CFA Institute Releases Diversity & Inclusion Guide for the Investment Management Industry

Amidst demand for greater diversity and inclusion (D&I) in the investment management industry, CFA Institute has released a guide titled, “Driving Change: Diversity & Inclusion In Investment Management.” Launched today at the CFA Institute Diversity and Inclusion 2018: Strategies for Success conference in San Francisco, the guide examines the current state of the industry and outlines 20 actions to encourage more diverse and inclusive workplaces, to ultimately achieve better outcomes for investors. 

Research shows that cognitive diversity improves business results, and yet the industry has done little to address this issue,” said Paul Smith, CFA, president and CEO of CFA Institute. “An industry that embraces many voices and perspectives will shape better investment outcomes and a stronger future for the investment profession. The guide serves as a catalyst for the conversations and actions needed to create change, and we are proud to be on the forefront of driving progress.&rdquo

Current state of industry diversity is reactive

The guide is based on data gathered through a series of workshops held from October 2017 to May 2018 in Toronto, Boston, San Francisco, Chicago, Philadelphia, and New York City. The workshops included 344 participants ranging from C-level executives to D&I professionals across 99 companies, representing approximately $38 trillion in assets under management. Firms openly discussed what they are doing when it comes to D&I, what has been effective, and ideas for improvement.

Among the findings:

• Two-thirds (65%) of participating firms have established diversity goals, and the greatest motivations for D&I efforts are improved business outcomes (80%) and talent acquisition (71%). 
• When it comes to focus areas for D&I, participants cited gender (96%), race/ethnicity (83%), and gender identity/sexual orientation (58%) as the highest priorities for their firms.
• The majority of professionals (60%) reported they do not have diversity efforts as part of their formal responsibilities, though many of them are expected to drive change in this area.
• When asked how their firm is doing on diversity, most participants scored their firms as “average” (3.1 on a 5-point scale), with San Francisco reporting the highest (3.5) and Boston reporting the lowest (2.6). 
• When asked to score how the industry is doing on diversity, the overall score was just slight of “fair” (1.8 on a 5-point scale), with Chicago firms reporting the lowest (1.5) and Philadelphia and San Francisco firms the highest (1.9).   

• Following the self-assessments above of their firm and the industry, participants looked at the detailed actions in the Global Diversity and Inclusion Benchmarks, and again assessed their firms, resulting in an average overall ranking of “reactive” on D&I efforts (2.7 on a 5-point scale). 

Workshop participants also discussed D&I efforts that have been effective and formulated new ideas for improvement. Based on these ideas, CFA Institute compiled a list of 20 recommended actions to help industry firms make progress in the D&I space. Those action items range from defining diversity and recognizing biases, to building diverse internal networks and implementing returnship programs for those who have taken a career break. Underlying many of these was the need for quantitative and qualitative metrics to assess progress. 

In phase two of the project, CFA Institute is inviting investment management firms to become experimental partners in putting the ideas into action to prove their effectiveness and establish industry best practices. From January  2019 to December 2020, firms will test the actions, report the results confidentially, and determine more detailed implementation plans. For more information, contact [email protected].

“Diversity and inclusion are not only correlated to performance, but also a powerful differentiator for top talent recruitment, an essential ingredient for the investment industry’s long-term success,” said Maarika Paul, chief financial and operations officer at Caisse de dépôt et placement du Québec.

Diversity and inclusion takes on new urgency for investment firms

Several factors, including a changing labor force and client demand, are creating urgency in the industry to address D&I. According to the Pew Research Center, more than one in three Americans in the labor force (35%) are millennials, making this the largest generation in the workforce. The 2018 Deloitte Millennial Survey found that most millennials (83%) believe that corporations should set out to achieve a broad balance of objectives that include an emphasis on D&I in the workplace.

Beyond workforce demand, requests for D&I are on the rise among investors. A recent survey by CFA Institute found that of more than 800 institutional investors, 83% said gender diversity is important to them. The majority (55%) believed that gender diversity in investment teams leads to better performance through diverse viewpoints, and 28% simply preferred to hire an investment firm that is supportive of gender diversity.

“With changing demographics and the increasing impact of technology, we need our industry to be attractive to all types of people, with all types of backgrounds, if we are going to remain relevant and trusted stewards of capital,” said Wylie Tollette, CFA, executive vice president at Franklin Templeton, former Chief Operating Investment Officer at CalPERS, and member of the CFA Institute D&I steering committee.