Many financial services have publicly declared their commitment to Diversity and Inclusion (D&I). In its report Driving Change: Diversity and Inclusion in Investment Management,¹ released in September 2018, CFA Institute noted that 65 per cent of the respondents had a stated diversity goal. The two greatest motivations for firms’ efforts around D&I were improved business outcomes and talent acquisition, with only six per cent stating that compliance was a driving force behind their activities.

“Diversity – the art of thinking independently together” – Malcolm Forbes

Yet, women represent fewer than one in five positions in the financial services C-suite globally. In this article, we focus on the value of gender diversity hiring, followed by a closer look at some of the trends in the Canadian financial services sector.

Why gender diversity?

According to new research by the Korn Ferry Institute,² the global financial and business services industry will be short 10.7 million workers by 2030, making it critical for business leaders to identify new sources of talent and labour skills. By tapping traditionally underrepresented talent in the industry, such as women, organizations can not only broaden their resource pool but also attract people from all sections of society, creating a positive impact on society,

Diversifying teams does more than help solve a supply shortage of workers—it also makes good business sense. A recent study by McKinsey³ shows that companies in the top quarter for gender diversity on their executive teams were 21 per cent more likely to outperform on profitability, and 27 per cent more likely to demonstrate superior value creation. An improved representation of female leaders also leads to a more rounded view of customers; this is particularly critical in the financial services industry, as more and more women now control their household finances and are responsible for household savings and investing.

According to the International Monetary Fund,⁴ having more women in leadership positions leads to greater financial stability, lower levels of non-performing loans, and higher profits. In fact, banks with a higher share of women on their boards were found to be more stable during the global financial crisis of 2008. Within the venture capital space too, firms with 10 per cent more female partner hires observed a 1.5 per cent spike in their annual fund returns, and a 9.7 per cent increase in profitable exits.⁵

Gender diversity helps explore alternative perspectives and approaches to complex, non-routine problems, better avoiding blind spots. Research shows that background influences the way problems are framed and solved. By reducing their homogeneity and encouraging creativity and innovation, diverse teams make better quality decisions that are often faster and more fact-based, with less cognitive bias.

Gender diversity in Canada

According to Osler,⁶ women in the Canadian financial service sector make up 21 per cent of its executive officers. This is a higher percentage than the overall average of 17 per cent for all TSX-listed companies and 19 per cent of S&P/TSX 60 companies. If we focus on the 10 largest financial institutions in Canada (which consist of eight banks and two life insurers), the share of women executive officers in those institutions, at 26.5 per cent, is the highest amongst all sectors.

Is it then safe to assume that the financial services sector in Canada is the standard bearer of best practices in diversity? That assumption would be far from the truth—for every major bank that is in the lead, there are many smaller asset- managers or investment banks that are still marked by bias and contain systematic barriers that work against women. Over a 3-year period from 2016 to 2019, the percentage of women executive officers in the financial services industry rose only two per cent, from 19 per cent to only 21 per cent.

Next steps

Starting Jan. 1, 2020, the Canada Business Corporations Act requires all Canadian publicly listed companies to reveal their diversity policies and targets as well as the number of women, visible minorities, Indigenous peoples, and people with disabilities on their boards and in senior management. While disclosure requirements are helpful in encouraging progressive behaviour in the boardroom and exposing companies to greater public scrutiny, progress in getting women into the boardrooms of Canada’s largest companies remains slow and fragmented. 

An article in the Harvard Business Review, “Why Diversity Programs Fail,” noted that companies do a better job of increasing diversity when they forego control tactics such as mandatory diversity trainings for their managers, and instead frame their efforts more positively. The most effective programs spark engagement, increase contact among different groups, and draw on people’s strong desire to look good to others.

Some noteworthy examples include: Manulife’s Global Women’s Alliance, a networking and professional development program with multiple chapters worldwide, each with an executive sponsor to increase exposure and impact; National Bank of Canada’s well-established process to monitor and report on progress in promoting women into management and executive positions; and CI Financial Corporation’s successful mentorship program to identify and foster potential future leaders.

As the financial services industry faces an increasingly competitive environment, disruptive technologies, and more complex regulations, firms must focus on their people as a key part of their strategy. The successful firm of the future will be differentiated by its culture and its ability to attract the best talent. An inclusive culture that leverages diverse views effectively will be an important element determining a firm’s success.