The most Underrepresented Groups in Finance
7 May 2021
The financial world has long been nicknamed an “Old Man’s Club,” and it’s easy to see why. Many demographic groups are seriously underrepresented, as these alarming — and disappointing — statistics make clear.
Who are the most underrepresented groups in banking and financial services?
It’s the type of management outburst that makes HR — and PR! — departments wince. KPMG made headlines recently for all the wrong reasons after its UK Chairman, Bill Michael called unconscious bias “utter crap” during a company Zoom call. He has since resigned.
While Michael doesn’t speak for everyone in the world of finance, the stark lack of diversity within finance paints it as a sector with a lot of catching up to do. Whatever the opinion of those like KPMG’s ex-Chairman, it’s hard to dispute the facts.
So who exactly is underrepresented in this sector? Essentially anyone not white or male. The Financial Times called it a “male and pale” problem. And while the issue of underrepresentation is present across almost all sectors in finance, nowhere is it more of an issue than in asset management.
✺ 79% of financial advisors identify as white
No wonder it’s considered to be one of the least diverse industries in America. For context, 63% of the US’s general population identify as white.
Could this lack of representation be one of the reasons why employees from ethnic minorities engage less with savings plans than white employees? Probably. When a business understands and represents, the full breadth of its audience, both the company and the consumer can benefit. L’Oréal is the perfect example —
A lack of engagement, on the flipside, equates to lost opportunities for financial institutions, too. A 2020 study by McKinsey revealed that “nearly half of black households are unbanked or underbanked”. And that financial institutions could earn $2 billion in incremental, additional annual revenue if access to financial products was more equitable across races.
In the UK, the world’s second-largest savings market after the US, the story is much the same.
✺ 1% of London Fund Managers are Black
…and only 18.5% are Asian. The higher up the chain you go, the leaner those statistics become.
✺ 1.1% of assets are managed by firms owned by women or minorities
Ownership by those from underrepresented backgrounds is not only low, it’s declining. The number of Black-owned banks in the US has dropped by 50%. There are now only 21 Black-owned banks — not one of which manages over $1 billion.
Gender diversity in finance
A lack of diversity is not just apparent in individuals from underrepresented racial backgrounds. Women are hugely outnumbered by men and, not only that, are often subject to discriminatory behavior, too.
✺ 17% of FCA-approved persons in the UK are female
Approval from the Financial Conduct Authority can open doors to bigger, better places in the financial sector. Whether fewer women apply for approval, or fewer are successful in their application, it’s hard to tell. Either way, a 17% representation shows there’s a lot of work yet to be done.
The representation of women in senior roles at financial firms is only slightly higher, at 23%. And though still paltry, these figures illustrate a significant improvement versus last decade, when gender diversity at the senior management level sat at 9%. As of 2019, it’s double that: 18%. Can we really call that progress?
In the US, women have been able to break through the glass ceiling to hold more C-suite roles than ever before. That advancement hasn’t reached the very top, though.
✺ Only 6 of the 107 CEOs at America’s largest public financial institutions are female
6 out of 107 is only 5.6% — that’s the figure as of 2019. Why are female leaders not achieving those all-important CEO seats?
The vast majority of male CEOs come from one of three departments prior to being promoted: business, finance, or operations. These are all areas in which males significantly outnumber women.
Instead, women are more likely to hold leadership roles in areas such as talent management and marketing. These areas seldom feed into promotion to CEO — even at the highest levels.
… surely it’s different in FinTech, right?
Progressive and innovative — those are the values we’d expect from start-ups within the financial space. So surely their diversity stats paint a more equitable picture?
FinTech’s progressive and innovative nature hasn’t filtered through to diversity stats. Women are still underrepresented across the board in FinTech: in the workforce, as leaders, and in user bases too.
Many in the industry would wheel out the — frankly, tired — excuse that too few women apply for jobs at finance start-ups. But this shouldn’t be the end of the discussion. We’re all more than aware of the proven benefits diversity can bring, so shouldn’t such a discrepancy really beg the question:
Why are women shying away from the financial sector?
✺ 20% — the figure by which women are less likely than straight white men to win endorsement for their ideas
This issue isn’t unique to finance. In the US, the UK and most of the Western world, many women are raised and taught to minimize their ambitions. And even when they try to break the mold, the structures that surround them are more than ready to knock them back.
In FinTech companies, women are far more likely to have their ideas quashed versus their male colleagues.
Not only does this cost their companies crucial market opportunities, but we’re essentially training women to step back and stop trying.
🗯 “Blockchain…feels more inclusive, with the opportunity to be rewarded for innovation and initiation via peer to peer crowdsourcing.”
It’s not just the underrepresentation of women that FinTech has a problem with. BAME diversity is also lacking. Lavinia Osbourne is the founder and host of the award-winning platform Women in Blockchain Talks. She says that while there is representation, minority groups don’t get the same level of funding and support as their white counterparts.
She says FinTech is still very “corporate,” with a strong bias present, while Blockchain — and its peer-to-peer positioning — has proved more inclusive.
Underrepresented groups struggle to set up on their own
Funding is one of most difficult challenges for entrepreneurs to overcome — ask anyone who’s ever launched a business. Individuals from underrepresented groups in particular would be forgiven for having a somewhat pessimistic outlook on their potential for funding. In fact…
✺ 48% of black and minority-owned businesses don’t expect to qualify for financial support from government programs and accelerators
In the same way we’re training women to doubt their ambition and abilities, the same can be said for BIPOC entrepreneurs too.
But is this pessimism in line with reality?
The answer is no, encouragingly. At least not in the UK. In London, BAME-owned businesses now account for almost half of “startup loan” funding. Unfortunately, the same cannot be said for the US.
✺ <3% of funds raised by US venture capital firms are allocated to black and minority-owned startups
That’s less than 3% of the more than $40 billion typically raised annually. What’s perhaps more shocking, however, is what happens if a founder falls into two underrepresented groups. Say, an African-American female. Then the percentage of VC support drops even further.
How will we ever turn the tide with all these inequalities stacked up against minority groups?
Invest in D&I and invest in your success
The financial world could benefit from increasing DEI, these statistics make that almost impossible to deny. But the firms themselves stand to gain just as much as their current and potential employees.
🗯 For an industry so tied to numbers, it seems shocking that financial institutions can consider statistics like the above and not implement immediate and drastic change. Whether a bank or firm is traditional or challenger, they need to adapt.
As we saw above, from McKinsey, the greater the diversity of your workforce, the more closely you reflect your customer base. Let’s explain that insight in numbers.
One Harvard Business Review study found that a team with a member who shares a client’s ethnicity is 152% more likely than another team to understand that client. And increased empathy drives innovation and customer satisfaction, right?
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