From the April 2016 issue of Investment Advisor • Subscribe!

Diversity: Equal Opportunity or Equal Recognition?

Leveraging diverse talents is the key to firms’ evolution and growth

Diversity in the financial services industry has yet to catch up with diversity among potential clients. (Illustration: Jing Jing Tsong/Theispot.com) Diversity in the financial services industry has yet to catch up with diversity among potential clients. (Illustration: Jing Jing Tsong/Theispot.com)

I find it remarkable that some people are still talking about the uniqueness of having a person of color or a woman in a position of leadership. It startles me when I hear someone refer to “our female partner” or parenthetically remarking, “he's African-American” or “she's Asian.” While I’m not blind to differences, these qualifiers seem unnecessary in today's diverse society.

This point was driven home when we at Pershing LLC recently announced our new CEO, Lisa Dolly, and our new COO, Lori Hardwick. I heard some people outside of Pershing refer to these employees as our new “woman CEO” or “female COO” as if they were appointed to serve our female constituency only. Women in leadership is not new to Pershing. Women fill key slots including chief administrative officer, chief legal officer and chief operating officer of Pershing Advisor Solutions. Our heads of marketing and human resources and president of our parent company, BNY Mellon, are also women.

Having two women at the very top of our organization seems quite natural because it means that we are considering each candidate's qualifications and potential impact on the company and putting the best candidates in the right roles. Dolly, our new CEO, worked her way up from the very bottom of the company over a 25-year career and most recently served as our chief operating officer. Hardwick, our new COO, brings a fresh perspective as a long-time leader at Envestnet, a market leader in technology, along with experience in the advisory business as group president of Envestnet Advisor Services. Our employees and clients are thrilled because of the qualities these two bring to their new positions and because they represent a new generation of leadership. Their talents are recognized regardless of their gender.

More and more, the promotion of women or minorities is less about equal opportunity and more about equal recognition of the competence and qualifications of individuals. As Erica Peitler, an executive coach who specializes in leadership development (EricaPeitler.com), says: “Having a deep and diverse talent bench is crucial. But finding ways to ensure that those talents are well-utilized is often more challenging and where I see leaders fail.”

Peitler advises leaders to differentiate between “diversity” candidates and the “diverse” talents of individuals. While nuanced, this is a helpful distinction when building a dynamic, high-performance organization.

All firms, even smaller financial advisory firms, must make an effort to hire and promote people who reflect the greater community. Without a conscious effort to introduce new leadership views, we risk being close-minded to both needs and opportunities. We also deprive ourselves of the chance to be the employer of choice in our markets.

Consider these facts: Today, women make up two-thirds of the U.S. workforce, and a majority of married women with business-related degrees earn more than their husbands. About 80% of women will have sole responsibility for household financial decisions at some point in their lives. These statistics shatter the outdated image of women as secondary earners and minor economic players. Yet only about 26% of personal financial advisors are women. Among certified financial planner (CFP) designees, only 23% are women, a percentage that has not increased in 20 years. According to the Grant Thornton International Business Report, only 25% of the senior management roles in the global financial services industry are held by women.

So as often as I am surprised to hear the descriptive qualifiers mentioned above, it is clear that financial services has a long way to go before it reflects the diversity of the communities we serve, let alone our employee and client bases. This leads to a critical question: What type of leaders should populate the financial advisory business?

A study commissioned by Pershing in 2014 entitled “Americans Crave a New Kind of Leader — and Women Are Ready to Deliver” shared many powerful insights. Among the standout observations in this study of 2,000 adults:

  • Americans crave a new, more collaborative style of leadership.

  • The most popular new leadership quality was “innovation through creativity and a commitment to life-long learning.”

  • Seven out of 10 Americans associate these leadership qualities with women.

  • Older Americans are more comfortable seeing women in traditionally male roles, a departure from their children and grandchildren!

With a greater number of advisory firms seeking professional management to run their businesses, these points merit consideration.

Many people in financial services are accustomed to the traditional “command and control” style of management common in banks, brokerage firms and the military. While such a disciplined approach has its place, younger generations of employees appear to respond better to techniques that favor listening, consultation, coaching and building community (see table, below). Our survey indicated that the general population associates these leadership qualities with women rather than men. Conversely, more employed men than employed women say they prefer their direct manager to “reward, threaten and demand compliance.” This may reflect a typical male bias.

Traditional vs. Collaborative Leadership Qualities (Source: Harris Poll)

It would be a mistake to assume one leadership model is superior to the other. Many successful businesses have evolved under the command and control model. However, the divergence of views tells us that employees are conscious of firm culture and they actively consider whether it will enable them to grow their careers over the long term. The dearth of talent in the advisory business means that employees have the opportunity to move to a like-minded employer. This helps explain why many are seeking careers in more innovative environments that foster the education and development of people. It also explains why many old-style bosses get frustrated with the younger generations of talent.

Financial services, like all industries, needs new kinds of leaders. The Harris Poll confirmed that the general population associates these new leadership qualities with women rather than men. Does it follow then that we should only consider women for leadership roles? Of course not. But it does show us that management style needs to be given as much weight as the academic background and experience of a candidate.

Our challenge may be more about cultural conditioning than about equal opportunity. The poll showed that older individuals were more open to women in leadership roles than young people. What explains this unexpected result? According to V.I. Blair, writing for the Journal of Personality and Social Psychology in 2001 (“Imagining Stereotypes Away”), stereotypes can be broken down through real-life experiences with women in traditionally male occupations. In other words, some may have difficulty picturing a woman as a financial advisor or a leader of a financial advisory firm until they have the experience of working with one.

This gives us hope that as more financial services firms recognize the capabilities of all individuals regardless of sex, race, religion or other differences, we will see our businesses flourish under open, consultative, innovative and curious leaders.

--- Read "What Advisors Can Learn From ‘Conan the Contrarian’" on ThinkAdvisor.

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