A Difference of Opinion on the Gender Diversity in Investment Management: Food for Thought

Unlike Korth’s somewhat simplistic idea of asset management moving towards relationship building, Morningstar noted that a change in how teams are managed towards building ones with more diverse skill sets may help change the ratio of women in asset management.

A recent article by FinSum writer Duncan MacDonald-Korth that was highlighted on NASDAQ’s news page noted that demographic changes among retirees may create opportunities for more diversity among advisors, at least as to gender. Yet, that report seems to not align with other, more recent studies. That may beg the question, what is the state of gender diversity in asset management and financial advising?

Korth reported three main things that lead to an increase in opportunities for female financial advisors: first, a demographic shift as older advisors retire; second, an increase in the demand for financial advice; and finally, a culture change towards relationship building that will allow female advisors to thrive. “The financial advice industry is going to go through major changes over the next decade due to demographics and an evolving culture. The average financial advisor is 65 years old and thinking about retirement and succession planning rather than growing their practice. For younger advisors, it presents a unique opportunity to advance their careers.”[1]

In nearly the same timeframe, other reports indicate the lack of female asset managers requires significant attitudinal changes. In their latest Gender Lens Investing Recap, the folks at Parallelle Finance noted that the current situation in asset management was a “depressing picture.”[2] Parallelle Finance conducts gender lens investing research, analysis, and advocacy. They reviewed the results of Responsible Investor’s Women in Finance Survey 2024, noting that “44% of respondents, the majority of whom were women, reported a belief that gender is a barrier to career progression.”[3]  

Specifically, they noted that the problem may arise from culture, not opportunities as Korth wrote in his recent piece. “In terms of culture, experiencing non-inclusive language or behavior in the workplace was reported by 60% of the respondents, with sexist comments and inappropriate feedback in the mix…. An overarching sentiment was that policies may be in place, but equality is lacking in practice and attitude.”[4]

Yet, there may be some room for balance between these two extremes. For example, a separate contemporaneous study showed a strong effort towards diversity initiatives. “The results of the survey of 1,200 asset managers, Callan’s first on the subject, were that 70% had a formal DEI policy, 71% had diversity recruitment initiatives and 65% had a DEI training program.”[5]

Morningstar also conducted research on the topic of gender diversity in asset management. It found “[w]hile the asset management industry has made strides toward inclusion, women are still underrepresented. Globally, about one in eight fund managers is a woman. That ratio hasn’t meaningfully budged in over a decade, even as teams have grown, and more professionals have entered the field.”[6] Unlike Korth’s somewhat simplistic idea of asset management moving towards relationship building, Morningstar noted that a change in how teams are managed towards building ones with more diverse skill sets may help change the ratio of women in asset management. “Women in asset management do play a prominent role in mixed-gender teams. Our study found that 26% of funds are led by a team that includes at least one woman.” Other research, such as that conducted by the Knight Foundation concerning higher education endowments found many of those institutions with similar percentages of AUM by women or diverse groups.[7]

These different sources and reports seem to find common ground on the proposition that enhancing gender diversity on management teams is a common goal and one supported by many. Financial advisors may want to consider how they might implement Morningstar’s findings concerning mixed-gender teams and what impact that might have on their larger clients, such as the endowments studied by the Knight Foundation.

[1] https://www.nasdaq.com/articles/changing-culture-retirements-resulting-in-more-opportunities-for-younger-female-advisors

[2] https://parallellefinance.com

[3] https://parallellefinance.com/gender-lens-investing-review

[4] https://parallellefinance.com/gender-lens-investing-review

[5] https://www.ai-cio.com/news/asset-managers-show-strong-efforts-at-dei-survey-finds

[6] https://www.morningstar.com/business/insights/blog/fund-managers/women-gender-gap

[7] https://knightfoundation.org/reports/knight-diversity-of-asset-managers-research-series-higher-education-2024

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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