Speech by Sheree Howard, Executive Director of Risk and Compliance Oversight.
Speaker: Sheree Howard, Executive Director of Risk and Compliance Oversight
Event: PIMFA Women’s symposium conference
Delivered: 16 April 2024
Note: This is the speech as drafted and may differ from the delivered version
Highlights
- Our latest Financial Lives Survey finds more women than men are struggling to cope financially.
- To attract and retain women in financial services, we need to make sure the culture works for all.
- Whether we are parents or policy makers, advisers or consumers, we can all play our part in tackling the wealth gap.
- Advice Guidance Boundary review and our thematic work on investments advice will help industry
to better support investors, including women.
Introduction
Comprehensive school, blue collar parents, redbrick university. Three characteristics that are not always propelling people to the top of our industry. These are, however, my roots.
And then there is the fact I am a woman and a mother. How have I done it? And how can we get more women to do it? I would hope that women would not now need follow my lead.
There was a great deal of study and even longer hours. The truth is I was required to work harder if I wanted to move up the corporate ladder.
It is also the case that, in choosing to adopt three girls one of whom has special needs, we agreed that one of us would have to place home ahead of career and, in our case, it was best for my husband to do that.
While everyone has to balance the various aspects of their lives alongside their careers, in many households, women find themselves working, perhaps for less pay than their male partner, whilst being a carer or parent. This is what my husband chose to do.
But is this the reason why there are so few women at the top of financial services when there is clearly so much talent out there?
And what are the implications of this for financial services and delivery to consumers, particularly women investors, and what is the FCA doing about it?
A bit later, I will talk more about our shake up of the guidance around advice and what we have found when we conducted an industry study.
But first, we have to acknowledge that some women are deterred more from working in financial services than other industries.
From a personal perspective, I need to work in an environment which feels safe, open and respectful of all the diversity each and every one of us bring.
I am a very strong advocate of building healthy cultures in organisations that respect all people.
Firms with those cultures, by the way, that attract and retain staff from a range of backgrounds are best at equipping themselves to know how to serve customers from diverse backgrounds.
Many of you here today have – like me – worked in an environment where you did not feel entirely safe to speak up.
My husband and I struggled for 6 years with infertility. We could not have birth children so embarked on an ultimately futile journey of IVF.
I remember being at an industry conference and running off to the toilets to inject the latest batch of hormones.
I had not told a soul at work, let alone my boss. I am not criticising the individual, just reflecting on the reality of being a woman, in an industry whose culture was aggressively masculine in the 1990s (yes I am that old!).
How different that journey would have been had I been embarking on it now where I currently am, at the FCA. Our ExCo has a majority of women and we are exceeding our own deadlines for equality on the senior leadership team.
There is always more we could do – and we are always holding ourselves to higher standards - but we try to lead by example.
My husband and I ended up adopting 3 sisters who have both enriched and up-ended our lives immeasurably.
As adoptive parents, your children will often have additional needs and we have embarked on many counselling sessions.
My husband was once told by a therapist that all our children’s issues would have been resolved if I had been the one to give up work and stay at home rather than him.
Now that therapist had not met me, so it was not a statement about my character or skills, but just a lazy assumption based on gender. A cultural assumption which has to be tackled – and was by my husband.
He has used it on countless occasions to remind professionals that gender stereotyping is why women footballers continue to be paid much less than the men – and that is despite the Lionesses having actually won a European title recently.
In society’s accepted perceptions, we were not the norm. In our family I was the main breadwinner while my husband stayed at home with the children, tackling most of the unpaid work.
Much has changed in the last 2 decades. Parental leave can be shared. More same sex couples or single people adopt. And more men are taking on parenting and cutting their working hours.
There is greater statutory flexibility in the workplace. However, I challenge whether the cultural acceptance of a new norm is embedded.
I have repeatedly shared my journey at work, not least because colleagues have openly asked me for advice and wanted to swap stories.
My husband has even appeared on a company-wide Teams call to talk about life as a stay-at-home dad and the work he does to help other aspiring adoptive and special needs parents.
