Whatever Beyoncé may sing about girls running the world, women certainly don’t rule the financial services industry.
Despite women representing 55 per cent of the financial and insurance services workforce, the industry has the highest gender pay gap of any group studied by the Australian Bureau of Statistics (ABS) at 26.1 per cent.
Looking at funds management, 76 per cent of investment managers are male. According to Mercer, female investment managers are 30 per cent less likely to be promoted and 50 per cent more likely to leave the industry than their male counterparts.
As of February, this year, just six of the chief financial officers of Australia’s 100 biggest listed companies were women.
Women can offer a lot to the industry; whether in investment decisions, client care or workplace culture.
So, why aren’t more progressing through financial services and how can this change?
Getting a foot in the door
An initial problem is encouraging women to both choose and then remain in careers in the industry in the first place.
Research by Mercer has found that female finance students are almost 50 per cent more likely to say they don’t know enough about investment management (IM) to consider it as a career option.
Mercer’s learning and inclusion practice leader, Yolanda Beattie, says that this is driven by young women not knowing enough about the industry and not thinking that they will fit in.
When conducting background research for Future IM/Pact, a recently launched collaborative industry initiative to encourage women to pursue careers in IM, for example, she met women working in IM who said they had to develop an interest in AFL to feel they could keep up with workplace chat.
Women are less likely to study courses leading to finance careers. Men study economics at an almost 2:1 ratio to women, for instance.
Principal Global Investors (Principal) Australia chief executive, Grant Forster, points to this as a struggle point in hiring women into the industry.
STEM studies, often a feeder course into IM, have performed better in terms of encouraging female participation. However, according to Australia’s Chief Scientist, in 2016 just 16 per cent of university and VET STEM graduates were women.
Barriers to progression
A male-dominated culture impacts progression once women get their foot in the door too.
When asked to identify barriers to women progressing through IM by Mercer, women pointed to bias in decision-making, culture, lack of flexibility, and parental responsibilities as the biggest issues, in that order.
When men were asked, they said the same factors but flipped the order.
“So, men think the problem is women, women think the problem is the system,” Beattie says.
“So, there’s a need to get a much deeper appreciation in the industry, particularly among leaders, that parental responsibilities really aren’t the problem. The problem is a system that doesn’t create an environment where women can thrive.”
Then there’s the issue of what jobs women hold once they get into the industry. Australia’s level of job segregation is amongst the worst in the developed world, and the problem this poses in typecasting women is evident in financial services.
Karen Volpato, senior policy adviser at the Australian Institute of Superannuation Trustees (AIST) and Money Management’s 2017 Women in Financial Services (WIFS) Awards Woman of the Year, says that you can see this in the governance roles women and men hold.
“In the financial sector, the investment roles are dominated by men which can lead to a very alpha-blokey culture amongst investment teams. This in turn may discourage other women from applying for such roles, then impacting the gender balance on boards across the sector,” Volpato says.
“There are many women in top marketing and customer services roles in the financial sector which could add enormous value to boards. These roles are just as valuable to a fund or a bank than those working on the investment side of business.”
Improving client outcomes
Whatever the reasons there aren’t more women progressing through financial services, their impact is clear; client outcomes aren’t maximised.
Firstly, having more women in financial planning can improve client relationships and retention.
“Women see things differently and bring a very different edge to the profession, and it’s not just about numbers and returns,” partner at Sofcorp Wealth and Financial Planner of the Year at Money Management’s 2017 WIFS Awards, Tracey Sofra, says.
Sofra has noticed that she is more comfortable talking about personal aspects of clients’ lives with them than her male colleagues; pertinent considering that financial advice inherently often relates to people’s goals and fears.
Having female advisers could also help make clients more comfortable.
“Having observed some of my colleagues’ appointments, I’ve found that when females meet with a male financial adviser, they can be less forthcoming with information, especially when discussing personal budget and expenses, and personal medical information when discussing insurance,”
Laura Baker, a senior financial adviser at the Commonwealth Bank of Australia, says.
This is especially important when the often lower financial literacy of women compared to men is factored in.
“There has been a number of women I have met in the last 12 months that have gone through or are currently going through divorce, and they have limited financial independence or knowledge,” Baker says.
For women in this vulnerable position, it is vital that they can access advisers they feel comfortable talking to openly.
Secondly, having a more diverse group of people making investment decisions naturally leads to more varied investments.
