Improving Culture in Financial Services

Diversity and inclusion remain key supervisory concerns for the FCA. Recent findings have indicated that while many firms are showing improvement, there is still more that needs to be done.

The FCA observed 12 financial service firms across multiple sectors to see how they have designed and embedded diversity and inclusion strategies into their daily practices. The publication showed that the majority of the firms spoken to had been making serious efforts towards representation, with several thoughtful initiatives already underway since 2019.

Most firms were focused on addressing gender representation, with ethnicity also starting to receive more attention. It was noted, however, that other demographic characteristics were receiving much less attention than expected. Fewer still, had recognised or implemented measures to consider the diverse needs of their consumer base, which could have significant implications as we move into the new year.

Some of the firms’ strategies for improving diversity and inclusion were also believed to be too “generic” in their approach or failed to take a “holistic view”. Within the work environment, diversity and inclusion is often closely interconnected with workplace culture. However, the findings suggest that firms have less of an understanding of this connection and have taken a “compliance approach” instead of addressing any cultural issues they may have.

Another worrying finding revealed that some firms were focussing exclusively on senior staff diversity out of regulatory obligation, rather than genuine commitment. The FCA warns that: "such focus, in isolation, risks creating a culture where firms attempt to 'poach' diverse senior talent rather than develop their own pipelines”. Taking this approach is not sustainable and is less likely to foster change that is meaningful or long-lasting.

Changing the Image of Financial Services

It’s not just the internal issues that firms need to address when developing strategies for diversity and inclusion. The public perception of their consumers also needs to reflect these changes.

In a recent speech, Emily Shepperd, Chief Operating Officer and Executive Director of Authorisations for the FCA, said the culture of financial services is often depicted as “either dull and Jurassic or reckless and scandalous”. Film and television media often depict the industry as one of (usually white, male-dominated) glamorous lifestyles that are fuelled by greed, putting profits before customers or even their own staff. It certainly makes for thrilling entertainment, however when they are based around real events or people (such as, The Wolf of Wall Street, Margin Call, and The Big Short, to name a few), is it any wonder why the current public perception is a negative one? 

The FCA considers culture as a root cause of harm and conduct failings, particularly where a firm’s purpose, leadership, remuneration policies, and governance arrangements are ‘unhealthy’. If the culture of a firm is unhealthy, then people may no longer feel safe or represented and may no longer wish to work for the business. In turn, this may result in the firm being less representative of its customer base, thus increasing the risk of consumer harm. 

Developing Healthy Cultures

Leading by example will be crucial for firms in the lead up to the new Consumer Duty next year. If the strategies aimed towards improving diversity and inclusion have no meaningful purpose for senior managers, that is likely to be reflected throughout the culture of the rest of the firm.

Establishing an environment where it is safe for staff to speak up or challenge decisions, is essential for firms to develop a healthy culture, particularly one that aims to protect consumers from foreseeable harm, as well as deliver market integrity.

Firms should be aiming to:

  • provide the right environment for employees of all backgrounds to feel safe challenging decisions and speaking out
  • develop measures and initiatives for diversity and inclusion and monitor them to identify what is/is not working and why
  • discourage irresponsible behaviour by ensuring higher pay or bonuses are not based on volume of sales or productivity metrics

If you are a Development Zone user, you can find a range of courses on diversity and inclusion in the course catalogue. For those not currently using the system, you can find out more and request a free 14-day trial here:

About the author

Jessica joined RWA in 2018, having graduated with a First Class Honours degree in Film Studies. Her role as a content designer involves developing new and engaging e-learning modules as well as assisting in the creation of articles for Insight. 

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