Wall Street needs to come clean on diversity data

Fintech has a gender diversity problem and it’s no secret. Women make up just 7% of the global fintech founders, according to a recent study by Deloitte, and women-led startups raise 50% less capital than their male peers. With less access to funding, women are less likely to find solid footing into the fintech community.

The Harvard Business Review also found funding decisions are often unconsciously based on gender. After listening to identical pitches by both men and women, investors usually preferred pitches made by men. Admittedly it’s a challenge to find women wealthtech executives to interview for stories or invite on panel discussions, although there are thousands of qualified women in fintech.

Addressing the gender gap is of course a moral responsibility. But it will also open up fresh perspectives and ideas, and eventually new product lines specifically aimed at addressing financial wellness. Some of the largest financial services firms have launched gender diversity efforts, like Goldman Sachs, which aims to invest $500 million in gender-diverse companies. Likewise, J.P. Morgan recently launched an initiative to support women founders by providing them greater access to capital.

The efforts are a good start, but what’s really needed is more transparency around gender diversity reporting at the highest levels. The nation’s wirehouses have been reluctant to release specific statistics about diversity and have a long history of being nearly all white and male. Problems with hiring and building a diverse group of financial advisers are nothing new; Wall Street has been known colloquially as an old boys network for decades. However, U.S. companies are not required under SEC rules to publicly disclose workplace diversity metrics or diversity-based pay breakdowns.

What we know for sure is that with each woman added to the C-suite, there’s a threefold increase in the number of women in senior leadership roles, according to the Deloitte study. Let’s put the multiplier effect to good use.

In a surprising move in August, Merrill Lynch Wealth Management released adviser diversity data and reported increases in the number of women and ethnically diverse advisers. Andy Sieg, president of Merrill Lynch Wealth Management, said his company is seeking to more accurately reflect the nation’s changing population and appeal to potential clients.

Sieg doubled down at a recent CFP summit, saying more transparency around diversity is healthy for the industry and the recent protests over the killing of George Floyd last year led to an epiphany at Merrill that “full transparency was overdue.”

There’s no reason for companies to keep investors in the dark about diversity.

Opening up the books will put pressure on companies to hire more women and also allow the industry to acknowledge the firms that succeed. Kudos to Merrill for showing the rest of the industry the benefits of promoting diversity.

The rest of Wall Street needs to follow suit and report gender and racial diversity breakdowns quarterly. It’s the right thing to do.