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Willis Towers Watson sets out diversity action plan for investment industry

Investments
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October 27, 2020

ASIA, 27 October 2020 – Progress on diversity across the whole investment industry has remained disappointingly slow, according to research from Willis Towers Watson. In its paper, Diversity in the Asset Management Industry, Willis Towers Watson sets out a clear action plan to accelerate the pace of change which it believes will lead to better investment outcomes, including specific actions for its own business.

Focusing on data-driven measurement and engagement, Diversity in the Asset Management Industry outlines Willis Towers Watson’s updated methodology for assessing and encouraging diversity within asset managers, investment consultants, and asset owners.

This approach leverages the insights gleaned from new research into Inclusion & Diversity (I&D) issues at asset management firms, including demographic information collected at both a firm and product level. This data-led process goes beyond a reliance on a single metric, such as minority or female ownership, and instead uses a new more broadly-based Willis Towers Watson Diversity Score to establish a baseline view on gender and ethnic diversity. This is supplemented with the more nuanced aspects of diversity gleaned through its qualitative manager research process. 

Willis Towers Watson has also established clear actions to encourage the use of a more diverse set of asset managers in its clients’ portfolios, with an expectation that these measures will improve end-saver outcomes. Its manager research team is targeting an increase of 20% in discovery meetings (where it seeks to identify best in class asset managers it doesn’t currently work with) with firms that have a diverse investment team. It also expects to increase its allocation to diverse investment teams within its delegated portfolios as it believes this will lead to better investment outcomes allowing for risk.

Willis Towers Watson is making a call to action across asset managers, investment consultants and discretionary investment solution providers, and asset owners to support progress in diversity. In particular, Willis Towers Watson is encouraging:

  1. Greater transparency and disclosure: high-level statistics to understand how diversity is reflected across different functions.
  2. Increased sourcing of diverse talents: for example, through graduate and returner programmes.
  3. Measurement of diversity of asset managers that goes beyond just equity ownership.
  4. The removal of requirements that may unwittingly exclude diverse funds/firms.
  5. Progressive compensation structures and policies around flexible working arrangements.
  6. Shifting away from a star portfolio manager model to a team-based investment approach, with a strong focus on ensuring decision-making teams are diverse.
  7. Asset owners and investment consultants to establish targets to significantly increase the diversity in portfolios, with the associated improvement in expected performance.
  8. A focus on internal policies, training and networks designed to increase diversity and address the challenges of racism, sexism and other unconscious biases.

Willis Towers Watson is keen to engage with asset managers who are working on improving their diversity. However, asset managers who fail to encourage greater diversity or do not respond to growing asset owner expectations, may face a downgrading of their rating – a measure which has been taken in the past by Willis Towers Watson.

Chris Redmond, Head of Manager Research at Willis Towers Watson, says: “Addressing the systemic issue of poor diversity in the asset management industry requires a collective effort, and in many cases a fundamental change in mindset and culture. Although some of these efforts will take time to bear fruit, as an industry we need to be challenging ourselves to do more now.”

Jihyun Sparrow, Director of Investments in Asia, at Willis Towers Watson adds: “Improving diversity is key in building a strong investment industry. In Asia, gender issue is what first comes to mind for most. While increased economic participation and educational opportunities for women are helping to improve gender parity, social and demographic biases continue to negatively affect collaboration and culture, and more can be done in senior positions.

The initial findings from our research show how improving diversity is positively linked to performance outcomes for investors. Our proposed actions are just a starting point – we are not asking people to change overnight but to be open-minded, sharpen their listening skills and recognise the unconscious biases that affect our industry. While we recognise the challenges that lie ahead, we strongly believe that by taking the steps we recommend, the investment industry can take a crucial leap forward in better reflecting our society and delivering better performance outcomes for investors.”

The full Diversity in the Asset Management Industry paper can be accessed here.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

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