Social Mobility in Financial Services: Issues and Solutions
“Social mobility is the link between a person’s occupation or income and the occupation or income of their parents. In other words, it’s about ensuring your background doesn’t determine your future.”
Overview
Few would be surprised to learn there is a lack of socio-economic diversity in UK financial and professional services. In fact, research by the Bridge Group shows that 89% of senior level employees in major financial services organisations are from higher socio-economic i.e. professional backgrounds.[i] The same research found it takes those from lower socio-economic backgrounds 25% longer to progress, despite a lack of evidence of poorer performance.[ii] Inevitably, this has repercussions for pay, with those from less privileged backgrounds earning on average 17% less than their more privileged peers.[iii]
89% of senior roles in financial services are filled by people from higher socio-economic backgrounds (The Bridge Group)[iv]
Within financial services, the private equity, asset management, and investment management sectors are shown to be the least diverse with 68% of private equity, and 61% of asset management leaders coming from independent schools and only 15% and 11% of leaders respectively coming from comprehensives, which educate around 90% of the UK population.[v] In the investment community, research suggests that two-thirds of portfolio managers[vi] and 40% of investment managers are privately educated.[vii] To put that in context, only 7% of people in the UK are privately educated.[viii]
The last decade has seen huge pressure on financial and professional services to improve diversity and while some – albeit slow - progress has been made, social mobility remains one of the slowest areas of change and seemingly one of the trickiest nuts to crack.
What are the issues?
The reasons behind the so-called ‘class ceiling’ are diverse and deeply rooted in the UK’s class and education systems. Barriers to equal entry and achievement in professional services for those from lower socio-economic groups often centre on perceptions of the right ‘fit’ of person. This may cover tacit social codes and attributes like confidence, accents, mannerisms, dress, behaviour, and social and cultural experience - sometimes referred to as ‘polish’. At all levels of career progression, the evidence shows that people who demonstrate such forms of social and cultural capital (i.e. those predominantly from higher socio-economic backgrounds who may have benefited from a range of experiences that helped them to understand the ‘rules of the game’) are considered a ‘natural fit’ within organisations largely run by people with similar characteristics and experience. In short, in professional services, we tend to hire and promote people who look, sound, and behave the same. This is often to the detriment of overall company performance, which has been shown to benefit from diversity of thought, which also helps to mitigate against groupthink. A recent report by McKinsey found that globally, the most diverse companies (mainly focusing on ethnic and cultural diversity) outperformed the least diverse by 36% in terms of profitability.[ix] Similarly, in the legal sector, evidence gathered by the Social Mobility Commission shows that state educated staff were 75% more likely to feature in the top decile of performers than their peers from independent schools.[x]
Another issue that perpetuates the lack of progress in social mobility is the myth of meritocracy. In the asset management industry for example, evidence shows that leaders still strongly believe that the highest achievers do so purely based on ‘merit’ i.e. their intellectual capabilities and hard work, ignoring the disproportionate advantages offered by a higher socio-economic upbringing (education, financial support to undertake unpaid work experience, social and cultural experiences, etc.). Meanwhile in the same industry, those from less privileged backgrounds report being held to a higher standard and their performance excessively scrutinised compared to more privileged peers who they report are often excused for lesser performance and other negative behaviours.[xi] Those from lower socioeconomic backgrounds also report feeling excluded from the dominant working culture in various ways, and perceive career progress to be connected more to intangible personal and social attributes (such as ‘polish’) than to performance.[xii]
Barriers to entry and progression in the financial sector range from the systemic to the cultural - including recruitment practices such as hiring only from a small selection of top universities, and requiring work experience from a small number of top companies, or attitudes about presenteeism. In smaller firms there are also practical issues, such as low job turnover and lack of job progression opportunities. And of course, there remains a severe lack of role models from diverse backgrounds.
What can you do?
There is increasing pressure on the financial sector to improve diversity, enabling people from a range of backgrounds to not only gain access to companies, but also to ‘get on’ and achieve equal levels of progress to their more privileged peers. We know it can be difficult, especially for smaller firms, to access diverse candidate pools and make choices that support social mobility. It also takes time to change the way an industry operates and how its perceived by prospective candidates, but there are some things you can do to help. And it’s important to remember the benefits will not only be felt by those who gain access but also by companies and the industry.
Here are some tips to help enhance social mobility via both recruitment and retention.
Recruitment
Skills – reassess the skills required for each role and in hiring practices, focus on those through structured screening, testing and interview methods. Avoid minimum requirements e.g. Masters in technical subjects from top universities, where possible.