How far we seem to have come. Yet at times it seems we are in danger of going backwards as an industry.
A recent report by EY found that the appointment of women onto boards in our sector fell by 28 percentage points year on year.
Last year, that same report showed that a third of all appointments were female directors, a steep decline from 61 per cent in 2022.
Over the longer term, there has been a decline in the share of women employed in the industry from 51% to 43%, whilst the sector has expanded.
This is partly attributed to a reduction in medium and lower skilled roles in which women were more highly represented and the increase in tech roles.
So, it is time that industry pivoted to attract women to those rewarding mid-level and senior roles.
And one of the ways to do that is to make sure the right culture exists so that enough female talent is:
- attracted at the start of a career
- promoted on merit not hard work, and
- retained in the industry whatever their life choices.
Culture is key
We need to make sure that our industry culture is one that attracts rather than deters the top talent from all backgrounds. Women are under-represented in financial services, both as employees and as investors.
The two are connected. To meet customers’ needs, you do need to have some understanding of their experiences. And one factor that deters women following financial services careers is the high-profile cases of non-financial misconduct.
Non-financial misconduct – which includes sexual harassment – is sadly still present in our industry and impacts financial performance.
It can destroy a firm’s reputation. It clearly deters the widest range of talent from working there and it undermines the results for consumers through toxic groupthink.
Firms should tackle the individuals who don’t meet those standards, risk their firm’s reputation and their clients’ money, as well as their colleagues’ wellbeing.
It was striking that 74% of respondents were supportive of our proposals to tackle non-financial misconduct, while only 12% disagreed and 13% were neutral.
One way we can work collaboratively is through making use of our whistleblowing hotline, which we urge anyone to use at any time with the full knowledge that they will be protected.
A recent inquiry on Sexism in the City by the Treasury Select Committee highlighted the pernicious use of Non-Disclosure Agreements – NDAs – to try and suppress whistleblowing.
It is worth reminding ourselves that nothing in an NDA can prevent an individual from reporting an incident to the FCA. And I mean nothing.
Treating colleagues well, protecting against group think and delivering for a diverse range of customers should not be controversial or antagonistic.
It is the right thing to do. So what is the first step in creating a healthy culture in your organisation?
One thing I have taken from being a parent that I would implore other managers to do is to listen. In fact, not just listen – but hear.
And at times, try to forget that you are a manager and do this as a fellow human if an employee shares a personal story. Responding as a human first, line manager second, will make you a better leader.
Many of us in managerial positions often leap in to offer advice, but sometimes it just pays to listen and think before acting.
This is the first step in creating psychological safety that is crucial for helping colleagues speak up.
Mind the wealth gap
We all know about the gender pay gap. But what we do not talk about often enough is the gender wealth gap.
That wealth gap is partly down to historical anomalies over women in paid work but it is not helped by low representation across financial services.
We in this room today have the power to tackle some of this with who we hire and how we communicate and innovate. We need a different and better mix of advisers and advice.
On 2018/20 data, there was a 35% gap in the private pensions wealth by age 55 between men and women, according to figures from the House of Commons.
Crucially, it does not include people who have no private pension wealth at all and there are more women than men in that situation.
According to the NOW Pensions gender pay report, women have on average just one third of the pension wealth of men at retirement. To have the same level of pension savings as men, women would need to work 19 more years than men.
In 2022, some 2.2 million women were in jobs that paid below the real living wage and were struggling to meet the basic costs of life such as food and rent. While 14.7% of women are in minimum wage jobs, the same is true of only 10% of men.
Setting aside the issue of proper value being placed on care, how many of these women have made this choice because the culture in better remunerated workplaces still fails to embrace the potential of these women because it cannot adjust to their needs?
And our latest Financial Lives Survey, released just last week, shows that while 25% of men say they are not coping with the cost of living, the same is true for 30% of women.
Women are more likely to take part-time and low paid jobs than men – which squares with NOW pensions’ report findings that different working patterns leads to a reduction in pension wealth of 47% for women.
This of course makes it all the more difficult for women to reap the advantages of the pension freedoms which are meant to bring prosperity and choice to so many.
