If Lehman Brothers had been Lehman Sisters, would it have failed? This tongue-in-cheek question invites a close look at gender dynamics and the role of women in the world of wealth management. In particular, women aiming to become leaders in wealth management face a raft of unique obstacles in an industry that claims at once to promote gender equality and increase company profits. But more diverse leadership in the industry would make it less hubristic, more focused on steady returns, and better advance the public good.
The challenge begins at an early stage. Young girls are spoken to differently from young boys about money, a tendency that only accelerates over their lifetime. Women’s social and financial disadvantages are an outcome of structural economic discrimination across societies, a great deal of which is propelled by unconscious bias. According to the Economist, at the recruiting stage, they have been conditioned to avoid applying for jobs that highlight qualities like aggression or ambition. Once working, women in male-dominated companies are routinely assailed as unprofessional if they are perceived as bossy or aggressive, but equally assailed as unprofessional if they are viewed as affectionate or friendly. Studies have demonstrated that, despite claiming objectivity, men are less likely to hire a woman than another man with equal qualifications.
Unequal pay
The fund industry compounds these inequalities by perpetuating the practice of unequal pay. In the UK, asset management is plagued by this imbalance to an even greater extent than the wider financial services sector. According to the Financial Times, as of 2018, the average gender pay gap among asset management groups was 28.5 per cent, the bonus gap among such groups 55.4 per cent, and the national financial services pay gap 22.2 per cent. Meanwhile, the national average pay gap was 9.7 per cent.
When questioned, asset managers often ascribe this large imbalance to a dearth of women in senior positions, but rather than explain their plans for rectifying a corporate structure that limits high-paying opportunities for women, they merely insist that they comply with ‘equal pay for equal work’, offering few details concerning how precisely they intend to achieve greater gender diversity.
Boost to bottom lines
Yet in spite of the hurdles of sexism, the evidence shows that supporting women is profitable. Research by SSGA suggests a positive correlation between the presence of women on corporate boards (or in senior management) and corporate performance. A study by Credit Suisse Research Institute illustrates that across 3,400 companies globally, the presence of at least one woman board director raised excess compound returns by 3.5 per cent between 2010 and 2016.
Many senior women executives in wealth management confirm these findings, staking the success of the companies they lead on the power of diversity.
Coutts, the reputable UK wealth management firm, is a leader in gender diversity. Three of their eight business heads reporting to CEO Peter Flavel are women. The firm have implemented innovative programmes popular at many banks, such as Returnees after Children, which employs a structured buddy support system, as well as the Comeback programme. Camilla Stowell, managing director and head of wealth and investment management at
Coutts, believes that “securing a diverse leadership is a given for any business to succeed in the future and part of our purpose is to champion the potential in our female colleagues and customers to thrive”. Noting the importance of realising any vision of diversity, Ms Stowell assures bankers that Coutts have “governance in place to ensure that there are women and BAME colleagues on selection panels for senior roles, and challenge where this is not the case”. It certainly helps that at group level, the CEO and CFO of the retail bank, NatWest, are both women.
Power of diversity
In the US, Sallie Krawcheck, CEO and co-founder of Ellevest, a digital investment platform for women, holds that gender diversity in senior leadership increases returns, lowers risk, improves client engagement, enhances employee engagement, and engenders superior innovation. Indeed, as CFO of Citigroup during the 2008 financial crisis, Ms Krawcheck was one of the only people on Wall Street who advocated reimbursing clients that had been sold products riskier than advertised. “Was there something about my difference?” she asked. “Was there something about my femaleness that led to that?” She contends that an overarching focus on diversity is key to success, arguing that the power of diversity is diversity itself.
In Asia, Su Shan Tan, group head of institutional banking at DBS Bank in Singapore and the architect of a leading Asian wealth management business, has led the focus on building the next generation of women leaders. She maintains that the glass ceiling can be broken through changes within the bank. Providing flexibility for women to take time off, ensuring that 40 per cent of senior management roles are held by women, and landing the Bloomberg Gender-Equality Index are tangible steps being taken by DBS.
As Covid-19 compels us to appreciate the true value of health, family, and community, women in wealth management positions can help steer nervous clients in the right direction. The time for women’s advancement into leadership positions is now.
Malik S. Sarwar is CEO of K2 Leaders Inc, a New York-based wealth management advisory firm and a senior adviser to Singapore Consultancy
