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Diversity Is Smart Business And Investment - Wealth Managers
20 February 2020
“Diversity” is a term that trips easily off the tongue but perhaps there’s not enough where it counts - different voices within business and finance. Arguably many recent problems are caused by an echo-chamber effect if talent comes from only one side. Take the 2008 crash and the complacency that spawned it. A bit more diversity of views might have made a difference. This approach is part of a rising trend. Women want to use their increasing financial firepower to back women in business, and there are examples in the US and UK. In the US there are organisations such as Plum Alley Investments, founded in late 2015 by Deborah Jackson and Andrea Turner Moffitt as a platform to invest in female entrepreneurs while engaging a broader base of investors in the asset class of venture capital. In the UK there is the Angel Academe. These organisations are already substantial, and have gained hard-fought experience in managing women-run businesses. (To see more about women's issues in wealth management, click here. To see research done in the field by this news service, click here.)
This point arises when thinking about calls to open up wealth management, for example, to a more diverse talent pool. In plain language it means targeting, promoting and investing in more women; and hiring people from different groups outside the “pale, male and stale” backgrounds. It means getting in those who don’t fit the mould, haven’t attended a smart university or business school, and who have got their hands dirty outside bank dealing floors.
More broadly, there is a need for more women to be involved across the modern business ecosphere, such as in supply chains, sourcing investment ideas and pressing the button in spending on infrastructure, opening markets and acquiring talent.
How does this point apply to wealth management? To address this, senior figures in the business and investment field recently spoke to WealthBriefing about their views on what diversity means in practice when it comes to women’s issues. They had been attending the first international women’s economic empowerment conference held in Scotland and organised by Women’s Economic Imperative (WEI), the global collaborative initiative, in partnership with Women’s Enterprise Scotland (WES), the community interest company which focuses on the contribution women’s enterprise makes to the Scottish economy. (Other statements from the conference can be seen here.)
“We should be returning to a more inclusive form of capitalism,” Keith Skeoch, chief executive of , said. (Skeoch was named to the post last year and has been a long-standing prominent figure in the UK’s investments industry.) “We are looking to get more women involved in the investment decision and in pushing hard for that.”
“You not only get diversity of opinion , there is evidence from surveys that women do take a longer, more balanced approach to things,” he continued. “I think getting more women involved in investment decisions and to allocate capital (to them) is very important,” Skeoch said. Being more diverse is smart business.
There appears some evidence that hiring more women and pushing above the “glass ceiling” is clever business. Fidelity Investments, the US firm, found that female investors outperformed males in 2016, for example, by 0.3 per cent (source: CNN, 8 March 2017). A report said Fidelity found that females outdid men in the past decade. The same report said that data from Openfolio, an investment tracking app, also found the same trend.
Of course, such data should not be the clincher on its own, as there are wider reasons, so industry figures say, to bring in more women into the industry.
Women are increasingly important sources of investment and have business insights and ideas that need to be heard, Gillian Marcelle founder and managing member, , who spoke at the same Edinburgh event, said.
She has a 20-year history of working towards gender equity within the technology space (besides Resilience, her career includes that of being executive director of UVI Research and Technology Park, and owner of Technology for Development TfDev).
Marcelle argues that while women have progressed in business and finance in some ways, the accelerating pace of technology change can work against them. To a degree, today’s modern technology firms continue to be dominated at the decision-making level by men. One problem is that regulations haven’t kept pace with development, such as the rise of Big Tech, which may work against women, Marcelle continued.
Marcelle’s current advisory practice aims to provide strategic advisory services and acquire capital, working in regions such as the Caribbean and sub-Saharan Africa and sectors such as technology, impact investment, telecoms and energy. In her experience with her current and past businesses, overall returns and financial performance improve with a more diverse investment team.
She also advocates creating networks among women, for example, to learn more about finance and investment in parts of the world that are not on the usual wealth management radar screens. Her Resilience business, which is part of the “invest for better” movement, aims to educate women entrepreneurs at becoming smarter at raising and deploying capital.
There is big potential. For example, for all the noise around the attractions (despite the illiquidity) of venture capital and other private market investing, Plum Alley points out that only 2 per cent of decision-makers in VC firms are women. Some figures are higher: Fewer than 10 per cent of decision-makers at VC firms are women and 74 per cent of VC firms have zero female investors, according to the publication Techcrunch last year. That article, by the way, went on to note that women raised a record amount of VC money in 2018.
Getting more visible
The value to be won is immense, so reports say. Up to £250 billion ($325.3 billion) of new value could be added to the UK economy if women started and scaled new businesses at the same rate as UK men. Even if the UK were to achieve the same average share of women entrepreneurs as best-in-class peer countries, this would add £200 billion of new value to the UK economy (source: The Alison Rose Review of Female Entrepreneurship. Rose is the Chief Executive of the Group). One in three UK entrepreneurs is female: a gender gap equivalent to about 1.1 million missing businesses. Female-led businesses are only 44 per cent of the size of male-led businesses on average, in terms of their contribution to the economy, and male SMEs are five times more likely to scale up to £1 million turnover than female SMEs (source: Alison Rose study, as previously stated).
There is evidence that some women aren’t pitching for capital because they think they will not get a hearing, Susan Fouquier, regional managing director, business banking in Scotland at Royal Bank of Scotland, said.
In most cases, sources of capital will be male-dominated, she said.
Fouquier said that RBS (the group is being renamed as NatWest Group, as reported here) is pushing hard to break through this problem and raise awareness among investors about the great potential of female-run enterprises. The bank, for example, runs business accelerator programmes and uses its networks to bring people together. (The private banking arms of RBS, such as Coutts, also run networking events bringing their high net worth clients together where they can tap interesting opportunities.)
With women making up just over 50 per cent of the global population and increasingly significant holders of wealth, both liquid and in operating businesses, the need to tear down old boundaries has become more urgent. If people want enough money to achieve their goals, they cannot afford to let old attitudes to get in the way.
“Diversity” is a term that trips easily off the tongue but perhaps there’s not enough where it counts - different voices within business and finance. Arguably many recent problems are caused by an echo-chamber effect if talent comes from only one side. Take the 2008 crash and the complacency that spawned it. A bit more diversity of views might have made a difference.
This approach is part of a rising trend. Women want to use their increasing financial firepower to back women in business, and there are examples in the US and UK. In the US there are organisations such as Plum Alley Investments, founded in late 2015 by Deborah Jackson and Andrea Turner Moffitt as a platform to invest in female entrepreneurs while engaging a broader base of investors in the asset class of venture capital. In the UK there is the Angel Academe. These organisations are already substantial, and have gained hard-fought experience in managing women-run businesses.
(To see more about women's issues in wealth management, click here. To see research done in the field by this news service, click here.)