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financial services

Engaging with Millennials – the future of retail banking

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The Millennials are the squeezed generation. Many find themselves adrift in a harsh world of low wage growth, increasing living costs, and an uncertain future influenced by climate change and the imminent automation of jobs.

It’s not all doom and gloom however… Millennials may actually be on the cusp of the greatest inter-generational transfer of wealth in modern times. This looming inheritance boom, not to mention the buying power of one of the biggest generations ever, means banks inevitably spend a lot of time thinking about how to engage with Millennials. The question is, are they getting it right?

MoneyLIVE recently surveyed over 200 senior banking executives to understand more about the role of trust, loyalty, customer co-creation, ethics and environmental change for effective engagement with the Millennial demographic.

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Blah equality, Blah gender, Blah workplace Blah …

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Enough talk. We’ve heard it all before. Let’s just do it!

These words, a tweet from @LaraOyedele popped into my timeline in response to an article in Diversity Woman Magazine which revealed that, according to research by Bank of America Merill Lynch,  “Gender equality can lead companies to make more money.”

This revelation is by no means ground-breaking. Our Knowledge Bank is full of research documents saying the same thing. Yet

Gender pay gap set to last for 36 years

Recent research by Easymoney suggests that the pay gap between top earners is unlikely to close until 2055. The research found that 79% of the 860,000 people earning over £100k pa are men. This has fallen only marginally since 2011, when 83% of the top earners were men.

Academics Geraldine Healy, Queen Mary University of London and Mostak Ahamed, University of Sussex have taken an in-depth look at the Financial Services Sector and identified that women, on average, earn 27.2% less than men an hour, whilst the bonus gap is nearly 50% (and 79% at Barclays).

Moreover, the lack of progress of women in Financial Services  is a global phenomenon. IMF chief, Christine Lagarde said at Davos: “The numbers are just appalling … you have 20% of board members and 2% of CEOs who are women.”

2019 Pay Gap reporting reveals poor progress

This year’s Pay Gap figures indicate that far from the pay gap narrowing in the past year, it’s widened with four in ten private companies reporting wider gaps than last year. Surely it’s time for companies to publish Action Plans alongside data and narrative.

The pace of change is slow – let’s change that!

At a recent Lunch, I sat with 3 other women. By pure coincidence we were aged 75, 65, 55 and 45. Our conversation turned to the progress of women in the workplace. We concluded that (1) regrettably there has been much less progress than any of us anticipated and (2) none of us thought at the age of 25 that we’d be saying this 20, 30, 40, 50 years later.

Yes, it’s time to be a bit more Lara – LET’S JUST DO IT!

Portfolio Management Dominated by white, middle class, straight men

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portfoliomanagement

Unique research identifies the barriers to diversity in portfolio management, what the industry is currently doing to improve diversity, and analyses what needs to be done to accelerate change.

New Financial’s latest report, Diversity in Portfolio Management, looks at what it is about the asset management industry – and portfolio management specifically – that makes building a diverse work force so challenging.

This research was conducted by New Financial in collaboration with the Diversity Project, and was supported by Allianz Global Investors, Hermes Investment Management, and GIC. It will be launched on Monday 24th September at an event hosted by AGI.

Based on interviews with more than 100 people working in and around portfolio management the report includes:
• Data showing the lack of diversity in portfolio management today
• Why diversity is important to portfolio management and why now
• The skill set required to be a portfolio manager
• The 18 key barriers to entry and progression
• What asset management firms are currently doing to improve diversity
• What needs to happen to accelerate the pace of change

The highlights of Diversity in Portfolio Management are:

1. Moving up the agenda: diversity is moving up the agenda of the asset management sector. In the context of portfolio management, there is a broad consensus that diverse voices enhance investment performance by increasing diversity of thought. This in turn improves decision-making and investment idea generation while guarding against groupthink and herd mentality.

2. Under pressure: asset managers are under increasing pressure to improve diversity – and quickly – from both external and internal sources. Government, regulators and clients all want to see increased representation from women and minority groups, while employees are also becoming frustrated by the glacial pace of change.

