The following is a rough draft of an article I wrote about women in leadership roles in finance. The article was scrapped and reimagined, but I felt its original contents (with the time spent researching and writing) deserved to see the light of day. Enjoy!
Despite the fact that women now receive the majority of college degrees in the U.S. across every category—from bachelor’s to doctorates—women in the workforce have been historically underrepresented, specifically in leadership roles.
In recent years, we have made notable progress, but one industry, in particular, has been slow to fix the scarcity of women in powerful roles.
The finance industry has long struggled to keep pace with many other professional fields. According to a recent report by McKinsey & Company, women and men in financial services begin their careers on equal footing, making up roughly equal portions of entry-level staff, but higher up the ladder, women account for only 19% of positions in the C-suite. This is slightly lower than the 22% average for U.S. women overall.
- Among senior roles in venture capital and private equity, women held just 9% and 6% of the positions, respectively.
- In hedge funds, women only occupied 11% of senior management roles.
- Women manage just 1.6% of mutual fund assets.
- Only 6% of the Chief Investment Officers (CIOs) of the largest institutional U.S. money managers are women.
- Only 4% of senior leaders in real estate are women.
- 36% of senior private sector managers and public sector officials are women.
- 30% of senior officials and managers were women, up only 1% from 5 years ago.
In North America, women account for over half of the entry-level workforce in financial services but represent fewer than 1 in 5 positions in the financial services C-suite. It seems as women advance in their careers, they steadily lose ground to their male peers at every single stage. In fact, women are 24% less likely to attain their first promotion than their male peers, even though they request promotions at similar rates.
As for the talent, it exists. The pool of women seeking a charter from the CFA Institute has risen to 32% of all candidates. Women also account for 36% of the classroom at FIU Chapman Graduate Business School earning a Master of Science in Finance.
The research cites their “experiences” as an explanation for the steep drop-offs in female representation between entry-level and middle management roles.
Early in their careers, they do not aspire to top positions.
Coming into an industry with so few women presents challenges. A limited number of female role models in leadership positions might also limit women’s motivation to seek those higher roles, creating a vicious cycle.
Only 26% of women aimed for top executive positions as their goal compared to 40% of their male peers.
Entry-level women cite:
- Lack of interest in such roles
- Concerns about balancing family and work commitments
- Perceived pressure associated with the top roles
- Too much politics makes it less appealing
When they do aspire to top positions, they lack the support needed to rise.
Earlier tenure women receive less encouragement and support from managers and senior leaders. Research shows women who receive advice from managers and senior leaders on career advancement are more likely to be promoted.
Unfortunately, entry-level women are less likely than men to have managers who act as their advocates and help them identify opportunities to pursue.
How Can We Help Women Succeed?
1. Changing the culture and structure of the workplace.
There are preconceived notions about finance that the industry has had a hard time shedding. Whether it’s long working hours, a masculine and unwelcoming culture, or the thought that women are simply not interested or capable of working in finance.
We need to focus on creating a more flexible, equitable, and supportive workplace, especially in a post-pandemic era, where 1 in 4 women are considering downshifting their careers or leaving the workforce due to COVID-19 across all industries. Without bold steps, we could erase all the progress we’ve made toward gender diversity.
2. Provide meaningful mentorship and sponsorship.
Many women might not recognize the importance of cultivating a strong network of supporters and advocates, but the research shows it makes a difference when we mentor and sponsor women in the workplace.
Guide them to seize the opportunities available to them or the resources that will develop their skills and knowledge. Women should be supported and pushed to throw their hats in the ring for bigger roles.
Carolina Peraza, Finance Director at Warner Music Group, says, “the most gratifying experience has been mentoring people. It has given me not only the opportunity to guide and help but also to learn about my capabilities as a professional and a leader.”
Eileen Cardelle, Vice President of Broker Relations at the MIAMI Association of REALTORS, says, “I believe it is important to learn from those who are senior to us, and then pay it forward by teaching and helping the younger professional women.”
“If there is someone you admire in the community, in the industry, reach out to them, have coffee, ask questions, and don’t shy away from challenges and opportunities. They will make you stronger. It is difficult, it might be scary, but you will be a better person at the end of the day for it,” says Mey-Ling Perez, Managing Director of Private Banking for First Horizon Bank.
3. Hold your executive team accountable.
Companies need to view gender parity at the top as a strategic priority integrated into the organization’s day-to-day work. Senior leaders need to champion diversity and inclusion. They should inspire diversity of thought, reflecting their customer base. Gender diversity has to be a target with a measurable KPI.
The gender gap in finance comes as both a challenge and an opportunity.
With the vast amount of research that has been published, industry leaders and executives have acknowledged the problem and are working towards gender parity.
- In 2019, a record number of women (54) became partners last year at venture-capital firms for the first time.
- Within finance, banking has made the most progress with women accounting for 26% of the top 5 highest-paid positions, up from 11% in 2010
- Women now account for 22% of corporate boards, twice the figure in 2000.
In McKinsey’s research, 90% of financial service companies surveyed assert a commitment to diversity. It’s making a massive difference for everyone.
Companies in the top quartile for gender diversity on executive teams were:
- 21% more likely to outperform on profitability
- 27% more likely to demonstrate superior value creation
- Companies with at least 30% of women in management have enjoyed higher subsequent one-year returns on equity since 2010
Diversity within firms has also been shown to drive innovation and increase productivity. The case for diversity has never been more convincing.
Achieving gender parity is ambitious, and despite all the progress, we have a long way to go. Still, it’s clear that when we empower women to take on leadership roles, we see a positive and beneficial change in the workplace.
“Challenges have been many. Since I started, finance has been a male-dominated field. I have been the subject of harassment and other situations. However, if there is one piece of advice I can give to anyone is to believe in yourself and your capabilities, and never ever let anyone put you down,” says Peraza.