Barbara Stewart, CFA, is a researcher, currency expert and former portfolio manager with 25 years' experience in the investment industry.
I am happy to announce that, as of 2017, finance is finally outgrowing its tension with women.
I mean tension in the way that Carl Jung used it. He said that "the greatest and most important problems of life are in a certain sense insoluble. …They can never be solved, but only outgrown."
The Jungian "tension of the opposites" perfectly describes the relationship between today's financial industry and women. He said this tension can hold for a long time and be extremely uncomfortable, until it changes into a third and better outcome.
I have been in many investment committee meetings where the alpha male lead manager and his predominantly male followers (often from the same MBA class, sports team, fraternity or golf club) sat around a table and spent the hours agreeing with each other in what sometimes seemed like a single voice. There were some women, but most tried to be one of the boys, with only the occasional outlier who had a different way of looking at the world.
The standard script was that the alpha male stated his views on a stock, the followers gave their input, a couple added "colour" and everybody nodded and moved on. But sometimes a voice (it may have been mine!) asked "how can I explain what the company does so that our customers will understand?" Female clients tend to ask those questions, but asking that in an investment committee meeting runs the risk of making you looking foolish.
Investment committees matter: a more diverse group will ask questions that don't occur to less-diverse teams. And it is in tricky markets when asking different questions really matters: groupthink is fine with a tailwind, but a disaster when your firm's picks aren't working out.
Diversity will enhance a firm's ability to ask better questions, and a diverse approach has been shown to produce both better results and lower risk. Every portfolio manager team is "seeking alpha" (the amount by which the portfolio beats the market): perhaps the path to better alpha is to move away from traditional alpha male dominance?
Most firms are rapidly scrambling to figure out how to sell more effectively to female customers and attract much-needed female advisors and executives. More women = more money.
It's estimated that women already make more than 80 per cent of all purchasing decisions and will control two-thirds of all wealth within the next decade.
If companies want to attract more female clients, they need to help women align their investments with their values. This is a language women understand: their investments should match their personal values, and women prefer to be engaged emotionally in an investment decision.
A diverse investment team will better mirror a diverse customer base and understand what motivates each and every customer. Women are incredibly loyal customers and love to share, so they are likely to bring along assets from their parents, their siblings and everyone they know.
Much can be learned from firms such as Canada's Kensington Capital Partners. With 50 employees, they are 50 per cent female, challenging the status quo for the industry. A recent hire was renowned technology entrepreneur Gerri Sinclair.
"Part of the reason that I decided to start working in the investment field was that there were so few women in the field," she said. "There was no way that I would have joined [Kensington] if this was a firm of only white guys! I was impressed that at our first dinner, there were three women and two men at the table, and I also liked the fact that the Kensington culture was also reflected in the wide diversity in age, ethnicity, and personality of its people."
Only 11 per cent of global senior venture capital employees were female in 2015, and in private equity buyout firms, that figure was only 9 per cent. According to a study by the CFA Institute titled Gender Diversity in Investment Management, women represent less than one in five CFA (Chartered Financial Analyst) charterholders both globally and in Canada.
The most often-cited reasons for the lack of female talent in finance are the long hours, the difficulty in balancing work and family life, and the general shortage of available qualified female candidates.
Maybe we need to advertise more, but particularly on the sales side, that the investment business is one of the most flexible in terms of time at the office. It is all about pay for performance. Produce results and no one will care how you made it happen or where you were.
I think the old guard in money management is fading, and they aren't putting energy into making serious change at this point. Meanwhile, behind the scenes we have the new guard (of smart men, women and millennials) working passionately to move the world of finance forward in leaps and bounds.
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