On Nov. 22, UK FCA spoke of more diverse and inclusive FS industry.
UK FCA issued speech by executive director, consumers and competition, Sheldon Mills, at the ABI Diversity, Equity & Inclusion Conference on Nov. 22, 2022.
Mills spoke of driving change in the financial services industry, as this is a core part UK FCA Business Plan objectives, with priority on ESG and wider strategy for 2022-2025.
Progress is being made, but there is more to do as firms, consumers face pressures from cost-of-living crisis; must still ensure diverse representation, inclusive cultures.
Firms are taking important steps to develop their capabilities, and Mills stressed that as an industry, firms are encouraged to maintain and expand momentum on D&I
Purpose of D&I Policy
Mills said UK FCA is committed as a regulator to taking action on D&I because progress on making financial services, including the insurance industry, representative of the country and communities it serves remains at best uneven, and at worst, stagnant.
D&I is a 2-sided problem: first, internal representation within organisations; second, externally, sufficient knowledge, understanding so diverse society can be served well.
It not a debate solely about race or gender, but also about social mobility, class or levelling-up, ensuring regulators serve all communities; many of these intersect.
UK ABI’s talent & diversityresearch in 2021 found that only 24% of executives in the insurance industry were women, despite 55% of new industry joiners being women.
Similarly, only 2% of insurance executives were minority ethnic, despite 10% of new industry joiners being minority ethnic and 14.4% UK population are minority ethnic.
In London where a lot of top leadership is located, ethnic minority population is 40%.
These indicators show that levels remain below what the public might expect.
Achieving a more diverse and inclusive financial services industry is an important part of ESG priority UK FCA set out in its 2022-25 business plan, strategy, see #134653.
Promoting D&I in financial services firms furthers statutory objectives of protecting consumers, making markets work well, ensuring effective competition for consumers.
There is growing evidence that a diversity of perspectives and thought, when part of an inclusive culture, results in better judgements and decision making.
Research by Bayes found firms with gender diverse boards received significantly fewer misconduct fines; and while firms and consumers face heightened pressures from the cost-of-living crisis, must maintain sight of importance of diverse representation.
Research shows firms must have strong awareness of diverse needs of customers.
Mills said internal diversity and inclusion are essential to firms achieving this.
Mills also stressed importance of collecting and appropriately using D&I data.
Good data allows firms to identify where they are doing well, or where intervention is needed, and allows firms to measure, be accountable for, progress they are making.
Over 80% of firms UK FCA sampled have a D&I strategy in place: most focus on gender then ethnicity, but strategies should have broad base to ensure equity.
UK FCA also found most firms focus their strategies on senior-level representation.
Leadership and visibility are important, but the most purposeful D&I strategies focus on building and developing a sustainable diverse talent pipeline from recruitment.
Data shows diverse representation falls markedly between junior and middle-management levels; Mills said UK FCA is working to rectify this in its own D&I strategy.
Firms can only benefit if they take a holistic view of diverse talent development and succession planning, and then if all organizations do this, when diverse talent moves around then there will be support and succession planning across the industry.
Most firms recognize the value of inclusion, want to develop inclusive cultures.
But FCA found that, in terms of actions, inclusion is not systematically approached alongside diversity, that while some firms aim to measure inclusion through staff surveys, it is unlikely a quantitative measurement alone will tell the full story.
Mills stated that building a healthy, resilient culture is challenging, requires consistent and focused action over time and firms are not expected to to develop this overnight.
But to make progress, firms should consider practical steps they can take to address fundamental aspects of inclusivity, such as the welcoming of different perspectives.