3. Starting from a low base: our research paints a stark picture of portfolio management dominated by white, middle class, straight men. Only 4% of UK fund assets are managed exclusively by women, compared to 85% run by men. During our research we came across only 12 black portfolio managers based in London, and nearly two-thirds of the industry’s leaders went to private schools.

4. The ideal portfolio manager: Our research found that the essential skill set for a PM includes numeracy, intellectual curiosity, analytical ability and an aptitude for learning. However, this broad view of who could become a PM does not reflect the reality of the narrow, subjective criteria that determine who actually makes it.

5. Barriers to entry and progression: we identified 18 barriers to entry and progression for portfolio managers. The top ranked barrier is the meritocracy myth: the asset management industry firmly believes that the best will rise to the top, that “merit” is objective, and that companies promote and reward staff based purely on performance – but that is simply not true.

6. A generalist approach: asset management firms are not yet tackling the lack of diversity in portfolio management specifically – nor does it appear to be a priority. While they recognise barriers to entry and progression exist, there is a relative lack of understanding of how these barriers are prioritised and their cumulative effect.

7. An uncollaborative effort: our research found a distinct lack of collaborative spirit amongst asset managers. The biggest barriers cannot be tackled by any one firm on their own – peers will need to come together to discuss and set industry standards, and work with the wider investor community, including asset owners, investment consultants and regulators.

8. A disconnect: there is little alignment between the biggest barriers and the most common actions taken by firms to improve diversity. Only one of the top five actions points we identified directly answers a top five barrier, and we observed very little activity in response to the remaining four barriers.

9. Signs of change: asset management firms have begun a concerted effort to review, update and formalise their HR policies. While they may not be breaking new ground compared to other business sectors, this shift signals an encouraging change in thinking for the industry.

10. Widening the gene pool: the industry is also turning its attention to improving diversity at entry level and raising the profile of asset management as a career to feed the future pipeline of portfolio managers. Firms are playing a more active role in graduate recruitment by introducing structured programmes and looking beyond STEM graduates and the same handful of universities.

Yasmine Chinwala, partner at New Financial and co-author of the report, said:

Our research shows diversity is moving up the agenda for asset management firms, but few are tackling portfolio management specifically. This is a serious issue. Portfolio management cannot remain an outlier in diversity statistics indefinitely just because it is difficult.

We found broad consensus across the industry that diverse voices enhance investment performance by increasing diversity of thought, that diversity improves decision-making and investment idea generation while guarding against groupthink and herd mentality.

Yet when it comes to portfolio management (i.e. those in charge of making investment decisions at the very heart of asset management) there is scarce evidence that the industry is actively cultivating the diversity of thought that can bring all these benefits.

The industry must act. This research deliberately highlights a wide range of interesting practices and ideas shared by participants to stimulate discussion and collaboration to shift the industry’s thinking from bare minimum to setting high standards and prompt genuine, sustainable change.

Jane Welsh, Co-Founder and Project Manager at The Diversity Project, which collaborated on the research, said:

I am delighted that the Diversity Project has been able to collaborate with New Financial on such an important piece of research. This report highlights both the cultural and practical barriers to achieving true inclusion and diversity in portfolio management and sets a challenge to the industry to address these as a matter of urgency. It also highlights the value of collaboration in addressing some of the specific barriers in the asset management industry and is a vital call to action.

Andreas Utermann, CEO and Global CIO at Allianz Global Investors, which supported the research, said:

By shining a light on the barriers to greater diversity in portfolio management, and the lack of success in addressing the most significant barriers in an effective manner, this report makes uncomfortable yet vital reading. It makes clear our obligation to ensure that current momentum translates into permanent, sustainable change. To that end, as well as underscoring the need for more concerted and effective action, the report offers practical suggestions for where and how asset managers can step up to the challenges we all face.

Harriet Steel, Global head of Business Development at Hermes Investment Management, which supported the research, said:

Women are still heavily underrepresented in senior roles in the investment industry, including portfolio management, which is why we need to widen the pool of candidates from which we recruit. Moreover, the industry needs to take taking meaningful, measurable and visible steps that deliver long-term change so that we can encourage and empower women, affording them the opportunity to succeed.

