Let’s Talk About the Gender Pay Gap in Financial Services

James Rust, Founder & CEO The Pay Index

As a sector, finance has a reputation for many things. Gender pay gap leadership is not one of them.  A recent report based on Financial Conduct Authority data, found that out of 9,957 partners at UK private equity firms, hedge funds and other financial services companies only 1,381 (14%) are women. And, despite a consistent push of initiatives to open up top finance roles for women, the percentage increased by just 2% in the previous five years.

Elsewhere, the World Economic Forum’s Global Gender Gap Report 2020, showed women will have pay equality in 257 years. And, despite a 2% increase in the number of women in senior roles, female participation in the labour market is stalling and financial disparities are growing.

To get more insight into the state of play in gender diverse finance workforces, we ran research across C-level positions in the top 100 companies in the FTSE, NYSE and NASDAQ. Comparing the findings with our proprietary Pay Index data, we found that of 300 positions of Chair, CEO and CFO, women make up a total of just 8.6%.  It gets worse.  Within this, just 5.6% of the chair positions were held by women. And women are paid on average 85% of men in all three exchanges.

A small win for CFOs

With just 6.6 % of CEO roles held by women, the position of CFO emerges as most diversified at nearly 15% (14.7%).  This isn’t exactly cause for celebration but it suggests progress.  What’s more, female CFOs counter the persistent pay gap trend, averaging a salary which is 132% more than their male counterparts.

The FTSE is the most diversified with 9.7% of these roles occupied by women; RBS achieved a FTSE 100 first with the appointment of Alison Rose to CEO and Katie Murray as CFO.

But there’s a long way to go, to break down the cultural, structural and attitudinal barriers to drive change in the sector. Here’s how to start:

Lead with gender diversity

The government’s Women in Finance Charter recommends appointing a senior member of your executive team to own responsibility and accountability for gender diversity and inclusion.  Setting and publishing internal targets in senior management takes this a step further, to be benchmarked in your annual report.

Ensure your gender diversity lead is closely aligned with your HR team, as well as recruitment partners (internal or external). Developing bespoke initiatives to develop, grow and promote women within your organisation is part of this. Gender diversity programmes also boost your employer brand and in turn feed back into supporting recruitment and retention.  Authenticity and commitment to change is essential rather than a reporting tickbox.

Create role models at all levels

In an industry defined by old boys’ clubs, golf days and trading floor “bants”, women find it hard to break in as there simply aren’t the numbers there to support them. Look to other sectors who are gradually starting breaking the mould – law, for example, is making incremental, steady process to model.

Billie Jean King said, “You have to see it to be it.”As organisations, we need to make sure that women have access to those role models and mentors, throughout every level. As in all sectors, leaders need be supported, encouraged and nurtured from the outset. Mentoring, promotion and the opportunity to flourish needs to be upped from middle management levels, with clear career roadmaps set out.

Start with tapping into a wider talent pool
Opening up flexible working opportunities in finance is essential; it immediately enables your business to access a wider talent pool.  From an employer brand perspective, 70% of UK employees cite that flexible working makes a job more attractive, with 30% preferring flexible working to a pay rise.

Within the sector, our key challenge lies not so much in recruiting, but promoting and retaining our female talent throughout the career lifecycle. Stats show that graduate schemes tend to be split 50/50 between the genders, however, the numbers start to decline as employees become more senior – women reach a level of seniority at the same time as their personal and family commitments increase. It’s the lack of flexibility that makes it challenging for them to return to the workplace at the same level. Developing genuinely flexible strategies, grounded in trust and empowerment are the route to overcoming this.

Atom Bank is a real trailblazer in actively promoting flexible working, rapidly establishing a reputation as an attractive family-friendly employer.

Flexibility drives retention strategies
By creating more flexible opportunities, businesses can significantly improve their retention rates; CIPD research found 75% of employers say that flexible working has effected retention positively.  Having invested in employees through training and professional development, enabling them to come back after a period of leave, can only be a positive when you consider the cost of attrition.

We’re also encouraging more organisations to commit to Return to Work programmes, welcoming team members back after an extended career break. Returners build on the skills and experiences gained in their careers then complement these with training, mentoring and coaching to transition back into the world of work.

Embrace industry collaboration with the industry

Change can’t happen in isolation. Challenger banks such as Starling, founded and led by Anne Boden, and Atom Bank are leading the charge on gender diversity as fintechs such as Monzo and Tide completely embrace new narratives.

With the sector ripe for disruption, developing a new business culture is inevitable: traditional finance needs to be part of this. Nurture links and partnerships with like-minded organisations, breakdown barriers and shape the new cultures that will attract and hold onto senior women in finance.

Gender – and all – diversity is more than a buzzword in the modern financial workplace. It’s a mind-set that needs to go beyond reporting requirements. According to McKinsey, gender-diverse companies are 15% more likely to deliver financial returns above their respective industry average. Ultimately, those organisations failing to prioritise gender equality will miss out on building truly diverse teams – in backgrounds, experiences and thinking –stalling competitiveness, growth and reputation. Can you afford to take that business risk?