Back when I was a young lad in the auditing world, one of the largest clients we dealt with was a long-established commodity broker in the City. This was many years ago, but the structure of the business then tells us much about why issues like diversity and social inequality seem to make less impact than they should in financial services and the City now.
It was a simple structure. It was a partnership, and the chap at the top – and he was most definitely a City chap – made a fortune. We knew: we were the audit team – access all areas.
He and his partners brought in the contacts and oiled the wheels. But the real cash was made much, much further down.
The place was full of what we would now call traders. None of them bore any resemblance to public school City chaps. They were nearly all the sons of a very different sphere of the City: East End stallholders and the old-fashioned type of market traders. They were sharp and gregarious, money makers all.
The combination was irresistible, and hugely successful. But that success down the years has bred complacency and forced out the old diversity. I suspect that is one of the reasons why the City, at the behest of the Treasury and the business ministry, has set up a taskforce to tackle socio-economic diversity in the financial services sector.
Success down the years has bred complacency and forced out the old diversity
But that success is not sustainable. The banking crisis of 2008 was largely fuelled by a bunch of bankers all agreeing with each other that they were doing a jolly good job. That way disaster lies. The financial services sector already has the largest pay-gap by socio-economic background. Without a balance the sector will founder. The lingering culture stifles talent and innovation.
As Catherine McGuinness, policy chair of the City Corporation, puts it in her foreword to the research underpinning the setting up of the taskforce: ‘To be globally competitive, we must be led by performance, and not just polish’.
The research found that almost 90% of senior roles are held by people from higher socio-economic backgrounds. And it is not as though much change is moving up from below either. The report found that those from a lower socio-economic backgrounds took much, much longer to move upwards. It is going to be difficult to combat this.
The report points out that ‘unlike many other sectors, including in broadcasting, law and accountancy, financial services employers are not currently asked for socio-economic diversity statistics by their regulators’.
The banking crisis of 2008 was largely fuelled by a bunch of bankers all agreeing with each other that they were doing a jolly good job
But I suspect this could lead the whole enterprise in the wrong direction – into a morass of headcounts and classifications. It is with good reason that the report makes the fixing of processes, not people, one of its recommendations, calling for review and reform of ‘dominant cultures and opaque processes’. It is within the processes that the problem lies.
And the people involved know it. The bankers’ livery company helps to fund the City’s social mobility charity The Brokerage. Patrick Ntiamoah, one of its ‘ambassadors’, recently pointed out: ‘Inclusion is often partnered with diversity, but it can be seen as the “lost son”. From my point of view, people focus on diversity and often forget about inclusion. Once you’ve got a diverse talent, inclusion is fundamental in maintaining that amazing talent.’
The answer is simply to bring bright people in and ensure they are valued and can progress.