“If you just keep doing the same stuff, you get the same outcome,” Cbus chief investment officer, Christian Fok, said at the launch of Future IM/Pact. Hardly a desired result for wealth managers seeking to differentiate themselves to clients or take advantage of investment opportunities other funds don’t identify.
Similarly, having women, who are often more naturally risk-adverse than men, involved in IM could temper volatility at both ends of the scale.
Head of the International Monetary Fund (IMF), Christine Lagarde, touched on this when she controversially said in 2011 that the GFC may not have happened had women overseen the big banks, saying that they “have different ways of taking risks” than men.
Encouraging women into and through the investment management ranks could, then, be in clients’ best interests.
“Harnessing the power of diverse identities and thought processes to create optimal outcomes for them” is “doing the right thing for our clients,” managing director and head of PIMCO Asia Pacific, Kimberley Stafford, says.
Helping an industry in trouble
There’s no hiding the fact that the industry is experiencing an unprecedented level of public and regulatory attention.
Volpato argues that boards with directors from a diverse range of backgrounds and experiences will be in a better position to debate, be challenged, and consider other views when responding to this need for change, or even changes imposed upon the industry.
“Women are better at incremental change than men, which could be especially good in the financial services [industry] now,” Volpato says, adding that this often means the change brought about is more deeply embedded.
Volpato also notes that the governance structures and boards already in place to oversee this change need to be able to show empathy and engagement with people in this changing environment – qualities that women are often naturally stronger in.
The change the industry is facing, and the role gender equity can play in improving that, goes deep to the core of the purpose of financial services.
Mercer found that a key reason why women aren’t drawn to investment is a “sense that it’s an industry that lacks integrity” – Beattie says that when researching this, references to The Wolf of Wall Street and The Big Short came up from participants.
If the responses to the Royal Commission are anything to go by, this sentiment extends to how the public sees financial services as a whole.
Pendal chief executive, Richard Brandweiner, said at the launch of Future IM/Pact that while the industry may have lost its way, empathy and emotional intelligence could help it get back on track. Again, qualities that women often possess strongly.
“Empathy and EQ will be critical in helping our industry rediscover our purpose … because there is a fundamental purpose to finance, and it’s good, and if we have more [gender] diversity I think that will help us [get back to that],” he said.
How can gender representation be improved?
As individuals, both women and men have a role to play in improving gender equity in the industry. And women lifting up other women can have a huge impact in doing this.
Beattie says that a key finding of her studies at Mercer was the importance of connections and sponsors in encouraging younger women.
Her research found that while 77 per cent of Anglo-Celtic male investment managers felt their manager supported their career ambitions, only 59 per cent of women felt the same.
Often women find it harder to connect and network with senior male managers; however, this can be a learned skill with the right tools and guidance, Beattie says, and one that women can help each other develop.
Men also need to put in effort here: “For senior male team members, sometimes it takes more of an effort from them to learn how to connect with up-and-coming female talent, so it will take effort from everybody to learn how to step into that role,” Beattie says.
Volpato believes that coaching can play a vital role. She says women should celebrate each other’s successes across the office as well as offer reflection and feedback on their work.
Telling positive stories is vital, as “the issues in financial services are so big and the pay gap so shocking” that it can be hard to have hope otherwise.
Sofra runs mentoring sessions in the form of “boardroom lunches”; she finds there’s a real benefit in women from the industry “getting together and seeing other women who are experiencing the same thing or feeling the same way,” especially as women often communicate differently and given the right environment can flourish and grow.
For younger women, having female role models to look up to within the industry can empower self-beleif and create a vision for the next generation of leaders.
Although she acknowledges that this is a tough role for the women leading the way, Sofra says that “if we have a couple of mavericks doing it, it spurs other women on to believe in themsleves [and go], ‘If she can do it, I can do it too’”.
This does not have to be through formal mentoring programs either. Volpato argues that women need to see success at higher levels to believe they can get there too. Women who are at ‘higher levels’ could do more to highlight the detail, pace and the stories of how successes came about. And sadly, she doesn’t think she sees this enough at the moment.
She points to the recent AMP scandal as an example; while there were women on the board, as soon as the going got tough they were the ones booted off. In Volpato’s opinion, it cannot have been only their fault.
Seeing women in senior roles provides more than just mentoring or role models, too. Principal has found it improves the workplace itself as an environment for women.
