As we eagerly await the outcome of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) consultation on measures to boost diversity and inclusion in financial services which closed at the end of last year, we consider the proposals made by the regulators in relation to social mobility. Our recent insight article here delves into the results of the 2023 Social Mobility Foundation Index and emphasises the importance of employers making a visible commitment to progressing social mobility in the workplace.
The importance of social mobility
The FCA and PRA consultation highlights that research from the Bridge Group shows that employees from lower socio-economic backgrounds progress 25% slower than peers, despite no evidence of poorer performance. The regulators propose asking financial services firms to gather data, on a voluntary basis, on the socio-economic background of their employees, using the occupation of the primary household earner when the employee was 14 years old.
The voluntary aspect of the proposals
Arguably, however, the voluntary aspect of this proposal is out of step with other regulators. For example, the Solicitors Regulation Authority in England and Wales has mandated the collection of this data since 2013. Law is now the best represented sector in the Social Mobility Employer Index Report 2023. Research from Progress Together, a not-for-profit membership body which focuses on boosting senior level socio-economic diversity in financial services, also highlights that socio-economic background has a much stronger effect on progression to senior roles in financial services firms compared with other diversity characteristics, such as gender and ethnicity.
Of the 257 responses to the consultation, we are aware of several in favour of the collection of socio-economic data being mandatory. The recommendation from the government-commissioned socio-economic diversity taskforce in their “Breaking the Class Barrier” report was for regulators to mandate the collection of this data and/or publicise the data of regulated organisations. Furthermore, if elected, the Labour Party has committed to improving social mobility and may look to enact its previous proposal of making socio-economic background a protected characteristic under the Equality Act 2010.
The push for social mobility in financial services
Many financial services firms in the UK are already actively engaged in tackling social mobility. Many run impressive apprenticeship and mentoring programmes as well as making connections within schools to demystify the world of work.
The collection of socio-economic background data is already common in large organisations in the financial sector. Since 2021, the FCA itself has been asking its own employees to share with it details of their socio-economic background for diversity monitoring purposes. Investors increasingly request socio-economic data, recognising it as an indicator of a company focused on growth, inclusivity and innovation. The UK’s focus on social mobility in the financial sector is also reflective of the wider societal and governmental push to address social mobility and ensure that career success is based on merit rather than background. We are interested to see the outcome of the consultation later this year and whether reporting on data relating to social mobility will be introduced on a voluntary disclosure basis, or whether the regulators will respond to the requests to make it mandatory.
