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Not long ago, Chief Investment Officer ran a blunt headline about the state of gender diversity in the finance industry: “The Missing Women of Asset Management.”
The problem, according to the article, is that 90% of senior money managers are men. That means just one in 10 senior investment professionals are women.
Yet, in the United States, “one in three physicians are now women, one in four science, technology, engineering, and math roles are held by women, one in five law firm partners are now women, and one in five members of Congress are women.”
Why so few women in asset management, specifically, and finance, generally?
Put that question to Suni Harford, head of investments and group managing director at UBS Asset Management, and she would say: “Lack of opportunity.”
At the recent CFA Institute Alpha and Gender Diversity Conference, Harford noted that most industries enjoy a fairly even entry-level division between men and women. This includes financial services, where about 50% of entry-level production positions go to women. But when it comes to the partner or managing director level, the percentage drops to 15%.
“So, if you agree with me that we’re doing a decent job attracting women into the industry,” she said, “then it would be the retention of women that needs some serious work.”
But before firms start making plans for how to better retain women, they need to understand why they are leaving or not being promoted up through the ranks.
Harford, who has worked on Wall Street for three decades, concedes having a full-time career is tough. “Hours are long and stressful, travel’s brutal, but this is true for men and women,” she said. “So why is it we lose women faster than we lose men?”
It’s not because of the usual scapegoat, work-life balance. “I really hate that phrase, mostly because it’s uniquely applied to women,” Harford said. “Everyone wants better balance, men and women.”
(An interesting aside from Harvard Business Review: “Your Feelings About Work-Life Balance Are Shaped by What You Saw Your Parents Do.” Consciously or unconsciously, we reject or adopt our parents’ work habits. But the good news for working parents is that dual-career families have more options than single-career families.)
Harford quipped that she has been known to say that work-life balance is a myth, but quickly acknowledged this is perhaps unfair.
“What I really mean to say is that the concept of a solution or a fix-all for a universal, internal peace between the tug of both sides of a life, work life and personal life, is a myth,” she explained. “The scale is ever-present. On one side of the scale are the things that pull us away from work, things that make working hard. On the other side of the scale are things that pull us toward work, give us reward, and make it worth it for us to put in all the hours and all the travel, etc.”
Her point is that everyone feels this tug. It’s not unique to women. But somewhere along the way, women who are juggling demanding careers and motherhood ask, “Is it worth it?”
“So back to the balancing act,” Harford said. “Work is hard versus work is great. If we want to retain women, we have two choices. Make the left hand of the side of the scale lighter. Make it easier to work, make it easier for them to do what they need to do. Or make the right hand of the scale heavier, which is to say give them more rewards, more opportunity, more reasons to stay at the job.”
She noted that a lot has been done to lighten up the left side — mentors, flexible work arrangements, and advances in technology that have made remote work possible, for example. But what of the right side?
“Male attrition tends to be led by external pull factors, whereas female attrition is led by internal push factors,” she said.
So where does that leave us?
“Men, (and I know I’m stereotyping) tend to be pulled. That is, their rationale for leaving a firm is they are presented with an offer of a better title, greater compensation, upside potential,” Harford said. “Women tend to be pushed. They don’t like the culture, they don’t feel that the firm or their manager gets it, fail to receive appropriate compensation, perceive a lack of opportunity.”
And so it is opportunity that is the key to retaining women. Financial firms must recognize — and address — this challenge if they want better gender representation at the senior levels.
Harford said that, based on her experience, women at the junior or mid level leave because they don’t believe the balancing act is worth it:
“They’re looking into their future and they’re working their butts off as new associates or VPs, and they’re imagining themselves with a husband or a partner and kids at home, and they just can’t imagine getting it done. So they back out early. The more senior women tend to leave and go to a competing firm. They leave because they’re ticked off. They’ve given the company every opportunity to do right by them, they’ve worked hard, performed well, and still they don’t feel fairly rewarded, nor do they see an opportunity to advance to their full potential. Both of these groups are looking for one thing and that’s opportunity.”
So, here’s a question to think about: “Are women leaving because they see less opportunity than do their male counterparts, or do men, in fact, have greater opportunities than women?”
Harford said opportunity is difficult to define and almost impossible to measure. But if we look to some of the factors that drive opportunity, there are important differences between the genders.
There are three types of opportunities, according to Harford: opportunity for wealth accumulation or economic opportunity, opportunity for recognition or promotion, and the opportunity for mobility.
- Economic opportunity: “It’s widely believed that women are inclined to keep their head down, do their work, expecting that in a fair world they’ll be recognized and rewarded for these efforts. Men, on the other hand, will not wait but will demand that recognition and reward. In my experience, this is absolutely true. I’ve been in the financial services industry for 30 years, and managing for over 20. That’s a lot of bonus discussions. And in every single one of them, in all those years, I’ve never had a woman ask for more, and I’ve never had a man not. It’s a true statement. It’s something in the DNA, I’m not sure what it is. Our solution to this issue to date: train women to speak up. Make sure your boss knows what you’ve been up to, develop a mentor program so she can get advice, train managers to read the subtle cues or ask the questions rather than waiting for the women to come forward. All important things and valuable tools, but what if the process and criteria around compensation and promotion were the same for all employees? What if managers had to present all of those eligible for promotion, rather than self-select those he or she felt were worthy? What if the firm itself provided the manager with the tools to do so?”
- Opportunity for advancement: “This is a big one. When the head of the group leaves his role, and let’s just assume it’s a he, who gets to replace him? More often than not, that job goes to the number two in the group, which has generally been selected by the number one in the group, which is just normal human nature to pick someone who looks like you, someone you’re most comfortable with. This is a really tough self-fulfilling cycle to break if you’re a diverse candidate. How can a diverse candidate break this cycle? Our solution to this issue to date: train our managers to recognize unconscious bias, train our women to ask for the job, encourage managers to take risks on candidates from other areas. Important things and valuable tools, but what if the process and criteria were not left solely to the individual manager? What if every job opening had to be posted in a central place for all to have access?”
- Opportunity for mobility: “Mobility, particularly for advancement to the executive level, is important. It is said that women are more risk averse in their career. Women will be 100% confident in their ability to take a new job before they will accept the job. And you’ve all heard this stat: Men will be less than 50% confident that they can tackle the job when they ask for the role. If this is true, greater opportunity for mobility comes to men,” Harford said. The solution has been to train women to speak up, encourage them to be willing to take risks, put them through training so that they are ready for the next role. While these are important steps, we should take things one step further: require a diverse slate of candidates. Harford said that data from Citi (her previous employer) showed that when no slate was used, a woman got the job 14% of the time. “But when a diverse slate is used, a woman will get the job 41% of the time,” she said. “This is real, hard data, and that’s pretty compelling.”
Why does all of this matter?
“Diversity absolutely drives alpha,” Harford said. “There is no question about it. Simply put, diversity of thought and approach leads to better business outcomes, because it leads to better decisions.”
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Image courtesy of Nicola Laing
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