It will take real action to bring more diversity to the finance industry

The new Financial Conduct Authority boss has warned companies – but that may not be enough, writes James Moore

The FCA’s new chief has called on firms to do better on diversity (Getty)

Nikhil Rathi, the new boss of the Financial Conduct Authority, made some waves last week when he warned financial companies that the watchdog could block senior hires if the miserable progress they’ve made on diversity doesn’t improve.

The timeliness of his comments have been underlined by some figures unearthed through a freedom of information request made by law firm Pinsent Masons, which sought to discover the proportion of women hired to senior roles by regulated firms.

It probably won’t surprise you to learn that the industry is still dragging its feet through the mud.

Only around one in five applications made under the watchdog’s senior manager and certification scheme were women during the 2019-20 reporting year.

Now we have to be a little careful here. There is no mandatory field for gender on the forms. So the only way to draw conclusions from them is to rely upon the titles people submit.

Some chose not to disclose them, and nor should they have to. One way for the financial services industry to improve upon its dismal record would be to adopt a blind application process, removing people’s names, titles and other irrelevant data from their forms.

Some also used neutral titles such as, say, Dr.

But if you consider that there were 3,211 applicants using the title Mr while just 833 used Mrs, Miss or Ms, with 49 using other titles and 246 not supplying them, it’s fair to conclude that the gender imbalance at the upper levels of finance remains an issue.

This is an industry that is failing to attract and/or promote women into senior positions.

It’s an industry that, as Rathi correctly identified while speaking to a committee of MPs, has a diversity problem across the board, despite all the warm words from its leaders about how terribly keen they are on improving things.

It bears repeating that studies have shown diverse businesses are more profitable businesses. My favourite was conducted by McKinsey, the management consultant, which found that firms with a higher degree of gender and/or ethnic diversity were more likely to be more profitable.

But there are others.

This makes sense. A diversity of people makes for a diversity of perspectives. When you are serving a diverse customer base you should be looking to have a diverse staff, especially among decision makers.

Yet, despite the greed is good mantra that dominates in banking and other parts of the financial services industry, they appear not to have woken up to this.

This is largely because the problems are cultural and they run deep. I have spoken to too many people who’ve run into brick walls because their faces don’t fit due to being the wrong colour or the wrong gender or the wrong sexuality, or because they’re not able bodied.

Maybe some level of improvement will be a rare positive to come from the pandemic: it has forced inflexible financial institutions to think about new ways of working, notably working from home and working flexibly.

Pinsent Masons partner Elizabeth Budd says women “will be hoping that City employers are going to be much more receptive to flexible working requests and this won’t be used as an excuse for the low levels of women at senior levels”. Indeed so.

If bosses reflect upon this, the virus could be a catalyst for some positive and long overdue change.

But I’ve been around this industry for long enough that I’m not going to hold my breath.

Linking improvements to bonus assessments, or making them a greater part of the process if they’re there, might help still more. Bonuses seem to motivate bankers even more than the fear of their regulators playing hardball. This is something shareholders, who would also benefit from a more diverse industry because it ought to improve their returns, might like to think about it. They have to sign off on financial firms’ remuneration policies, after all.

If that isn’t sufficient then Mr Rathi may need to make good on his threat. For what it’s worth, he’d have my backing.