When job recruiters finally bother to ask them, African-American and Latino finance professionals mostly say that they highly value sticking with a company for a long time. Sure, starting salaries matter, they concede, but not as much as the opportunity for advancement.
For whites, generally speaking, company loyalty doesn’t rank as high as the upward mobility they believe comes with strategically hopping among financial-services firms.
Here’s the problem: Too few recruiters fully understand these motivational differences, says a Chicago-based task force called the Financial Services Pipeline that is questioning, and hoping to fix, the lack of diversity up and down the management ranks at banks and investment firms.
Nationwide, representation of African Americans and Latinos in the financial services industry remained virtually unchanged from 1993 to 2014, according to the U.S. Census, the Equal Employment Opportunity Commission and the Government Accountability Office.
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In fact, trends show that in five years, absent change, the talent pool will include even fewer managers and executives of color in finance than currently, according to an index the FSP developed with human resources firm Mercer. That’s a puzzling contradiction in an industry that is increasingly handling the banking, borrowing, investing and trading needs of a diversifying clientele.
“Representation of people of color in the industry is significantly less than the general population. Expectations aren’t for a 1-to-1 ratio, but there is a significant gap and the higher up in an organization, there’s less and less representation,” said Valerie Van Meter, a senior vice president at the Chicago Federal Reserve and co-chair of the Financial Services Pipeline steering committee, in an interview after a late-October update on the progress of the three-year-old FSP.
‘Instead of just lamenting lack of a diverse pool of candidates [of color] in what HR brought in, we are increasingly seeing senior leaders taking leadership and pushing back now on HR.’
For example, in Chicago, the population includes 21% Latinos, but only 12% of Latinos make up the Chicago financial services corps, thinning to only 3% among executives and senior management.
Recruitment efforts typically miss the mark, underestimating the degree to which job turnover trends turn off applicants of color, for instance. What’s more, retention suffers because potentially high-quality workers feel stuck when they can’t follow a clear path of training and promotion. That means they’re often more likely than their white counterparts to quit mid-career in search of a different profession.
There has historically been a deficiency about where recruiters seek out candidates, too. “Many financial industry firms go to the same schools looking to recruit minority talent and because diversity at those select schools was rather small, recruiters are fighting over same handful of people and saying, ‘We can’t find talent,’” said Van Meter. “Even among the Historically Black Colleges and Universities, recruiters go to one or two, but we don’t avail ourselves to a broader subset. We have to sometimes recruit in different ways for subsets of the population.”
Van Meter thinks more ground could be covered if executives themselves pounded the pavement from time to time to recruit talent of color.
”The old mantra is ‘recruiting is a [Human Resources] job; it’s not my role to recruit,’” Van Meter said. “Instead of just lamenting the lack of a diverse pool of candidates in what HR brought in, we are increasingly seeing senior leaders taking leadership and pushing back now on HR.”
Some 20 Chicago banks and the Chicago offices of national banks — Discover Financial Services
, Morgan Stanley
, Ariel Investments (the largest African American-led money management firm in the country), Bank of America Corp.
and CME Group
among them — joined the Chicago Fed task force aimed at turning around this diversity brain drain.
What’s more, high-profile diversity in financial services can spill throughout minority-owned businesses, startups and nonprofits, and consequently lack of progress in multicultural finance can sometimes hold back business growth. Certain dynamics have changed the landscape and financial services firms aren’t necessarily focused on cultural needs.
“Things are substantially worse than they were 40 years ago,” Ariel Investments founder John Rogers told Crain’s Chicago Business. “The spinoff benefits of a successful [Independence Bank Founder] George Johnson were so powerful for our [black] community … We lost all of that. We don’t have those types of businesses of scale, and it’s such a challenge.”
Change won’t happen overnight, concedes Van Meter, but one goal of FSP is to allow its members to share what is working at their respective firms. At the October meeting, Morgan Stanley’s expanded recruitment practices with HBCU institutions were acknowledged, as was Bank of America’s diversity and inclusion practices focused on the distinct perspectives of millennials.
Is Chicago much different than other financial centers? Not really. Compared with New York and San Francisco, the representation gap may vary by category, but broad numbers look largely the same across the three metros. See the tables below.
“Of cities with comparable population, everybody is starting behind the eight ball [with financial services diversity],” said Van Meter. “But we felt strongly compelled to try to at least start within our geographic footprint. Chicago is hoping to showcase the leadership we have in this area.”