In Chaos Theory, the butterfly effect can be described as cascading events all connected and triggered by a seemingly innocuous—or self-contained—initial condition. This non-linearity is where we find ourselves after the killing of George Floyd. Many civic and business leaders have been left confronting an entire host of topics including community policing, income inequalities, wealth inequities, racial health disparities, and diversity and inclusion (D&I).
I am all too familiar with these topics. As an African American financial professional with degrees in the math and physical sciences (MAPS), D&I has always been front of mind—especially because it’s so often lacking. In math and physical sciences, African Americans received less than 5% of the bachelor degrees conferred in 2017-18, compared with 10% in business-related fields. The percentage of African American Ph.Ds. in MAPS is even more meager.
In the spring of 1977 at Morgan State University, the Society of Black Physicists was formed. This organization, with Walter Massey and James Davenport serving as interim president and secretary-treasurer, was initiated to address the inequities experienced by Black physicists and those in related disciplines. Similarly, other organizations—the National Society of Black Engineers; the National Organization for the Professional Advancement of Black Chemists and Chemical Engineers (NOBCChE); the National Society of Black Physicists (NSBP) (formally the Society of Black Physicists); the Society of Hispanic Professional Engineers (SHPE); and the National Black MBA Association—sprouted up throughout the mid- to late 1970s.
These and many other organizations had/have the explicit purpose of providing support to the current and future advancement of professionals in their respective physical sciences fields.
Despite the advancements made in these fields since the 1970s, in part due to these organizations and the efforts of civic and business leaders, African Americans, and, more broadly, underrepresented minorities in STEM [science, technology, math, and engineering] and STEM-derived fields, of which I consider financial services one, still struggle with providing equitable access, meaningful sponsorship, and mentorship. Thus, barriers to greater diversity and inclusion persist.
To create greater diversity and inclusion, it is important that the financial services industry think creatively and incisively in seeking sources of talent from a variety of academic fields, employment sectors, and experiences inclusive of, but well beyond, the most obvious. This may be achieved by expanding the talent selection pools when sourcing talent. I refer to this as “widening the aperture.”
Considering the Pipeline
Many industry experts conflate the issues of diversity and inclusion as simply an inadequate pipeline issue. However, the data doesn’t support this assertion. In 2017-18, the degrees conferred to African American and Hispanic American students in business-related fields represent the largest (19%) percent of bachelor’s degrees conferred by postsecondary institutions, relative to other majors, for these groups, according to the US Department of Education. Business remains their most popular major.
In business-related fields, this percentage drops to a meager 10% for African Americans and 13% for Hispanic Americans. When considering the “talent” pipeline, unlike for vocational fields such as engineering where specific technical training is a prerequisite to success, financial services allows for greater flexibility of skills by which professional entry may be offered and prospects of success predicted. The core skill for the financial services set can be found among students from numerous majors and disciplines, from the chemistry major who understands thermodynamics and therefore possesses an intuitive sense for non-linear systems similar to equity markets and derivative pricing, to the social science major who understands cultural differences and consequently is qualified for client-facing roles.
By expanding the recruitment process beyond business/finance-related fields and experiences, a vast, diverse talent pool can be accessed, including individuals who might not have considered a career in the industry because no one in their family or circle of friends has a degree in or is employed in finance. In addition, given the dearth of African Americans in the industry, most young individuals would naturally be inclined to think it’s unwelcoming or a dead-end career wise.
Positive Bottom-Line Impact
Firms that commit to “widening the aperture” will find skill sets that are accretive to success in financial services. One of the main reasons for this is that such atypical skills lead to a differentiated approach to problem-solving, and an attenuation of reverberations of the echo chamber in decisionmaking. Plus it makes good, bottom-line sense.
Consider these findings from a 2019 McKinsey study, “Diversity wins: How inclusion matter.” Of 1,000 companies in 15 countries:
Companies in the top quartile for ethnic and cultural diversity on executive teams were 36% more likely to have above-average profitability than companies in the fourth quartile; and
Companies in the top quartile for gender diversity on executive teams were 25% more likely to have above average profitability than companies in the fourth quartile.
When considering candidates, it’s important that financial services firms not look at skills of individuals in a vacuum, but rather as malleable and flexible mosaic elements, suitable for fitting into a much larger and encompassing vision. This approach allows for another opportunity to redefine the talent recruitment process. As a former academic, now turned financial professional, I routinely leverage a vast network of skill sets developed over my career, from distilling topics down to baseline elements, similar to teaching an advanced level concepts class to first-year graduate students, to ratcheting up complexity of explanations for more advanced students. This versatile skill set is the same in physical chemistry as in finance, and is highly valuable. It boils down to, “How does one convey one’s thoughts in a concise and accessible way?”
By looking outside the box in hiring diverse talent, firms would benefit themselves in accepting the value of experiences accrued outside the standard pathways, as in an academic managing diverse talent in a research project, or by recognizing that creativity and original thinking, paramount to success in laboratory sciences, may translate creatively to activities of financial services.
Don’t Confuse Mentors with Sponsors
I was told once, “There is a difference between a fan base and a sponsor.” It’s always great to get praise for excellent work, which often comes from a mentor; however, the ongoing engagement of sponsorship is a prized essential for enduring advancement in anyone’s career.
Mentors provide a critical bridge to help shape and guide one’s perspective and decisionmaking process. Within itself, it’s very valuable to navigating various situations in the workplace. Sponsorship is entirely different, as it provides advocacy for someone’s advancement. This subtle, but important, distinction is critical to understanding why many retention efforts fail.
A key ingredient to enhancing sponsorship among underrepresented minorities is weighing their advancement potential or worthiness based on a more diverse set of skills. These individuals must be held to the same high productivity standards as their “traditional” colleagues. The aforementioned McKinsey study clearly shows this should not be a concern.
The Time Is Right
The time to act is now. Financial services, an industry facing rapid change due to changing technology and shifts in investor profiles and demands, will benefit from “widening the aperture” to build teams in a fluid and dynamic way.
Abdur Nimeri, Ph.D., head of Institutional Multi-Asset Programs at Northern Trust Asset Management is a senior member of the Investment Solutions team, leading the Institutional Multi-Assets Programs with primary responsibility for the development and management of innovative, multi-asset class, bespoke portfolios for the institutional marketplace. He is a member of the Northern Trust Model Oversite committee.
Earlier in his career, Nimeri worked as a senior member of the FlexShares Investment Strategy team, offering insights into the development of exchange-traded fund (ETF) investment strategies, including factor-based strategies, multi-asset class investments, real assets portfolio construction, environmental, social, and governance (ESG) ETF product development and implementation. Abdur sits on the Advisory Board of the YWCA Impact Investing ETF Board, the MMI/Morningstar Sustainable Investing Initiative Academic Advisory Board, and the Northern Trust North American Diversity Council. Before joining Northern Trust, he was the Riley Professor of Physics at Colorado College. Abdur earned a bachelor’s in chemistry from Iowa State University, a master’s in financial mathematics from the University of Chicago and a Ph.D. in physical chemistry from the Ohio State University.
This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.