As the U.K. asset management sector prepares for the imposition of new rules on conduct and corporate governance later this year, regulators are urging firms to focus on diversity and inclusion to help shift the culture in their organizations.
Asset management firms will have to comply with the U.K. Financial Conduct Authority's Senior Managers and Certification Regime from December. The U.K. Financial Reporting Council is also looking to release an updated version of its Stewardship Code toward the end of 2019 or early 2020.
Greater focus on diversity
Diversity policies will be an area of focus for the FCA in the coming years, the regulator's head of asset management, Nick Miller, said in a speech Oct. 14.
"If you are genuinely seeking to engage the whole of the U.K. population in your investment products, your staff should represent, at least to some extent, the population in the U.K. at large," Miller said at the Regulation of Asset Management conference in London.
Firms should also take "the important next step, which is inclusion" and ensure that individuals across their organizations are being heard and more challenges are embraced, Miller added.
The FRC's new Stewardship Code also specifically refers to diversity and inclusion, with the council looking to drive cultural change across firms and not only at the senior level, its director of corporate governance and stewardship, David Styles, told the conference.
Research shows that diversity leads to improved investment decisions, fewer governance issues and the better attraction of talent, Juliet Bullick, global head of consultant relations at Fidelity International Ltd., said during a discussion on culture and conduct changes in asset management.
"What is a little disappointing is the slow pace of the change," she said, arguing that for years, women in the industry have been asked to talk about gender diversity as though it is their own issue to solve, which it is not. Gender-based quotas would not "change hearts and minds," she added.
The matter of diversity, gender or otherwise, needs to be approached from multiple vantage points within the sector, panelists agreed. It is also important to distinguish between diversity and inclusion, they noted.
Having diverse staff does not necessarily equate automatically to an inclusive culture, said Adam Jacobs-Dean, a managing director at the Alternative Investment Management Association.
It takes a village
The FCA's vocal support for inclusive culture within asset management will help raise the profile of the issue, Bullick said, adding that financial advisers' increased focus on issues such as corporate culture, diversity and inclusion is also very promising. Mercer LLC, for example, has added a culture subsection in its ESG ratings on investment products, and Willis Towers Watson PLC runs a corporate culture survey for asset management, she said.
Where the industry is particularly lacking is middle management education on social and governance matters, Bullick said. Many managers need training in the basics of inclusivity, such as how to approach staff to solve organizational challenges, or what to consider when weighing promotions, hiring, etc., she added.
Senior staff, particularly middle-aged white men, can be reluctant and feel uncomfortable to champion diversity and inclusion, Jacobs-Dean said. However, their engagement is particularly important for carrying the message through the entire organization, Jacobs-Dean and Bullick said.