need to make sure their teams have the range of skills and perspectives required to build sustainable, resilient businesses that thrive long into the future. This will be impossible without diversity. Those in senior positions have a responsibility to lead the way, but everyone in the industry can make an impact by challenging outdated practices and championing a more inclusive organisational culture.
Given the role asset managers play in holding investee companies to account on issues such as diversity, getting our house in order is imperative to avoid accusations of double standards. Institutional investors and consultants are starting to ask tough questions about diversity among asset managers, who also need to ensure they are satisfying the needs of an increasingly diverse client base. After all, the UK’s millennial generation hails from a wider range of backgrounds than their predecessors. Managers and advisers that lack diversity will look increasingly out of touch as they seek to engage with this cohort.
They may also find themselves on the wrong side of regulation. In a speech in March 2021, Nikhil Rathi, chief executive of the Financial Conduct Authority, said “firms that fail to reflect society run the risk of poorly serving diverse communities…at that point, diversity and inclusion become regulatory issues”.