The COVID Impact on Diversity & Inclusion in Financial Services

As financial services firms are gaining more certainty in the market and hiring plans are starting to be more liquid, it has become obvious that these companies have stalled or fallen behind in their diversity and inclusion efforts, due to coronavirus. The increased competition stemming from a lack of open opportunities and the surplus of candidates available has led to a decreasing number of candidates from a diverse background being interviewed - and ultimately employed.

Furthermore, the Government Equalities Office and the Equality and Human Rights Commission suspended in early 2020 the enforcement of the Gender Pay Gap Report in response to the COVID-19 outbreak. Businesses in the UK with more than 250 employees were due to report and publish details of their current gender pay gap in 2020, but in a press release published in March last year, the Minister for Women & Equalities Liz Truss and EHRC Chair David Isaac said: “We recognise that employers across the country are facing unprecedented uncertainty and pressure at this time. Because of this we feel it is only right to suspend enforcement of gender pay gap reporting this year.”

This is just one of many examples of how the 2020 pandemic has shifted Diversity and Inclusion initiatives further downhill. So what can we collectively do from now on? And where do we actually stand as of today? After looking at current available data on the matter and speaking with experts within the financial services sector, one thing seems clear: the industry needs to speed up in terms of D&I.

Where do we currently stand?

While the pandemic has affected both men and women, there is data to suggest that women are taking more of the burden of the current climate, including working from home, home schooling and childminding. Although this may seem like a temporary issue that will resolve itself when the world opens back up, Rutherford has seen in its own pool of candidates a large spike of women requesting increased flexible working for when firms reopen the workplace, the most frequent request being to work 2 to 3 days from home. While a larger portion of firms are likely to offer increased flexible working conditions in the future, there will still be a need - especially within business-aligned roles - to be in the office and on the floor.

It will be interesting to see how this trend will affect the progress of women reaching Head of Compliance and SMF 16/17 functions within financial services in the next few years. As mentioned in one of our articles on Diversity & Inclusion, the gender gap that currently exists in FCA-regulated firms is massive: in 2020, 83% to 86% of SMF16/17s in the UK were men. The pandemic may worsen this already problematic situation: are firms in the financial services doing enough to support gender diversity regarding compliance recruitment ?

“While the UK’s Gender Pay Gap Reporting Regulations have done an enormous amount to increase awareness of the problem, more commitment from more firms is needed. The reporting means that firms who are publicly committed to equality can now be measured on their progress – and that is a good thing. But the 2020 pandemic has, of course, meant that gender equality is no longer necessarily at the forefront of a firm’s planning. Firms like McKinsey have found that women are more vulnerable to COVID-19 related economic effects because of gender inequalities: it is clear that COVID has had a devastating impact on equality. For these reasons, equality must be at the heart of effective recovery planning, whether by firms or governments, along with sustainability”.

Joy Rhoades, ex Managing Director at JP Morgan

Reporting requirements ensure businesses can no longer escape public scrutiny. A firm simply stating its intention in supporting the D&I agenda is no longer enough: concrete actions are required, and failing to do so is now publicly frowned upon. In the past, firms have had their values and mission plastered all over their website, but as you dig beneath the surface, it becomes obvious that their intentions and actions are completely different stories.

We are already seeing an increase in scrutiny from Gen Z and millennial candidates, as they request further information on a firm’s position on Diversity & Inclusion and usually conduct due diligence on employees through websites or LinkedIn. There is also an increasing number of candidates using lack of D&I within a firm as a reason to opt out of a hiring process, placing additional pressure on employers to take action on the matter if they want to attract the best talent.

What are we seeing in the market?

From a compliance recruitment standpoint, some trends and practices seem to be working well for hiring firms. In the last few years we have noticed an increase of the following requests from businesses:

The removal of personal material from resumes, with a focus on skills and experience instead.
The rise of portals which require candidates to answer behavioural-based questions
Recruitment partners to provide diversified short and long lists, respecting a specific ratio (50:50 for example)

We have also noticed in the compliance recruitment sector how the prestige of a candidate’s university is quickly becoming less relevant to several firms as compliance teams and businesses are benefiting from the rise of new skills and diverse backgrounds. The increasing popularity of the ability to work with technology - specifically within compliance - is allowing for a greater pool of candidates with a diverse background while creating more efficient and cost-effective compliance functions. Candidates who have taught themselves to code over YouTube or taken courses outside of prestigious universities are starting to reduce the demands on tech teams and build systems and programs for the compliance function. Not only can these candidates speed up mundane processes and create efficiencies for half the price of a candidate coming out of a graduate scheme or similar, they also allow the IT teams to focus on enhancing the front-office teams.

How can we further go about change?

In addition to shifting processes to ones that promote unbiased opinions, firms should also adjust their own mentalities when it comes to the hiring process. The usual question “Who do we need to replace” should be instead “What skills do we need to replace”, putting the focus on the skills gaps left from the individual leaving.

Such a change will allow candidates with a diverse background to have access - and be relevant - to roles they typically wouldn’t be considered for. Firms can start implementing change by modifying their job descriptions, removing specific requirements: 2.1 or above from a Russell Group university, 5+ years of experience, and so on. These are limiting factors that will stop qualified candidates applying for positions, even if they do have the capability. Some firms have already shifted to an outcome-focused method instead of the required inputs.

This will mean more profiles will have to be managed by compliance recruitment firms, but ultimately it will allow more diverse candidates to put themselves out there for consideration.