As Professional Adviser launches the inaugural Women in Financial Advice Awards, our Armchair Critic Brendan Llewellyn looks at why diversity matters and how an employer should look to embrace it.

In common with many industries, the financial sector is lacking in diversity but why exactly does diversity matter and how should an employer look to embrace it? There are arguably three dimensions to any consideration of those questions – legal, ethical and commercial.

On the first point, labour law legislation makes it unlawful to discriminate against a person on the grounds of ‘protected characteristics’ – that is, age, gender, disability, gender reassignment, sexual orientation, marriage and civil partnership, race, religion and sexual orientation. This legislation does not require an employer to discriminate in favour of anyone – just not to discriminate against.

Even so, simply complying with the law will not be enough to pass a broader ‘ethical behaviour’ test. If a group is underrepresented, it may require special treatment to encourage it to succeed. You might call this soft positive discrimination or simply ‘positive action’.

Gender is the focus just now and firms with more than 250 employees are obliged to publish their ‘gender pay gap’. Yet all those protected groups deserve public disclosure on pay as a simple gateway to the wider question of fairness and barriers to real diversity.

Indeed there has been a call – in the McGregor-Smith Review – for the publication of an ethnic pay gap. We need two sorts of approaches here – passionate advocacy on behalf of all those protected groups, and balanced decision-making by business leaders.

The Gender Issue

Not enough women work in financial services except in the more junior positions where they are in the majority. As Goldman Sachs has put it: “We pay women and men in similar roles with similar performance equally. However, the real issue for our firm and many corporations is the underrepresentation of women and diverse professionals both in magnitude and levels of seniority.”

Individually, women experience and/or perceive a glass ceiling. Financial services appears to be a man’s world – which is unfair and leads to low representation of women in more senior roles and a large ‘gender pay gap’. Around 10% of financial advisers are female and around 20% of business development managers. These are not big numbers.

Consider your HR policies. If you that career breaks are a brake on females you might encourage males to share the break, or improve your post-break policies. If the culture is too male-driven – as it almost always is – how to change it? Concierge or advanced childcare services might be an option. Question the after-work or broader networking culture – if it seems to exclude women, then change it.

In looking to improve your firm’s diversity, you might for example insist that eight out of 10 of your next senior roles are filled by women – but you will need to be careful. For one thing, you may already have better diversity on the gender front than you do on age or race or disability or on LBGT. Can you disregard these?

Is it best to score 10 out of 10 on gender diversity and hope the other categories will follow naturally or is it better to go for a diversity balanced scorecard? It is of course important to not “do diversity” on a tick-box basis – if you do not really believe in it, then it probably will not work.

Broader Aspects Of Diversity

Diversity also has to embrace other important criteria – for example, social background. If two university candidates both present with the same academic achievements but the one who’s extra curriculum shines while the other has achieved their results despite a life in abject poverty and general familial deprivation which candidate do I favour? Personally I go for the deprived one on the grounds they are likely to have more untapped potential or, more importantly, has the right to be given a fair chance.

If you do operate a quota model then you will turn down candidates who are better. This will be uncomfortable but you have to hope the broader benefits to your company will outweigh the cost of losing the stand-out candidate on grounds they did not fit your diversity needs

Then you have to try to compare the unfairness experienced over time by those in the protected characteristics categories with the individual unfairness you have to apply if you are going to fill roles on a quota basis. Ideally, after several years operating a quota model, you could drop it and revert to a more naturalistic way of selecting your team.

You have to hope as well that your competitors will be making quota decisions on the same basis otherwise you will see many of the ‘best’ candidates – on a conventional measure of what is best – joining these rival firms.

The Commercial Dimension

That brings us to the third aspect we mentioned at the start – the commercial dimension or, to put it another way, why diversity will help your business. Here are six very good reasons and, for these purposes, diversity can be taken to mean types of person – for example, socioeconomic background or psychological types.

  • Diversity is good – it will encourage better debate by embracing a wider range of views and perspectives
  • According to this McKinsey report, diversity will make you richer.
  • It will also tend, broadly, to mirror your customers – or if it does not today, it will tend to make your organisation more appealing to a wider group of customers. Might more female advisers help in marketing your services to women? Or help in recasting your proposition and brand such that you present as gender blind?
  • The gene pool. If you recruit from a wider group – however defined – you will open your doors to more talent, and they will act as trailblazers for others
  • Strong diversity will create a company-wide sense of opportunity – the route to the top must be seen to be open to all.
  • Be on the right side of history – diversity is a key brand element for any modern business. Embracing it is no longer a decision – the only decision is how to go about doing so.

Brendan Llewellyn is owner of Marketing Edge and director of Adviser Home.

This is reproduced from Professional Adviser; all views are from the publication. This originally appeared online on May 1 2018.