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.

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.