Money managers get serious on DEI efforts

Money managers are creating new senior executive positions within their organizations to lead their diversity, equity and inclusion efforts.

Such efforts come as the industry overall has struggled to create a diverse workforce — not only when it comes to women and ethnic minorities, but also LGBTQ, veterans, the disabled and caregivers. Such shortcomings were spotlighted over the last year during the coronavirus pandemic and a push for racial equity after the murder of George Floyd in Minneapolis.

Having a top-level diversity chief who reports directly to the CEO, rather than being siloed in human resources, is expected to bring greater urgency and accountability to firms' efforts, sources said.

"The world is waking up to the fact that 'I' and 'D' can't just be a side-desk topic anymore for the dedicated few across the firm, but it needs to have a dedicated role to look at all aspects of diversity if we (are) going to see a shift in the numbers," said Lindsay Hudson, head of inclusion and diversity at Aegon Asset Management in London.

Ms. Hudson took on the role in January.

Other managers, too, are taking steps. So far this year, P&I reported on eight managers appointing senior DEI officials, five of which were newly created positions, vs. one hire in 2020, and one in 2019.

Results from a survey on diversity released by the Investment Company Institute and Aon PLC subsidiary McLagan show how much work still needs to be done to improve DEI in the industry.

Women represented 41.8% of the money management industry's workforce as of Nov. 1, while minorities made up 30.5%. And when it comes to senior leaders, things become even less diverse, revealing that most money management executives are white (83.7%) and male (74.6%).

"DEI is relatively new to the asset management world and there's so much work to do and it's so nice that organizations are taking an interest," said Indhira Arrington, New York-based managing director and global chief diversity, equity and inclusion officer at Ares Management, who took on the role at the alternatives firm in January. "When you think about asset management, it's one of the last frontiers of DEI."

Sources emphasize that diversity and inclusion are two separate considerations that the money management industry needs to understand. While diversity is essentially the headcount, inclusion is creating a culture in which diverse employees feel essential to the firm's success, sources said. That means creating a culture where diverse employees feel comfortable sharing ideas at meetings, know that their ideas are heard and valued, and are considered for promotion to senior leadership roles.

"There's diversity and inclusion. And diversity without inclusion is like an airplane without lift," said Alan Bowser, co-head of the Americas region and chief diversity officer at Bridgewater Associates, Westport, Conn. "You can think about (adding) a lot of diversity into your firm, but if you don't empower inclusion, you're not really getting the value of that diversity."

Despite an increased push for increased diversity and inclusion, Laura K. Pollock, New York-based founding partner at global executive and talent strategy firm Third Street Partners LLC, told P&I: "Asset managers are not where they should be," noting that only a few have focused on it properly.

Ms. Pollock said managers "fall flat" once they've brought diverse talent into the organization, often failing to develop and retain diverse candidates.

Managers need to have a strong onboarding process with someone senior at the firm helping the new employee integrate or assimilate into the organization in order to help candidates move up the ranks, she said.

Though most money managers already had DEI efforts and programs in place within their organizations — one of the reasons why many newly appointed chief DEI officers said they decided to join their firms — this is the first time that many firms such as Aegon AM, Loomis Sayles & Co. and Ares Management Corp., among others, have created a senior role to oversee such efforts.

Sources said there are several factors — both internal and external to the industry — driving this push for managers to establish senior positions to head DEI and make it a top area of focus.

"One primary driver is to create a new senior role to coordinate and take control of the diversity, inclusion and equity efforts that have been taking place within the asset management firm," said Daniel Celeghin, managing partner at money manager strategy consultant Indefi in New York. "Another is to expand and accelerate the pipeline of diverse candidates for promotion."

This focus on managers' pipelines of diverse talent is key. Money managers are being forced to reckon with an increasingly competitive industry and an increasingly diverse talent pool being given more options for where to work.

For example, Raymone Jackson, who joined T. Rowe Price Group Inc. as global head of diversity and inclusion in late October, said that the firm is focused on broad recruiting strategies to bring in a wider array of candidates and expects 40% of candidates to be diverse. The company exceeded that goal last year: 64% of the candidates for open positions were diverse, a spokeswoman said.

"We want to fish from a broader and deeper pond," Mr. Jackson said.

One such program is its MBA Day, which brings diverse candidates to T. Rowe's Baltimore headquarters to spend three days getting to know the firm's people and culture "in the hopes they consider T. Rowe Price as they join the workforce."

Mr. Jackson added that T. Rowe is also looking at "movement in senior leadership roles" within the firm, "not just in entry-level roles."

"We're looking at who's getting hired over time, we're looking at retention, and we're looking at representation within all those pieces of the puzzle," Mr. Jackson said.

Meanwhile, Marques Benton, who joined Loomis Sayles in December as the firm's first chief diversity, equity and inclusion officer in Boston, said that money management firms are now seriously "looking at their policies around hiring, training and succession. Who gets advanced? Who becomes senior management?"

Mr. Benton added that roughly half of the incoming workforce in the U.S. are women and ethnically diverse, so the next step is for the industry to find a way to attract and maintain that talent.

"We want to make sure asset management is an option young people consider for a career," Mr. Benton said. "Engagement is a huge priority."

