Diversity in Banking and Brokerage: A Recruitment Discussion

Diversity and inclusion have been top priorities for companies over the last decade. However, broader debates on diversity practices persist, with concerns that certain strategies, such as preferential treatment of specific groups, may only be suitable in the short term.

In recent years, there has been a notable increase in early entry programs for underrepresented groups at top banking and brokerage firms in the United States. These initiatives aim to counteract unconscious bias by prioritising the inclusion of diverse candidates before considering other applicants. However, recent months have seen some firms retreat from these efforts, with concerns about potential legal challenges related to so-called reverse discrimination.

As many companies continue to strive to meet diversity targets, and some workforces remain unrepresentative of the general population, the question arises: What is the best approach to diversity and inclusion in banking and brokerage to ensure fair opportunities for everyone?

This article examines the current state of diversity, equity, and inclusion (DEI) in these sectors, focusing on the UK. It explores how the market can address ongoing challenges in recruiting diverse talent and outlines effective strategies that companies can implement.

The Importance of Diversity in Banking and Brokerage

Diversity transcends corporate responsibility; it is a crucial driver of innovation, adaptability, and competitiveness in recruitment practices. By committing to diversity, companies not only show they value unique contributions from all backgrounds but also attract diverse talent, creating a positive cycle of inclusivity.

Diversity in financial services fuels innovation by providing varied perspectives catering to a wider audience. Research by FDM, via Censuswide, reveals that 84% of respondents believe greater diversity in recruitment would benefit their organisations. As banks undergo digital transformations to improve operations and meet customer expectations, tapping into underrepresented groups brings unique skills and perspectives that drive creative thinking and positive change. This diversity enhances problem-solving capabilities, making institutions more agile and competitive.

Investing in diversity also yields tangible benefits in productivity and talent attraction. A LinkedIn survey found that 76% of employees and job seekers consider diversity important when evaluating job offers, and 80% prefer companies prioritising DEI issues.

Moreover, UK banking and brokerage firms must consider diversity to meet regulatory standards set by the government and accrediting bodies. The FCA identifies diversity as a “key supervisory” issue, asserting that a healthier culture and mitigation of “groupthink” risks can be achieved through a diverse workforce. Regulations like CRD IV and MiFID II mandate that promotions to board-level positions must be supported by a length of service in leadership roles and ensure a fair distribution of ages, genders, geographies, and educational backgrounds. These standards help counter criticisms that companies prioritise quotas over expertise, providing a balance between diversity and professional excellence.

Current State of Diversity in the Financial Services Industry

Despite challenges, banks and investment firms worldwide have made noticeable strides in recent years, increasing the representation of marginalised groups. Following the Black Lives Matter protests in 2020, the S&P 100 added more than 300,000 jobs, with 94% going to people of colour, and many UK companies joined the Business in the Community’s “Race at Work Charter”.

However, each achievement comes with its caveats, suggesting while hiring practices have begun to reform, supportive policies have not been fully developed to sustain these changes. Research by the FDM Group via Censuswide found that 70% of staff believe diversity, equity, and inclusion are still an afterthought in the financial services industry.

For instance, the study also discovered that while more than four in five financial institutions reported female representations at the C-suite level in a recent study, two-thirds of those surveyed believed the sector lacked supportive policies for returning parents, citing limited flexibility. In addition, despite progress in appointing people of colour to senior executive positions, African Americans still only represent between 3.7% – 8.7% of US senior executives in top firms, despite making up 14% of the population.

In the UK, almost 1,000 more women were in leadership roles in the FTSE 100 in 2017 compared to the year before, yet the appointment rate continued to favour men, with two-thirds of new executive appointments going to them.Nationwide was found to be the most gender-diverse bank, with the highest allocation of female directors, despite the current share across the UK being only 37.2% in 2023. Additionally, the highest median gender pay gap for the industry was reported at 48.3% last year.

While the financial services industry continues to meet its diversity targets, significant gaps and challenges remain. To truly reflect the populations they serve and create equitable workplaces, banks and financial institutions must address not only their recruitment policies but also their retention programs and support policies to sustain these advancements.

Challenges in Recruiting a Diverse Workforce

The financial services industry, employing an estimated 2.5 million people in the UK, offers some of the highest-paid jobs and a pathway to influential boardroom positions. Despite a growing commitment to diversity across industries, this sector continues to struggle with diverse recruitment.

One significant challenge is the reliance on informal hiring processes over data-driven or traditional methods. Informal processes, such as so-called “boys clubs”, risk inconsistency and inaccuracy, whereas a data-driven approach can enhance diversity by allowing companies to compare candidates objectively. Identifying key performance indicators and objectives can help address disparities and make hiring more efficient.

Additionally, unconscious bias plays a role in impacting diversity in recruitment. The Journal for Leadership Studies found that HR managers in male-dominated industries are more sceptical of female candidates. Jayne-Ann Gadhia, former CEO of Virgin Money, highlighted a pervasive male culture in some organisations, suggesting that hiring managers may unconsciously believe this environment could cause female employees to feel uncomfortable or leave quickly.

Addressing these challenges requires a multifaceted approach. Financial institutions must refine their hiring processes, eliminate biased entry requirements, and foster inclusive cultures to support diverse talent. Only through these comprehensive efforts can the industry achieve true diversity and inclusivity.

Strategies for Improving Diversity Recruitment in Banking and Brokerage

Improving diversity through recruitment in the financial services industry will require a comprehensive approach, over simply allowing applicants early access to internships. Below we list various strategies that businesses can use in tandem to attract, hire, and retain a diverse workforce.

Partnerships and Outreach

Building partnerships with universities, professional organisations, and community groups is crucial for attracting diverse talent. Collaborating with institutions that serve underrepresented communities can help create a pipeline of qualified candidates your current recruitment process can’t. For example, engaging with universities, women’s professional networks, or organisations such as the 10,000 Interns Foundation can provide access to a wider talent pool.

Skills-Based Hiring

Similar to blind recruitment, skills-based hiring focuses on identifying and recruiting candidates based on the skills required for success in a role rather than relying on credentials, experience or academic achievements. This helps to eliminate preconceived ideas about the “perfect candidate” and broadens the talent pool. Research from LinkedIn suggests that 88% of recruiters filter out skilled candidates because they lack specific job titles or qualifications. Skills-based hiring can counteract this. For instance, it has been shown to increase the proportion of women in talent pools by 24%, and 73% of Asian and Arab employees report that skills-based hiring enabled them to access new employment opportunities.

Diversity Training

Most importantly, promoting diversity in the recruitment process will arguably require a culture shift throughout the financial services industry. This can be achieved by training hiring managers and leaders in the sector on unconscious bias, cultural competency, and inclusive interviewing techniques. Educated recruiters are better equipped to recognise and mitigate their biases, leading to more equitable hiring practices.

Adopting these strategies can significantly improve diversity recruitment in the financial services industry. These changes will enhance the organisation’s performance and ensure it reflects and serves the diverse communities in which it operates.

Diversity in banking and brokerage is at a critical juncture. While significant progress has been made, legal challenges and implementation gaps threaten to undermine these gains. Banks and investment firms must continue prioritising diversity to represent the populations they serve and remain competitive and innovative in an increasingly complex financial market. By fostering inclusive environments, the banking and brokerage sector can leverage the full potential of their workforce and drive meaningful progress toward a more equitable industry.

JSS Financial Services, a boutique search firm that partners with clients ranging from established international banks and investment managers to high-growth FinTechs, strongly emphasises staying updated with diversity and inclusion research and training. They incorporate this knowledge into their advisory approach, helping to develop and maintain robust business relationships across the financial services sector.