Diversity in financial services: why both executive search & FS firms must do better
In the world of executive search, financial services clients are often enticed by the prospect of a firm's extensive network, connections amassed over years of industry presence. And this is undoubtedly a benefit.
At Hanover, we have over 25 years of experience, and our networks open doors that might otherwise remain closed. But the true strength of an executive search firm is not merely in the contacts it has; rather, it’s in how it operates.
Indeed, as years pass, the reality of retirement refines these networks anyway, pruning away the stalwarts of the industry and making room for new, dynamic and often diverse talent waiting to be discovered. The more we, as an industry, lean on the 'old boys' network, the weaker our collective capabilities become.
As a search firm, we must be looking beyond the existing and traditional and towards the emerging talent - otherwise, we’ll see the same names being recycled, with the underpinning lack of diversity, lack of freshness and the seeming lack of ambition on our part that entails.
But increasing diversity with emerging new talent isn’t just on search firms, as I’ll explore later in this post - it’s also on you as a financial services firm.
Rethinking executive search in the modern age
Recent years, marked by the pandemic and socio-economic shifts, have imparted a crucial lesson: businesses must evolve to stay relevant. This applies as much to the executive search industry as it does to the financial services sector we serve.
With the emergence of forward-thinking and dynamic businesses, the demand for fresh, innovative talent is growing. Our clients increasingly wish to see new entrants in our market mapping alongside the established 'best in show'.
Moreover, there’s a burgeoning interest in how diverse leadership can drive success, with 81% of our clients keen to learn about the diversity initiatives that other firms are implementing. This interest isn’t just in financial services of course, but across industries - and there are some astounding stats that demonstrate the power of diversity at executive level.
According to a McKinsey report:
- Companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile - and the greater the representation, the higher the likelihood of outperformance
- Companies in the top quartile for ethnic and cultural diversity outperformed those in the fourth quartile by 36% profitability
- Companies in the fourth quartile for both gender and ethnic diversity were 27% more likely to underperform on profitability than all other companies
Harnessing diversity for the future of financial services
For decades, financial services have been marked by unintentional exclusivity, often attracting a specific demographic and sidelining others. This is no longer acceptable nor beneficial in a world that values diversity and inclusion. In 2015, I remember looking out onto the courtyard of The Gherkin in London’s insurance district. It was populated predominantly by white males - hardly the image of diversity that encourages inclusivity.
Today, the landscape has shifted significantly - but still hasn’t gone far enough. But financial firms are now prioritising flexible working conditions and actively working to attract previously marginalised groups. While this transformation can't be realised overnight, it has to be recognised as an important step in the right direction. It also demonstrates the power of presenting our clients with talent they haven't seen before.
At Hanover, we pride ourselves on conducting searches without prejudice, delivering longlists and shortlists that truly represent the diversity in the market. As an Associate, it's rewarding for me to uncover hidden talent and provide opportunities to those who may have previously flown under the radar. The diversity of thought new candidates bring is invaluable.
Even if the gender or ethnic demographics don't seem significantly different from what we presented years ago (this is something that’s highlighted clearly in the McKinsey report I referenced above), these new faces symbolise a freshness and innovation that goes beyond traditional parameters.
The way forward is clear: to champion diversity, we must continually refresh our perspectives, break away from traditional networks and uncover the full spectrum of talent available in the market today. Hanover’s and my commitment to diversity, equity and inclusion isn’t just a strategy; it's the cornerstone of our vision for a resilient and prosperous future in the financial services industry.
What financial services firms can do better
But it’s not just on Hanover and other executive search firms to help financial services firms drive diversity - it has to start with you.
While strides have been made, there's still much to do in the sphere of diversity, equity and inclusion within financial services. Some firms are still guilty of paying lip service to DE&I initiatives rather than committing to authentic and meaningful change. It's crucial for these firms to remember that diversity can't simply be retrofitted at the executive level; it's a philosophy that should permeate all levels of an organisation.
Building a diverse pipeline starts at the junior recruitment level. Firms should be proactively seeking out diverse talent for their junior positions, thereby fostering a diverse pool of potential leaders for the future. If this pool is not diverse to begin with, it's unrealistic to expect executive search firms to be able to produce a diverse range of senior candidates.
Additionally, it's crucial for FS firms to follow through on their commitment to diversity when it comes to hiring decisions. It's not uncommon for firms to express a desire for diversity, yet when presented with a longlist of diverse candidates, they revert to familiar patterns and hire a candidate who fits the traditional mould.
My take on this is that financial services firms shouldn’t be surprised if search firms struggle to find diverse high-level talent when they either haven't nurtured diversity at the junior level and/or they’ve failed to convert a diverse longlist into a diverse hire.
There’s an onus on these types of firms to make diversity a priority at every stage of the recruitment and hiring process. It's not just a question of 'finding' the right candidates; it's about creating an environment where diverse talent can thrive and grow.
If you’re looking to hire high-performing senior talent at your financial services firm, contact me directly and let’s set aside time for a call.