Advocacy

PUBLIC AFFAIRS AGENDA

NASP supports equitable participation and equal opportunity in all business dealings. Part of NASP’s objectives is to foster the inclusion and development of diverse men and women, and the growth of businesses they control, within the financial services industry. In order to pursue progressive and balanced policies affecting public and private finance, NASP maintains an active agenda around public affairs and regulation.

NASP has hosted its Annual Legislative Symposium in September in Washington, D.C. Key financial oversight representatives and decision-makers from congressional committees, federal and regulatory agencies and quasi-public private sector entities participate in this event. Among others, past speakers include Timothy Massad, Former Assistant Secretary for Financial Stability, U.S. Department of the Treasury; Michael Strautmanis, Deputy Assistant to the President and Counselor for Strategic Engagement to Senior Advisor Valerie Jarrett, The White House; Roel Campos, Commissioner, The U.S. Securities and Exchange; Congresswoman Maxine Waters; Congressman Gregory Meeks; Sandra Thompson, Deputy Director, Division of Housing Mission and Goals, FHFA; Don Graves, Deputy Assistant Secretary, U.S. Department of the Treasury; and Timothy D. Hauser, Associate Solicitor, Division of Plan Benefits Security, US Department of Labor.

Going Forward we will revisit the structure of and frequency of this type of collaborative program in efforts to increase impact, expand engagement from aligned organizations and support our legislative allies focused on economic growth and broader community inclusion.

NASP Public Policy Priorities

WHY ADVOCACY AND PUBLIC POLICY ARE CRITICAL

  • As judicial and business sentiment shift against inclusive policies and targeted funding programs, it is increasingly vital to change laws that reduce unnecessary restrictions. These changes are essential to leveling the competitive field and enhancing access to capital and business growth.

  • Diverse owned businesses have no chance to win and grow if they are excluded from competing equally for opportunities.

  • The impact of these efforts will be amplified through building coalitions and fostering broad support across organizations, with inclusion as a shared goal. NASP can facilitate this collaboration and advocate for your interests.

CAUSE FOR ACTION:

An essential component of NASP’s mission is to serve as a voice for its members at the federal, state and local levels of government to advance diversity and inclusion. According to a 2017 GAO report there were over $70 trillion of assets under the control of governments, endowments, companies and other institutions that were managed by third party investment professionals. While diverse and women owned asset management firms made up 8.6% of this sector, they only managed 1.1% of all assets under management. As of the latest data, diverse-owned asset management firms in the U.S. control only around 1.4% of the total assets under management, translating to about $1.2 trillion out of an $82 trillion industry. Despite some gains over recent years, this number remains disproportionately low compared to the diversity of the general population. The performance of diverse-owned firms has been shown to match that of their non-diverse peers, suggesting that factors such as incumbency and long-standing relationships, rather than performance issues, may limit diverse firms’ access to capital. The decision making around which firms manage these assets has far reaching impact across the economy related to job creation, growth and wealth building. Too few diverse owned firms have a seat at the table in this process.

Challenges contributing to this disparity include the preference of many large asset allocators for familiar, larger firms and the limited availability of data on diversity within firms, which complicates efforts to identify and support diverse-owned managers. Continued efforts by industry stakeholders and policymakers aim to address these structural barriers and encourage diversity in the asset management sector.

ENGAGING POLICY MAKERS TO INCREASE OPPORTUNITIES FOR DIVERSE FIRMS:

Advocacy can take the form of influencing legislation and trying to shape policies and regulation. It can also serve as a powerful tool in urging policy makers to push private sector and other entities to change their practices.

NASP has worked closely with elected leaders throughout the country to encourage them to help create more opportunities for diverse owned financial services with large anchor institutions. Often times, letters, appearances before Congress, and other inquiries asking about business diversity can prompt these entities to review how they conduct their business. The mere asking of questions DOES indeed make a difference in accelerating the behavior change in some of these large enterprises.

Some of the questions that help assess how serious and committed an enterprise is to inclusion efforts for diverse owned companies are the following that NASP recommends:

  • Do you track business spending across your enterprise?
  • Do you disaggregate that spending by race and ethnicity beyond just “minority”?
  • Do you classify spending categories to include professional services?
  • Do you use the more inclusive term “business diversity” rather than the outdated “supplier diversity”?

There are many elected officials who have shown strong leadership in trying to advocate for greater business diversity by posing these types of questions to various enterprises. Here are some examples that NASP applauds.

Senate Cory Booker (D-NJ) writes the CEOs of Kroger’s and Albertsons related to their proposed merger

Congresswoman Robin Kelly (D-IL) writes to the largest federal contractors seeking information about their utilization of diverse owned professional services companies as part of their business spending.

RECOMMENDATIONS:

What can be done to address this gap and increase opportunities for diverse securities professionals?

  • More focus on recruitment/selection process by government agencies and large institutions to diversify their asset managers. There is a clear need for more intentionality in the efforts to identify, engage and collaborate with diverse managers. Greater outreach to minority and women owned firms; use of the “Rooney rule” in the selection process of asset managers (must interview at least one diverse firm); and directing federal regulators and retirement systems to be aggressive in engaging diverse asset managers.

  • Refine minimum qualification statements and relevant terminology. Often large institutions, especially government bodies, have investment policy statements that have the practical effect of excluding diverse firms from competing to manage these assets. According to GAO, the minimum size requirements for assets under management could potentially exclude smaller minority and women owned firms. Similarly, there needs to be greater clarity on the definition of “diverse” so that large institutions and government entities have a consistent, working understanding of which firms they should consider. While there can be some variance across entities as to what constitutes sufficient minority ownership levels for these firms, it must be a priority to adopt some recognized standard by these decision-makers.

  • Include professional services in “supplier” diversity data collection. Tracking the use of vendors and suppliers in government, large companies, endowments, and universities is a best practice to monitor progress (or lack thereof) in the number of diverse suppliers across a range of functions (physical plant needs, security, food services, advertising, office supplies, etc.). However, asset managers and other professional services may not always be included among this type of survey for various reasons. Tracking professional services by large entities will help maintain a focus on whether diverse asset managers are being included in these important decisions about how organizational resources are being directed.

  • Urge federal and state regulators to diversify their advisory panels. The Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Commodities Futures Trading Commission and many other federal regulators have industry professionals and other experts serve on formal advisory committees that focus on various policy and regulatory priorities for these agencies. These advisory committees not only perform important roles for the regulators, but they afford their members unique insight into the workings of these agencies and perhaps more notably, give select thought leaders a seat at the table. These advisory committees are woefully lacking with few people of color on them and need to intentionally recruit more diverse participants.

OTHER NASP POLICY AND REGULATORY LEADERSHIP

  • NASP played a leadership role in crafting the provision in the Dodd Frank law that created Offices of Minority and Women Inclusion in the banking regulators. This was an important step to create some institutional structure in government agencies that work with the financial services sector, but more needs to be done to achieve the intended results of greater diversity and inclusion. The House Financial Services Committee in 2019 created the first Congressional Subcommittee on Diversity and Inclusion that has focused attention on these issues and demonstrated bipartisan recognition of the need to do more in the industry.

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