Wealth managers need to hear the call of diversity
Wealth and investment management is often seen as a bastion of upper-class white privilege, although the industry is actually more diverse than it sometimes appears.
But with Britain becoming an increasingly diverse country and the number of ethnic minority entrepreneurs rapidly increasing in the UK, wealth management companies need to step up the pace at which they respond to the country’s ethnic diversity. .
Wealth managers need to consider diversity when considering their clients and values, and planning their own employment strategies. Industry cannot risk being left behind, devoid of the diversity of thought that different backgrounds can bring.
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I’ve been talking to entrepreneurs and executives for over a decade and during that time diversity has spontaneously emerged as an increasingly common theme. Business leaders and managers have become accustomed to forming teams with varied profiles and skills. Many are also responding to pressure from stakeholders, including shareholders, to increase diversity on their boards and leaders.
In the 2011 census, 80.5% of the British population identified as white, meaning that almost a fifth of Britons now come from other origins.
While most ethnic minorities are lagging behind in terms of wealth, entrepreneurs and business leaders increasingly come from diverse backgrounds.
Immigrants, as has often been noted, are often more dynamic than natives. the Global Entrepreneurship Observatory Report on the UK from 2019 notes that total early-stage entrepreneurial activity – a measure of entrepreneurship – stands at 10.2% for immigrants, compared to 8.5% for natives.
Each entrepreneur has a unique life experience that helps shape their vision of wealth and investment managers. Customers care and expect the diversity of the companies they work with. Savanta’s MillionaireVue Omnibus survey found that two in three UK millionaires believe it is very important that their advisor has a diverse workforce.
In its Global Wealth Research Report 2021, EY, the consulting firm, found that one in eight wealthy people believe that a diverse team of advisers is an important reason in selecting a wealth manager. This rises to one in five among those from the LGBTQ + community.
The decision of clients to hire is often an emotional one, so there is a strong business case for having advisors as diverse as the clients.
Wealth managers also need diversity to adapt. They can do this more easily because, as EY notes, diverse teams are better able to “spot blind spots, improve innovation and identify investment opportunities.”
It is worrying, however, that in this year’s survey conducted by Savanta of asset managers, the average share of employees from an ethnic minority is only 14%.
Worse, only half of the 32 wealth managers we surveyed could provide data, and a paltry five told us they aim to increase the proportion of ethnic minorities by the end of 2023.
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Industry needs to take these issues more seriously. Fortunately, there are signs that it is starting to do so. The Personal Investment Management & Financial Advice Association is hosting its inaugural Diversity and Inclusion Awards this year, with the aim of showcasing the companies, people and initiatives that are successfully starting to bridge the gap.
And individual wealth management companies are taking action. Rothschild & Co was among the first large financial institutions to join the Sutton Trust’s Pathways to Banking program, which works with state-funded schools in London to expand access to finance.
Rothschild also offers positions designed to attract talented black students to careers in the investment management industry under the # 10000BlackInterns initiative.
Clients can expect to deal with more diverse wealth managers in the UK in the future. But the industry needs to move faster to meet customer demand.
David Barks is Director of the Wealth Management Team at Savanta, a global market research agency