Just over a week ago, the UK government unveiled its “Edinburgh Reforms”, a set of 30 recommendations to make the country’s financial sector more dynamic and less encumbered by the suite of regulations introduced after the 2008 financial crisis.
Less noticed a couple of weeks earlier was a report by the City of London and the government-commissioned Socio-Economic Diversity Taskforce on how to break the “class ceiling” holding back those from working-class backgrounds from achieving high office in finance.
It would be easy to caricature the two as in stark opposition — one a libertarian initiative to unshackle the City; the other a “woke” effort to extend the do-gooding diversity drive from gender and ethnicity to socio-economic background.
But sceptics should think again: in reality both projects align with the drive to boost the global potential of UK financial services. Diversifying the City — raising the quotient of female, non-white or non-privileged financiers — is both morally right and an important way to widen the talent pool and de-risk the system by mitigating groupthink.
The task force rightly reckons the first key to any such transformation is to measure the status quo and set a target for improvement. This has worked wonders, for example, in the area of female representation on boards; British blue-chips have tripled their tally to 40 per cent in a decade.
Gauging socio-economic diversity is harder. The task force quizzed more than 9,000 staff at 49 organisations and found that 36 per cent of those in senior roles came from a poor socio-economic background, defined by parental employment. This it has used to set a target of 50 per cent by 2030. But the data feels flawed.
The 36 per cent baseline may have been inflated by a methodology that relied on a self-selecting group of staff within the organisations that signed up. A smaller preparatory study for this project, conducted by the Bridge Group, a social equality charity, found that 90 per cent of senior roles in finance were filled by those from a privileged background — a ratio that anecdotally feels more accurate and is likely to be higher still in certain quarters of finance.
One such is investment banking, where white men from privileged backgrounds account for nearly all the senior roles — not just in the City of London, but in financial centres around the world. “People who are white and middle or upper class, ‘signal’ expertise to colleagues and clients,” the Bridge Group wrote of this kind of finance work. “Expertise has historically been ‘vested’ in white, middle-class men, who therefore have to do least to demonstrate its possession.”
How, then, should financial services groups that are keen to modernise go about finding poor, smart recruits? The task force report is thin on specifics beyond measuring, targeting and managing. But here are four concrete ideas.
One, seek out candidates from across the UK. The City has never been very proactive about who it hires: it does little or no outreach to the regions. There are some small initiatives designed to target young people from a disadvantaged background but they tend only to focus on London boroughs where the big employers are based.
Two, seek out candidates from state schools. According to a 2014 report for the Sutton Trust by Boston Consulting, 37 per cent of new hires and 60 per cent of senior managers in finance had been privately educated, compared with 7 per cent of the school population as a whole. That has perpetuated inequity.
Three, seek out candidates from a broader range of universities. Many financial sector employers seek UK staff only from Oxbridge or a handful of other Russell Group universities. Other institutions may provide equally talented graduates from a more diverse social background.
Four, seek out champions. New hires in finance — just like in other professions — often say how important it is to see someone like them in a leadership role to help promote aspiration. That is as true of social background as it is of gender or ethnic heritage.
Alison Harding-Jones, a senior M&A banker at Citi, who hails from south Wales, went to a comprehensive school and began work, aged 16, as a bank secretary, could be just such a champion. “There are hardly any senior women in my line of work, and a very small number of people from modest backgrounds. That needs to change: having people with different views is of huge value.”