And with more employees now having defined contribution schemes rather than defined benefit (or final salary) pensions – a lot more hinges on those investment choices.
Auto-enrolment increased participation amongst eligible workers to 88% in 2021, up from 55% in 2012. However, 1.9 million women earn below the earning thresholds, making up 79% of workers who do not meet this qualifying criterion.
Women as investors
So we need to talk to girls about money. A study of 7,500 women investors by Hargreaves Lansdown found that half of all women who grew up openly discussing money in their family said they were investors, compared to just 41% of those that did not grow up around money talk.
Most women said their mothers had the biggest impact on shaping their investment behaviours.
One of the main obstacles to investing for women was language. It was often alienating and inaccessible, with 63% finding the terminology off-putting.
While risk warnings are a regulatory requirement, it was also discovered that the warnings could deter women from investing altogether.
And one of the principles of the Consumer Duty which we introduced was around improving consumer understanding. Firms are expected to target their products and communications more carefully to their customers, particularly to customers who have vulnerable traits.
Under the Duty, firms also need to consider the outcomes their customers receive. All of us in the savings, retirement income and advisory markets should ask ourselves whether we are genuinely considering the specific needs of women in relation to pensions, savings and investment.
Are we doing enough to consider the product mix and is the level of innovation sufficient to adequately serve women?
When considering future finances, we need to be brave in holding up the mirror to ourselves. Are we serving the society of tomorrow or are we set up to serve society as it was?
Women with a stock and shares ISA, according to a report by Hargreaves Landsdowne held investments worth £57,500 – some £2,200 more than men.
Women investors are also likely to hold stocks and shares for the long term, they were more likely to choose actively managed funds and they were more likely to invest in British businesses. Whether it was consciously or otherwise, women were displaying model behaviours for investors.
One weakness of women investors however was analysis paralysis, according to this report. Women like to do their research.
But with the overwhelming number of other decisions they have to take, choosing funds and deciding on strategies was another thing to add to their to-do list.
If we want women’s business (and why would we not) then we have to adjust our offer to their needs. We need to look at ourselves and be honest in the ways we are creating barriers to women being wealthier.
Conclusion
One thing we can do hand in hand with industry is make sure that there is good advice out there for investors that is offered in a way that suits women. Our recent review into retirement advice found a mixed picture.
Some firms were not doing appropriate risk profiling of consumers when they were seeking advice on pensions drawdowns, they were giving advice that would lead to poor outcomes and even inflicting unnecessary charges on customers.
It was a helpful piece of work as it allows us to identify potential harms and we will support firms to improve their practice through our supervisory work.
We need to raise these standards particularly as in the near future, firms will have more latitude to provide advice to a wider pool of consumers.
Our Advice Guidance Boundary Review aims to unlock advice that was once the preserve of the wealthy to a broader base of customers.
It is vital that there is more flexibility around the advice that firms feel confident they can give, particularly as a time when consumers have been granted bigger freedoms over their retirement income than ever before.
We are also working with industry on behavioural field trials to test what engages customers on their pensions with a focus on decumulation.
We are all inundated with emails, so our behavioural scientists experimented with headings in emails to see what would make consumers open messages related to their pensions.
Clear, but not flashy, email formatting and addressing present bias and overconfidence were effective at engaging consumers.
We also found greater engagement when the email had a ‘social norms’ theme. This told consumers that the majority of investors sought help when it came to tackling retirement income.
The theme of this year’s International Women’s Day was a very valid one, for our audience today: Invest in Women, accelerate progress.
Really it is the perfect one-line strategy.
Women are more than half the world’s population. In the next two generations, mainly due to life expectancy and inheritance, women are set to be in charge of 70% of the world’s wealth.
This should be a wake-up call to us all.
Attract more women to work in our industry by addressing our cultures, extend the opportunity earn and grow wealth by engaging women on their terms to meet their needs and champion a new norm.
Together, we as regulators, advisers and providers must seize the opportunities and take down the barriers so that not just women, but wider society can reap the reward.