Can we really afford to spend 100 years closing the gender pay gap?

In recent years, calls for greater gender pay and diversity reporting have dominated conversations around compensation, talent and people management. These discussions came to a head in Spring 2018 when the UK government introduced mandatory Gender Pay Gap Reporting legislation. This includes providing a snapshot of hourly and bonus pay gaps, and the proportion of males and females by each pay quartiles.

In wealth management specifically, parity in pay and representation are notoriously low. With this in mind, and to encourage industry-wide action, McLagan has launched its inaugural UK Financial Services Gender Diversity Study. The study aims to understand the various types of initiatives firms across financial services are introducing to address gender pay, as well as explore the most effective ways to measure progress.

Most business leaders agree that diversity and inclusion is good – not just because it is the right thing to do, but also because it is good for business. One study by a US non-profit organisation, which focuses on researching gender issues, links better financial results with greater gender diversity among Fortune 500 companies. Another finds that on average, companies with the highest percentages of female board directors outperform those with the lowest by 66% per cent with respect to return on invested capital. Meanwhile, research from Columbia University highlights the positive correlation that exists between the performance of companies and the proportion of women it has among its top and middle management ranks.

Improving gender diversity first and foremost requires a shift in a company’s mindset and traditions. These tend to be deeply engrained in organisational culture and therefore need to be redressed by senior management. Fundamentally, this should start with more transparent communication, education and raising awareness around the various forms of unconscious bias that permeate everyday processes and interactions.

Moreover, because behavioural change is challenging to implement, senior management needs to be seen driving and representing the change it wants to see in the organisation. For example, by taking advantage of certain policies which may have a stigma associated with them, such as flexible working initiatives, shared parental leave and return to work programmes.

While women are frequently identified as high performers, they still struggle to get promoted at the same rate as men and do not receive equivalent bonuses or pay increases. Indeed, our study finds the average gender pay gap across the banking, asset management and wealth management sectors (31 per cent) is nearly double that of the UK average (18 per cent). A prevailing reason for this disparity is the low representation of women in senior, middle management and executive level roles in the financial services industry.

Across financial services, women represent less than half (40 per cent) of the UK workforce. This falls to a third for revenue generating roles and drops even lower for executive board (16 per cent). A (re)focus on recruitment retention and progression of women is therefore needed. This includes: introducing diversity recruitment targets, developing mentoring and coaching programmes, joining or promoting professional women’s networks, and raising visibility of female role models, particularly those with whom working mothers can relate.

Today, less than half of the firms in McLagan’s UK Financial Services Gender Diversity Study have an established diversity agenda. If change continues at its current rate, some estimates suggest it could take us another 100 years to reach equity. With the battle for talent at an all-time high, driving systemic and sustainable change to address parity in both representation and pay is fast becoming a priority.

Elizabeth Adeoye  is an analyst, Elizabeth Beh a senior analyst and Uma Aubeeluck senior manager at wealth management think-tank Scorpio Partnership