SNW Impact Insight: The Increasing Importance of Gender Diversity in the Financial Services Industry

A recent study by the Peterson Institute for International Economics, supported by EY, evaluated the impact of gender diversity at the Board and senior management levels on the profitability of companies. The study, based on data from almost 22,000 companies in 91 countries, found a correlation between increased profitability and greater gender diversity in senior management. This increase in profitability was most significant when comparing companies with little or no gender diversity at the C-suite level with companies that had above average representation of women in these roles. A difference in net revenue margin of up to 15% was found to exist between companies with no gender diversity and those companies where women held 30% of such roles. No significant correlation was found between profitability measurements when the gender diversity on the Board of Directors only was evaluated, or where there was a female CEO. The authors of the study postulate that this effect, the increased profitability associated with more women in senior management, is to some extent attributable to a pipeline effect. Companies with a higher degree of gender equity at lower ranks in the firm’s hierarchy will also have a higher level of gender equity at senior levels.

While women have seen increases in the number of senior leadership roles they hold in both the public and private sphere, they are still significantly underrepresented in almost all industries, including financial services. A 2015 report by Morningstar found that less than 10% of fund managers in the United States were female, with the AUM being managed by these women accounting for approximately 2% of total assets. Only 17% of chartered financial analysts are women. In comparison, 37% of doctors, 33% of lawyers, and 63% of auditors and accountants are female. While the financial services industry is not an outlier, its lack of gender diversity may become problematic in the upcoming decade as control of a majority of investable assets shifts to women. By 2020, this will amount to an estimated $22 trillion. The findings of the Peterson Institute study coupled with data specific to the financial services industry suggests that the industry needs to begin to more consciously encourage women to become engaged in finance, and to more consistently support and promote those women who have entered the profession to date.

Sources: Peterson Institute for International Economics, Morningstar, New York Times