Added to these industry-specific factors, recent events such as the coronavirus pandemic, the murder of George Floyd on a Minneapolis street last May and a recent uptick in hate crimes against Asian Americans have also brought these issues front and center.

"A lot has to do with incidents that happened last year," said Michelle Gadsden-Williams, managing director and global head of diversity, equity and inclusion at BlackRock Inc. in New York. "The George Floyd incident was a real inflection point. Finally, an acknowledgment that disparities exist is making its way into these organizations."

Ms. Gadsden-Williams, who joined the New York-based money manager in September, said that the increased focus on DEI within the industry is a sign of how "this space has morphed and evolved."

"Back when I started in the industry, it was affirmative action. Then it was diversity. Then diversity and inclusion. ... Now equity is also an important factor in the equation," Ms. Gadsden-Williams added.

These factors all add up to the conclusion that DEI is a matter of key importance for firms if they want to survive, rather than a problem for human resources departments to solve.

"Whether it was the pandemic or racial injustice, whether it was remote work, 2020 revealed the need for people to speak up and embrace their needs," said Corie Pauling, chief inclusion & diversity officer and head of corporate social responsibility and senior vice president at TIAA in Charlotte, N.C. "The year created a platform for my work that was truly unprecedented. If companies aren't serious about it now, they're behind."

Last June, TIAA launched a series of programs to raise awareness of racial injustice and support communities in need through its "Be the Change" initiative.

While more managers are creating a senior role to address issues of diversity and inclusion, Indefi's Mr. Celeghin cautioned managers against the negative repercussions of hiring a chief diversity officer if the role is "more for show than a move of actual substance."

"This is unfortunately the kind of appointment that could degenerate into vague platitudes," Mr. Celeghin said. "The initial positive press you receive when you announce the appointment will be great, but if the person in this role isn't empowered, if there's no tangible mandate, if there aren't tangible results within six to 12 months, it will backfire."

The chief DEI officers with whom P&I spoke detailed their tangible goals and quantifiable targets, from increasing the percentage of woman and Black managing directors within their organizations on an annual basis, to using data and analytics to track demographic trends and pay equity.

But while almost all of them are using data and analytics to track and measure their progress, many agreed that the qualitative measures are just as important, if not more so, than the quantitative goal posts.

TIAA's Ms. Pauling said that although her firm is "very analytics driven," it doesn't dictate quotas to its senior leaders.

"We don't set quotas in the sense of, 'You must hire X number of Z people.' It does not breed the type of ambassadorship you want," Ms. Pauling said. "We set targets and do other analytics to evaluate where we are. But (our targets) shouldn't feel like dictates."

On May 1, Thasunda Brown Duckett succeeded Roger W. Ferguson Jr. as president and CEO of TIAA, making the manager the first Fortune 500 company to have two consecutive Black CEOs. Ms. Duckett is also TIAA's third Black CEO in the firm's history.

Meanwhile, Regina Curry, who has been Franklin Templeton Investments' chief diversity officer since August, explained that while her firm uses data to set quantifiable targets, hitting targets alone is not enough.

"We can say we want to have gender balance, but that's not really telling you where women are in your organization," Ms. Curry said. "Are they in client-facing roles? Are they being prepared for executive leadership roles?"

Mr. Bowser from Bridgewater agreed that quantitative aspects are important, but they can be given too much credence and don't lead to sustainable change if they're not acted upon.

"In finance, we love to count things," said Mr. Bowser, who took on the role of chief diversity officer in January. "But it's the qualitative aspects that have impact."

Ultimately, most chief diversity officers agreed that a core goal of the job is to insert their firm's disparate DEI efforts into every aspect of the organization, and have these efforts be sustainable.

When Ms. Arrington joined Ares, she said that the firm "had put in place all the building blocks to create a DEI strategy," so she sees that her job "is to create a framework and infrastructure to operationalize it and take DEI to the next level."

"I was brought in to solidify these processes within the organization," Ms. Arrington said, adding: "20% of my job was embedding DEI into our business practices."

Ms. Curry, who had served in this role at Legg Mason since January 2018 before Franklin Templeton acquired the firm, said: "When I think about my core deliverables, one thing was to create a more sustainable DEI model," adding that "hiring a CDO alone isn't going to be enough, (since) meaningful change has to come from dedicated leadership."

"You can have great inclusive leaders, but if you don't have the right processes, those won't help you," Ms. Curry said, adding that neither she nor Franklin Templeton's CEO Jennifer M. Johnson can be everywhere. "Is the right strategy and framework in place?"

In mid-March, Franklin Templeton expanded its diversity and inclusion efforts by appointing LeeAnn Sims as director, diversity & inclusion. Ms. Sims is based in Baltimore and reports to Ms. Curry, helping her drive the firm's diversity and inclusion strategy, governance structure and performance measurements.

Bridgewater's Mr. Bowser told P&I that there's still more work to do. Ultimately, he wants DEI to be sustainable throughout the firm and doesn't need to be constantly enforced by the top leadership.

"We want to systemize how DEI gets embedded into the whole organization," he said. "It shouldn't depend on Alan Bowser being CDO. It shouldn't depend on David McCormick being CEO."

Mr. Bowser added: "My real goal is to work myself out of a job. If I do my job right, there eventually won't be a CDO."