New analysis shows the gender pay gap in the investment management sector has deteriorated, leading to the second worst performance across 22 business sectors analysed.
The industry recorded an increase of 0.6% in average mean pay gap over the first two years of mandatory reporting, second only to the 1% rise in the education sector.
These are the findings of a new report by PwC, in association with the Diversity Project, released today. Drawing on analysis of gender pay disclosures and extensive interviews with senior executives from across the investment management sector, the report provides a snapshot of an industry at a key juncture.
Of the five sectors with the biggest gender pay gaps in 2018 – banking, investment management, insurance, real estate and travel – only investment management failed to record an overall improvement. The mean of the median pay gap for investment management is now at 31%, second only to the banking industry’s shortfall of 32%.
The main reason for the gap, the disproportionate number of men in the highest paid roles, is common across all financial services sectors. However, investment management has the lowest percentage of high paid women (just 23.2% of the upper quartile, compared to banking at 24.9% and insurance at 31.5%).
Now in the third year of disclosures, mandatory gender pay reporting has put the lack of diversity within investment management under a harsh spotlight and is heightening the urgent need for change.
Jon Terry, Global Financial Services HR Consulting Leader at PwC, said:
“Just over half (54%) of investment managers reported a year-on-year reduction in their gender pay gap. However, the majority of these firms saw an improvement of less than 5%. The potential for existing staff and potential recruits to be deterred by the slow and even no progress within many parts of the industry is a major stumbling block.”
“When faced with such intensifying pressure, it would be tempting to see diversity and inclusion as a problem to solve. There may even be some fatigue or belief that what benefits some sections of the workforce comes at the cost of others, but seeing diversity and inclusion as peripheral issues or a zero-sum game is a huge missed opportunity.”
Dame Helena Morrissey, Chair of the Diversity Project and Head of Personal Investing at Legal & General Investment Management, said:
“In recent years there’s been a step change in the level of commitment at the top and a new sense of urgency around the issue. However, there are two outstanding problems.
“The first is the proverbial ‘chicken and egg’; young women are discouraged from even considering a career in fund management when they see our wide gender pay gaps and learn that just 4% of money managed in the UK is run exclusively by women.
“Secondly, we still have a problem convincing many mainstream fund managers that diversity is a business issue, rather than political correctness. Let’s be clear: diversity is a business imperative. We are throwing down the gauntlet to ensure it’s treated like one.”
Interviews carried out for the report highlight the growing commitment within many parts of the industry, such as firms requiring diverse shortlists and setting up mentoring and sponsorship programmes. Nonetheless, the gender pay gap reporting reflects the realities of an industry in which change is happening slowly at best.
Accelerating progress
Until diversity and inclusion get the same recognition as any other strategic priority, buy-in will only ever be skin-deep and progress slow. In practice, this comes down to several key pillars for accelerating change:
1. Align strategy for promoting diversity and inclusion with business priorities
Companies must articulate how steps to improve diversity and inclusion can help to meet key strategic objectives, such as attracting hard-to-secure talent and dealing with disruption. The issue should be included on every strategy day agenda, at every key Board meeting and in the reviews of all personnel.
2. Executive teams must set the tone for the organisation and ensure diversity and inclusion are recognised as business priorities
Diversity and inclusion metrics should be built into individual performance objectives and incentives as part of an organisation-wide accountability framework.
Change must also be encouraged by all senior leaders and portfolio managers having a mentor within either their own firm or through a cross-company scheme such as the 30% Club. Male mentors who have taken part in that scheme say the experience ‘opens their eyes’ to the issues that women are likely to be experiencing in their organisation.
3. Tackle scepticism
Encourage everyone (not just diverse talent) to speak up when they witness poor behaviours. Encouraging those who feel resentful about diversity programmes to speak freely, in a safe space, so their issues can be addressed is vital. If poor behaviours are endemic, design changes in areas such as reviews, pay decisions and promotion processes will be needed.
4. Be honest – tell it like it is
Statements of intent on diversity and inclusion aren’t enough to convince women and other underrepresented groups that an organisation is serious about diversity, especially if their own experiences are discouraging.
Clear and honest communication about plans for boosting diversity and inclusion, including plans to address the underlying issues, will help demonstrate real commitment.
Jon Terry, Global Financial Services HR Consulting Leader at PwC, said:
“In my work with clients and here at PwC, I see first-hand how more diverse workforces and inclusive workplaces make businesses stronger – bringing fresh ideas into decision making, enabling organisations to better reflect and connect with their customers, and creating a more vibrant and attractive environment to work in.”
“Increased analysis and explanation within gender pay gap reporting are likely to play a crucial part. It’s therefore important to look at how to make the numbers more reflective of the realities within businesses. This includes explaining where the gaps exist and the reasons for them-(not just stating the obvious underrepresentation of women in senior roles.”