 

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FRC report says more companies should treat diversity as part of business strategy

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Board-Room

The majority of the UK’s largest companies have adopted policies on boardroom diversity but their reporting to stakeholders needs to improve.

Research conducted for the Financial Reporting Council (FRC) by the University of Exeter Business School shows that only 15% of FTSE100 companies fully complied with the UK Corporate Governance Code’s provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives for implementing the policy, and progress on achieving them.

The FRC’s analysis shows that FTSE 350 companies’ approaches to diversity are wide ranging. While some do demonstrate a deeper understanding of diversity as an issue of strategic importance, the great majority appear to treat reporting as a compliance exercise, suggesting a lack of commitment.

The revised UK Corporate Governance Code, which takes effect from 1 January 2019, require improved reporting on diversity. It calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company’s diversity policy including how this links to progress on achieving company objectives.

The revised Code has a renewed emphasis on succession planning and diversity reporting, encourages boards to think beyond gender diversity and to act to ensure appointment and succession planning practices promote diversity more broadly. The changes encourage companies to build diversity across their workforces to feed the development of a diverse pipeline for succession to senior management.

Board Diversity Reporting in 2018 provides a snap shot of diversity reporting across the FTSE 350 and identifies examples that lead the way in terms of quality and approach.

The key findings of the research include:

98% of FTSE 100 and 88% of FTSE 250 companies have a policy on board diversity, a considerable improvement since 2012 when this was first included in the UK Corporate Governance Code.
However just 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current UK Corporate Governance Code.

Some companies are embracing the spirit of diversity in their narrative reporting but many need to develop a clearer strategy to drive greater diversity at senior management level.

Tracy Vegro, FRC Executive Director of Strategy and Resources said

There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group think. Some of the findings of this report are disappointing and FTSE 350 companies should provide fuller disclosures on all diversity.

We expected to see more of our largest companies providing greater information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code. To maintain a competitive edge and success over the long-term, UK companies need to consider how diversity and inclusion is relevant to the markets in which they operate, all their stakeholders and the communities they serve.

We are writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it.

Minister for Women, Victoria Atkins said:

It is essential that we maximise the contribution that women make to our economy – if we want our organisations or projects to succeed we had better include women. There are more women in work than ever before; more women-led businesses; more women on FTSE boards; and, more female MPs than ever before. In 2017, we introduced ground-breaking regulations, requiring large companies to publish their gender pay gaps.

But only about a quarter of FTSE 350 board positions are occupied by women, with eight all male boards still existing. We must continue to show that in today’s fast paced, competitive market, we are driving towards diversity in boardrooms.

Professor Ruth Sealy, Associate Professor of Management, Director Exeter Centre for Leadership, University of Exeter, said:

Our research revealed some companies’ sophisticated understanding of the contribution diversity can make to their business – as the optimal utilisation of talent and a significant strategic issue. However, many organisations appear to still have a minimalist ‘tick box’ approach and need clearer strategies to drive greater diversity at senior management levels.

 

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Alpha-male culture prevents women from progressing in financial services

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Abolish ‘alpha-male’ culture in finance and encourage the progression of women to senior levels says a Treasury Committee report calling for the reform of bonus negotiations and promotion of flexible working.

Key recommendations

  • Assess bonuses against clear criteria to abolish ‘alpha-male’ culture
  • Remove stigma of flexible working by senior men leading by example
  • Encourage firms to publish strategies for closing gender pay gaps
  • Partners and subsidiaries should not be exempt from gender pay gap reporting
  • Firms should re-examine recruitment and promotion policies to eliminate unconscious bias, which will avoid potential applicants being deterred and avoid groupthink

