The investment industry has certainly gone through a period of turmoil over the past 15 years, bookmarked by the infamous dotcom bust and the potential reshaping of the eurozone. Investor confidence has been shaken, and an entire generation of millennials has virtually no faith in the equity market. In fact, a recent Goldman Sachs survey found that fewer than 20% of millennials thought the stock market was the best avenue to save for the future.
Since the financial crisis, our industry has strived for positive changes — better practices, better regulations and better transparency — all to better serve clients. One way we can make an impact is by incorporating more diverse views and thoughts into our practices. Studies show that diversity produces better outcomes for investors; this finding holds true at senior leadership throughout firms, from investment teams to senior management to the board of directors.
Mixed-gender teams often work well together because men and women think differently, something that should be embraced and that, in practice, should help practitioners build much stronger investment firms. Research shows that female investors do a better job matching return expectations with results. Women also tend to trade less, which leads to better returns over the long term. If you combine these inherent skills with those that men possess, you can build a very solid investment team.
Studies also show that many women are often better communicators, which makes them well suited for leadership roles. Kip Tindell, CEO of the Container Store, recently stated that “women possess innate skills that cater to communication: empathy and emotional intelligence — two key pillars of conscious capitalism.” Yet, only 23 of Fortune 500 CEOs are women.
Strong communication skills and the ability to assess risk differently should also enable women to play a significant role in the global economy in the coming decade. With nearly a billion women poised to enter the global work force in the coming decade, managing women's wealth — and the ability to relate to female clients — will become more important than ever.
Research and statistics highlight the importance of managing women's wealth. Women live longer and are responsible for more household financial decisions than ever before, and there are increasingly more women in the workplace generating personal income and retirement assets. Female clients are often more relationship oriented, and thus loyalty and good communication skills are imperative (these traits are usually more important than relative returns). Often, these characteristics are also shared by female portfolio managers, so the pairing of the two is a natural fit that can lead to higher retention of clients.
If the investment industry is such a good fit for women, why don't we see more women entering the industry, and why don't we see more women in senior roles? The percentage of female CFA charterholders, a proxy for the industry, has been stagnant for several decades (around 18%). Morningstar Inc. recently published a paper showing that fewer than 2% of all mutual funds' assets are run by women — a startling figure.
There are several reasons for this lack of participation. There seems to be a misperception that the investment industry is mired in greed and would not be a rewarding long-term career choice. Although the reality is that numerous career paths within the industry are great fits for women, we need to reach out to young women at a much earlier point and educate them about these opportunities. Statistics show that women make great analysts, CEOs, CIOs, risk management experts, portfolio managers, and wealth managers, to name a few.
As senior women in the industry, we need to “lean down and yank up” (a twist on Sheryl Sandberg's “lean in”) to recruit, mentor and sponsor more women for the industry. The generation ahead of us broke through the glass ceiling; it's up to us to bring more qualified and talented women into the industry. As Carla Harris, managing director and vice chair of Morgan Stanley, said at the recent CFA Institute Women in Investment Management Conference, “Give your power away, and empower more women.”
We must create firm cultures that encourage diversity — in gender, thought and teams. Diversity should be tied to overall firm strategy. Women are the universal diversifier, which is why this subject is such an important one to embrace and debate. The end result should ultimately benefit investors.
Leah Bennett is co-chief investment officer at South Texas Money Management.