How to fix financial services? Diversity

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Finance is having a rough time. The risks of the climate crisis, innovation inertia, never-ending wealth gaps and financial illiteracy have all started to eat into day-to-day business. It’s getting stressful. And stiflingly hot.

Yet, in a poetic twist of karma, the solution could be something that the industry has long neglected – a little fairness. After all, giving others the chance to contribute benefits everyone.

Here are five ways diversity can fix problems for financial services, especially bridging lenders.

1.   Prevent disasters

Teams that lack diversity tend to make terrible decisions, suffer from low creativity and walk straight into disaster with misplaced confidence. It’s a social concept known as “Groupthink”, and – to put it mildly – it’s an evil, robbing b**tard.

Groupthink was one of the leading causes of the 2008 financial crisis. And arguably, it’s also behind questionable ESG and greenwashing issues in finance.

However, leaders should breathe a deep sigh of relief because there is a way to avoid groupthink. A genuine mix of viewpoints, experiences and backgrounds provides the solution, paving the way for robust decision-making.

“Your view of the world […] is based on the window you look out of”, explains one anonymous industry professional. “[To avoid bias], you need to allow people to think differently and to be different”.

2.   Help underserved markets

There are so many underserved markets in financial services. And it’s partly because so few decision-makers are from those communities themselves. “By embracing diversity, we avoid the risk of missing out on underappreciated – yet potentially lucrative opportunities”, elaborates Tiba Raja Executive Director, Market Financial Solutions.

Raja has a point. By overlooking women, for example, financial services are leaving over $700 billion on the table, according to 2022 research.

A simple way to capture these hungry markets is to bring people from different backgrounds and cultures into the decision-making process. Or in other words… embrace real diversity. It’s common sense!

For example, someone undergoing IVF treatment may have suggestions for new clientele. Somebody who is deaf could highlight how to make financial services more inclusive. Or a person preparing for Ramadan could add features to existing products so that they become religiously compliant.

“Look around”, comments Raja. “Seek faces like your own as well as those that are different. The more differences you see, the likelier you’ll witness new ideas come to light”.

3.   Solve problems faster

Diversity is paramount for problem-solving. “When I started to talk, the room listened as I brought another perspective”, comments Diversity, Equity and Inclusion expert Lucy Heavens. “Sometimes colleagues agreed, sometimes they didn’t, but it was this diversity that ignited […] different ways to solve problems”.

One study found groups with mostly women solve problems faster than groups with mostly men. This is because women tend to encourage everybody to speak up. They’re also often better at reading the room.

Yet, in stark contrast to this finding, women make up less than 20% of most boardrooms in finance today. And to make matters worse, 60% of financial leaders in the UK attended private school, which can be – shall we say – a little repressive. Especially thirty years ago. (For eye-opening insights, check out “boarding school syndrome”).

To get more out of meetings, why not try inviting more women than men encourage them to take the reins? You might just solve problems faster!

4.   Create genuine ESG

Harvard found that “…companies with gender-diverse boards are associated with better performance on ISS’ environmental and social risk management measures”. And they’re not alone. Time and time again, academics reaffirm that the more diverse a company is, the better it is for the planet.

Despite the lengthy research, the reasons are obvious. Decision-makers who represent more of society will benefit more of society. Simple.

As environmental, social, and governance factors become less of a “nice to have” and more of a business risk, there’s never been a better time to diversify the boardroom. For the sake of the planet, we need to.

5.   Enjoy a stronger workplace culture

Increasing inclusion by just 10% improves absenteeism dramatically. Research by Deloitte shows that for every employee, it adds nearly one day of working a year. What’s more, according to Gartner, inclusive firms reduce turnover by 20%! So, what is inclusion? And how is it different from diversity?

“Inclusion is where people’s differences are valued and used to enable everyone to thrive at work. It’s what attracts diversity”, Heavens elaborates. “The way I like to explain it is: Diversity is where everyone is invited to the party. Equity means that everyone gets to contribute to the playlist. But inclusion is where everyone has the opportunity to dance”.

There’s no point in having diversity without inclusion. Even if you have a mix of different people in your firm – as some bridging lenders do – you must ensure everyone is heard, valued and included.

“People shouldn’t be scared to speak up”, adds Raja. “Even if things go wrong, they should feel encouraged by being acknowledged and can contribute in the future”.

A better world awaits

Giving everyone a seat at the table offers vast advantages, stretching far beyond the office walls. Underserved communities can finally get the products they need and deserve, potentially narrowing the wealth gap. In addition, underrepresented people have role models to look up to, which attracts even more newcomers in a virtuous circle.

We can even help save the forests, oceans, plants and creatures with more innovative and sustainable financial solutions. All we need is for a few firms to break the cycle and empower truly diverse groups of decision-makers. Different classes, genders, backgrounds, accents and abilities are needed to fix today’s most pressing problems.

The future of the planet starts with the composition of the boardroom.

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