Report Summary

  • Culture is the overwhelming reason that women said they do not want to get involved at the senior levels of the financial services sector, which becomes a self-reinforcing barrier. The alpha-male culture in some organisations is evident in bonus negotiations, where it’s perceived that men argue more forcefully for bonuses than women. This can result in higher rewards for men, and acts as a deterrent for women. Performance bonuses should be assessed against clearly objective and formulaic criteria.
  • Flexible working can be perceived as a “female” approach to working, and can adversely affect career progression. Long working hours based in the office can be unnecessary in some roles, particularly with modern technology, but a culture of “presenteeism” persists. To remove any stigma associated with flexible working, more senior men should lead by example by working flexibly. This would benefit the entire workforce by enabling all employees to balance personal responsibilities with their careers.
  • The average (mean) gender pay gap per hour at banks and building societies in the UK is 35 per cent. The average (mean) gender pay gap for bonuses at banks in the UK is 52 per cent. Now that a large gender pay gap has been confirmed in the financial services sector by firms reporting their data, firms should now be required to publish their strategies for overcoming their gap and supporting the progression of women.
  • Company subsidiaries that have fewer than 250 employees, and partners who are remunerated differently to employees, are exempt from gender pay gap reporting. The Committee agrees with the Economic Secretary that this is “outrageous”; subsidiaries and partners should be included in gender pay gap reporting. The Committee has also noted that it would like to see the Chancellor of the Exchequer as vociferous as the Economic Secretary.
  • Unconscious bias can influence senior staff recruiting and promoting in their own image. Legacy requirements in recruiting, such as “masculine” language, or requiring a degree or certain hours to be worked, should be challenged to ensure that all requirements are strictly necessary. Firms should re-examine promotion policies and practices to ensure that unconscious bias is eliminated at every stage. This will avoid potential applicants being deterred and help avoid groupthink.
  • Encouraging girls to study relevant subjects at school could increase the number of young women entering the financial services sector. Government and industry should work with schools, further education organisations and careers organisations to facilitate such encouragement. This should involve ensuring that young women are made aware of the various career paths in the financial services sector, and where these paths may lead, which could encourage them into the profit-making functions of financial services companies.
  • Maternity leave can have a negative impact on the confidence of women, and many women returning to work can go into roles that are less financially rewarding or more junior than the role that they left. Employers can make unfair assumptions about the opportunities in which they may be interested.  Industry should keep women up to date on live work-related issues, and should design schemes to assist women when returning to work. The Government should continue to promote the Shared Parental Leave scheme, which allows parents to share childcare, and has had a very low take up rate.
  • The gender pay gaps of the regulators show similar trends to the financial services sector. They should continue to improve their representation of women at senior positions and reduce their gender pay gaps so they, alongside the Treasury, can act as an effective role model to industry. The Committee will continue to challenge the Treasury on its appointment of senior staff at the Bank of England, the FCA and all other bodies within its remit to ensure that a diverse pool of candidates is considered with each appointment.
  • The Women in Finance Charter has been effective at raising awareness on gender diversity, and the Committee encourages all firms in the sector to sign the Charter. However, there is still a considerable way to go. The Charter is focused on the representation of women amongst senior positions; the Government should consider initiatives to help improve gender balance at all levels of seniority, addressing the pipeline and middle management levels.
  • Gender diversity is only one aspect of the diversity agenda. Firms should widen their diversity initiatives and consider the representation of other forms of diversity within their organisations. The Treasury should extend its focus to other forms of diversity in finance, and should start by understanding its own treatment of employees from diverse backgrounds.

Chair’s comments

Commenting on the Report, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

The reporting of gender pay gaps at financial services firms confirms that a large gap exists between men and women working in finance, in part due to significantly more men than women in higher earning and more senior positions.

The benefits of gender diversity are highlighted in the report, including better financial performance, reduced groupthink and more open discussions.

The next step must be for firms to set out how they will abolish their gender pay gap and support the progression of women. Firms should focus on changing the culture in financial services firms, which remains a deterrent for women, especially the bonus culture.

In the current bonus culture – whereby individuals argue how well they have performed – it’s perceived that men argue more forcefully for bonuses, which can disadvantage women. This should be replaced by a system where performance bonuses are assessed against objective and formulaic criteria.

Firms should also encourage flexible working, promote returner schemes for women on maternity leave, and re-examine their recruitment and promotion policies to eliminate unconscious bias – people recruiting in the own image – to avoid both group think and potential applicants being deterred.

Industry, Government and the regulators all have a role to play in pipeline management. Encouraging girls to study subjects at school could increase the number of young women entering the financial services sector, and careers organisations can ensure that young women are made aware of the various career paths in the financial services sector.

 

WiC Comment

Fingers crossed!

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