Blind applications - remove candidate’s geographical details, school grades, and university names from applications.
Contextualise applications - taking into account candidate’s socio-economic circumstances (e.g. did they attend a low performing school, come from a low-income family background, have caring responsibilities, and work alongside study to support themselves and their family) to understand the barriers a candidate might have overcome and thus assess them fairly.
Diversify talent pools - collaborate with industry organisations to help hire candidates from a range of backgrounds, e.g. Investment20/20, UpReach, and the Social Mobility Foundation. Make a Social Mobility Pledge[xiii] and commit to improving outreach, access and recruitment.
Outreach – speak at universities outside the top ten to raise awareness about the industry amongst people who might not ordinarily be exposed to it. Support individuals by making introductions within the industry.
Internships / work experience – contextualise applications and prioritise offering opportunities to candidates from lower socio-economic backgrounds. Use platforms like the Social Mobility Foundation or 10,000 Black Interns to source candidates. Limit or avoid work experience to friends and family. Avoid unpaid internships.
Fit – initiate frank internal discussions on the issue of ‘fit’ to raise awareness of the disadvantages of homogeneous hiring to the business, and potential advantages of moving towards a more ‘skills’ or ‘diversity of thought’ approach to recruitment and retention.
Learning – educate hiring managers and leaders to ensure they understand the issues and begin to put in place strategies to improve hiring and retention for socio-economic diversity – start by reading the Social Mobility Commission’s “Socio-economic diversity and inclusion toolkit for financial and professional services.”[xiv]
Retention
Role models – encourage and enable staff from lower socio-economic backgrounds (especially those in senior positions) to share their stories and become role models. Ensure senior leaders set and support the company’s social mobility ambitions.
Inclusive culture – assess whether your company culture is inclusive towards people from diverse backgrounds. Ask staff from lower socio-economic backgrounds how to make them feel more included. Talk openly about issues such as privilege and the myth of meritocracy, allowing employees from all backgrounds to share stories. Ensure social events cater to all tastes and preferences – include staff at all levels in deciding what to do (i.e. avoid exclusive senior-level choices, and activities that require particular skills and experience).
Data – where possible, collect data on employee’s backgrounds to help inform more equitable hiring practices and understand in relation to job turn-over.
Training – offer or be open to offering a range of training opportunities to help staff progress.
Danesmead ESG is a supporter of Social Mobility Awareness Day (socialmobilityday.com).
If you’d like assistance in DEI and Social Mobility, get in touch. We can help with:
· Training
· Policies
· Initiative implementation
[i] According to the Office for National Statistics, high socio-economic or professional backgrounds include: CEOs, senior police officers, doctors, journalists, barristers, solicitors, teachers and nurses. SOC 2020 Volume 3: the National Statistics Socio-economic Classification (NS-SEC rebased on the SOC 2020) - Office for National Statistics (ons.gov.uk)
[ii] The Bridge Group (2020). Who gets ahead and how? (squarespace.com). The Bridge Group collected data from eight major employers in the financial services sector. This led to the creation of the Socio-economic Diversity Taskforce led by the City of London Corporation Socio-economic diversity taskforce - City of London
[iii] Friedman, Sam and Laurison, Daniel (2019) The class ceiling: why it pays to be privileged. Policy Press, Bristol, UK.
[iv] The Bridge Group (2020) Who gets ahead and how? (squarespace.com)
[v] The Bridge Group (2020) Microsoft Word - Lit review.docx (squarespace.com)
[vi] New Financial (2018) Report: diversity in portfolio management - New Financial
[vii] The Diversity Project (2017) The Diversity Project/Mercer Benchmarking Study | Diversity Project
[viii] Social Mobility Commission (2019) Elitism in Britain, 2019 - GOV.UK (www.gov.uk)
[ix] McKinsey (2020) Diversity wins: How inclusion matters (mckinsey.com)
[x] Social Mobility Commissions (2021) Socio-economic diversity and inclusion - Employers’ toolkit: Cross-industry edition - July 2021 (socialmobilityworks.org)
[xi] New Financial (2018) Report: diversity in portfolio management - New Financial and PowerPoint Presentation (newfinancial.org)
[xii] The Bridge Group (2020) Who gets ahead and how? (squarespace.com)
[xiv] Social Mobility Commission (2021) Socio-economic diversity and inclusion Toolkit: Financial and professional services - July 2021 (publishing.service.gov.uk)