Wealth managers need to hear diversity’s call

Wealth and investment management is often seen as a bastion of white, upper-class privilege — even if the industry is actually more diverse than it sometimes appears.

But with Britain becoming an increasingly diverse country and entrepreneurs from ethnic minorities growing rapidly in numbers in the UK, wealth management companies need to accelerate the pace at which they respond to the country’s ethnic diversity.

Wealth managers need to take diversity into account as they consider their clients and values — and plan their own employment strategies. The industry cannot risk being left behind, devoid of the diversity of thought that different backgrounds can bring.

I’ve been speaking to entrepreneurs and executives for over a decade and during that time diversity has come up spontaneously as a theme with growing frequency. Business owners and leaders have become used to building teams with a range of backgrounds and skills. Many also respond to pressure from stakeholders — including shareholders — to increase diversity in their boards and executive ranks.

In the 2011 census, 80.5 per cent of the UK population identified as white British — meaning that almost a fifth of Britons now come from other backgrounds.

While most ethnic minorities lag behind in terms of wealth, entrepreneurs and business leaders are increasingly coming from diverse backgrounds.

Immigrants, as has often been noted, are frequently more dynamic than the native-born population. The Global Entrepreneurship Monitor report on the UK from 2019 notes that total early-stage Entrepreneurial Activity — a measure of entrepreneurship — stands at 10.2 per cent for immigrants compared to 8.5 per cent for the native-born.

Each entrepreneur has a unique life experience that helps shape how they see wealth and investment managers. Clients do care about, and expect, diversity from the firms they work with. Savanta’s MillionaireVue Omnibus survey has found that two in three UK millionaires believe it is very important that their adviser has a workforce from a diverse range of backgrounds.

In its 2021 Global Wealth Research Report, EY, the consultancy company, found that one in eight wealthy people believe that a diverse team of advisers is an important reason in wealth manager selection. This rises to one in five of those from an LGBTQ+ background.

The decision by clients to hire is often an emotional one, so there’s a strong business case to have advisers as diverse as clients.

Wealth managers also need diversity to adapt. They can do this more easily because as EY notes, diverse teams are better at “detecting blind spots, enhancing innovation, and identifying investment opportunities”.

Worryingly though, in this year’s survey of wealth managers conducted by Savanta, the average share of employees from a minority ethnic background stands at only 14 per cent.

Worse, only half of the 32 wealth managers we surveyed could provide data, and a paltry five told us that they had a target to increase the ethnic minority proportion by the end of 2023.

The industry must take these issues more seriously. Fortunately, there are signs that it is starting to do so. The Personal Investment Management & Financial Advice Association is holding its inaugural Diversity and Inclusion awards this year, aiming to showcase the firms, people and initiatives that successfully begin to close the gap.

And individual wealth management companies are taking action. Rothschild & Co was among the first large financial institutions to sign up to The Sutton Trust’s Pathways to Banking Programme, which works with state-funded schools in London to widen access to the finance.

Rothschild is also offering positions designed to attract talented black students to a career path in the investment management industry as part of the #10000BlackInterns initiative.

Clients can expect to deal with more diverse wealth managers in the UK in the future. But the industry must move faster to keep up with client demand.

David Barks is a director in the wealth team at Savanta, a global market research agency