Globally, 40 per cent of direct reports to the CEO at Principal are by women and almost 42 per cent of executives are female. Showing a connection between this and workplace culture, Principal was just announced as America’s best employer for women by Forbes.
Men can also play a role on an individual level.
“We can each do our part to create an inclusive environment by becoming familiar with bias mitigation tactics, proactively seeking opinions from diverse team members, encouraging the success of our female colleagues by encouraging them to pursue leadership platforms and networking opportunities,” Stafford says.
What can businesses do?
Employers having transparency in hiring policies and remuneration can help improve representation, Volpato says, as can having blind job applications and actively encouraging women to apply for roles that are atypical of gender stereotypes, such as chief operating and financial officer positions.
When hiring, businesses can also factor in the tried-and-true old statistic that women will only apply for jobs when they meet the significant majority of the selection criteria, whereas men will if they meet half.
Cbus, for instance, responds to this by following up personally on applications from women that seem light-on but have relevant experience. After all, they are probably just selling themselves short.
The super fund also screens its job ads through an algorithm to check for gender bias.
Businesseses can vote with their feet too, with Stafford calling on them to actively leverage relationships with external partners who advocate for women in the industry.
Part of this could be through education. Like Beattie and Forster, Stafford points to the need to educate women about the industry as early as possible as key to encouraging more women through the ranks.
Principal, for example, runs a Women in Investment program each year to actively encourage women in America to consider careers in managing money.
With the advice arm of financial services facing significant education reform, perhaps educational institutions could take the front-foot and actively encourage women into the plethora of new planning courses that are bound to pop up.
Management of the workplace itself can also be adjusted to encourage flexibility, which in turn may help with retaining quality female employees so they hit an experience point where they can progress through to management.
The ABS found in 2013 that 33 per cent of women not in the workforce rated the ability to work part-time hours as “very important” in encouraging them back to it.
Despite businesses often selling themselves as offering flexible arrangements, Mercer found that flexible working is often seen as a career handbrake in practice, with 78 per cent of surveyed women saying this contributes to poor diversity.
“One concern that I find worrying about is, as a woman, taking parental leave can have an impact on your career. Many women struggle when they come back to work, trying to manage/balance their responsibilities between work and family,” Baker says.
“I have met clients and also seen in the financial planning industry, that when a woman takes time out of work to have a child and comes back, it can be part-time or a role below the role what they had previously.”
Beattie says that businesses need to better commit to making flexible arrangements work and enabling work from home. This can be as simple as having all meetings accessible via Zoom or Skype.
Employers also need to make sure part-time arrangements are also just that – actually part-time. The ABS also found that 36 per cent of women outside the workforce felt the ability to work a set number of hours on a set number of days was “very important” in returning to it.
Yet, Baker says, “when I meet clients who work part time I’m often told they feel they have to do more work in a short space of time”.
Offering these arrangements, and doing so well, gives businesses more than just having more women move through the workforce.
Forster says by having one to three portfolio managers running the same mandate not only is work-life balance and flexibility improved, but client outcomes are also improved.
Investors wary of key-person risk have their concerns abated whilst having multiple people sharing portfolio management responsibilities also improves communication.
Going further: Structural change
As much as people and businesses can do individually, there’s a point where systemic change needs to come from the structures underlying the industry itself.
Beattie says while many companies are already doing some great stuff, there are some efforts, such as appealing to early career women and shifting perspectives, that “have got to be an industry collaborative effort”.
There are also areas where regulation and wider societal change may need to come into play.
Volpato points to the cost of childcare as proof that there are general structural issues limiting the progression of women through financial services.
According to the IMF, the labour supply of young mothers grows by 6.5 to 10 per cent when the price of childcare is halved. The portion of Australia’s GDP spent on childcare is relatively low compared to the rest of the developed world and falls below the OECD and UNICEF recommended level of one per cent.
This hardly assists women in returning to work, Volpato says.
Always a contentious topic, quotas should also be considered when looking at systemic change.
While some argue that affirmative action may see deserving male candidates miss out, many in the industry agree that it may be a necessary step to achieving equity in representation.
Brandweiner argues that quotas make sense at a board level, but not the levels below that.
Speaking at the Future IM/Pact launch, he said that while ideally there would not be a need for quotas, they were needed at the start: “We need to force the change at board level and then hopefully a broader cascading will start.”