Practical analysis for investment professionals
17 April 2017

Three Steps to Beating Unconscious Bias

Unconscious bias is holding back the wealth management industry, Adrienne Penta told participants at the 2017 CFA Institute Wealth Management Conference in Nashville, Tennessee. And it’s a business imperative to address it.

Why? Because today wealth is being created across the demographic spectrum, while the finance sector, especially in the United States, remains predominantly older, white, and male.

“That lack of diversity is actually a pretty significant headwind,” said Penta, who founded and leads the Center for Women and Wealth at Brown Brothers Harriman, because it can make it hard to create “an environment where our clients can share their whole lives with us in an authentic way.”

The research is clear: We tend to have an easier time building relationships with people who look like us or our parents. That applies to clients as well as advisers. But it falls to the latter to do what’s necessary to overcome unconscious biases and appeal to a diverse client base.

“We’re really limiting ourselves in growing our businesses and thinking about how we serve clients if we only create a rapport with people who look like us,” Penta said. “We are going to have to serve a lot more clients that don’t look like us every day. And we have to create rapport in the absence of commonality.”

So to counteract the unconscious bias that impedes that process, Penta recommends an intuitive three-step method.

“How do we create, spread, and manage conscious inclusion in how we talk to clients and how we work with them?” she asked. “Raise awareness, training, and then process.”

But what is unconscious bias, how does it manifest itself, both in finance and elsewhere, and why is addressing it so critical to the industry?

To start, unconscious bias, indeed, bias itself, is not necessarily a bad thing. Instinctively, we look for shortcuts because we need them. Our minds are exposed to more data than they can process, so we develop time-saving hacks to deal with the overload. That cake? Eat it. That snake? Avoid it.

“We need bias to get through the day every single day,” Penta said. “Unconscious bias is merely a mental model, how we think about things and make efficient, very quick decisions, as we do millions of times every day.”

Treating Women Differently

But when misapplied, these sorts of biases, which serve us well most of the time, can have less-than-optimal results. Penta highlighted the case of blood clots at Johns Hopkins Hospital as particularly instructive for the finance industry. The hospital found that the women they were treating were more likely to die from preventable blood clots than were men. The question was why. As it turned out, it came down to unconscious bias. “Interns and doctors were treating women differently than they were the men,” Penta said.

Staff members were unconsciously making assumptions about women’s risk factors and letting those assumptions affect their treatment.

The same was true for heart attacks. It isn’t hard to see why. Picture someone having a heart attack. Is your initial visualization a young, underweight women? Or an overweight, middle-aged man? Probably the latter, right? You’ll be correct more often making that assumption than you would the reverse. But that won’t help the young, underweight woman suffering cardiac arrest.

Interrupting Bias

So how can we treat unconscious bias? We have to set up systems that, in Penta’s words, interrupt the bias. How did they do that at Johns Hopkins? They introduced a blood clot prevention checklist to ensure that doctors treated all patients at risk of the condition in the same way.

And it worked.

“Zero preventable blood clots happened for men or women,” Penta said. “So they nudged their doctors to actually go through the same list to check off the same issues for every patient to make sure that the standard of care was the same for everybody.”

Their efforts to improve care for women ended up improving care for everybody.

Financial professionals can approach unconscious gender-related bias in the same way, according to Penta. Finance developed as a distinctly male enterprise. It’s only in the last several generations that women could enter the workforce, keep what they earned, own property, and make their own financial decisions. And finance has yet to learn how to fully engage with them.

The evidence? “For high-net-worth women, women who have a million dollars or more, 30% of them don’t have an adviser,” Penta said.

And much of that springs from a failure to communicate.

For example, Penta discussed the tendency among financial advisers to ask men about business and women about their families. Certainly, no offense is meant. Advisers are engaging with clients in the manner that they think clients want and expect. But often that’s based on a faulty assumption.

One common refrain Penta has heard from women about their advisers: “My guy doesn’t even look at me,” she said.

“So that’s totally unconscious, right? Where we look, who we’re looking at, how our body language is expressing what we think. . . . We don’t go into a meeting thinking, ‘I’m only going to look at one person in this meeting. I’m not going to look at the other person.’ But sometimes those things are happening.”

Fostering Conscious Inclusion: Three Steps

1. Awareness

To apply the Johns Hopkins rubric, the finance sector needs to collect data, Penta said, to understand the scope and nature of the problem. What are the various segments of the client base saying? “Where are the differentials in your business?” Penta asked. Survey clients. Separate the data by gender, by ethnic background, by age, by membership in the LGBTQ community. What does the data say? Ask clients what they want. What form do they want communications to take? What information do they want to know about?

2. Training

Training alone is not enough, Penta was quick to stress. It is only effective when combined with the other two steps. “We know from the data,” Penta said, “that unconscious bias training or diversity training generally doesn’t work, which is unfortunate but true. And then sometimes, we actually go the other way.”

The focus has to be on the best ways to communicate. Learn from the client data. “It’s about training everybody who relates to clients in the best way to do it,” Penta said. “We have to be intentional about best practices in terms of communication, how we work with clients, how we communicate with clients, how we set up meetings, how we send email, lots of little, little, little stuff.”

3. Process

Process goes back to interrupting bias and the blood clot checklist. Behavioral design is critical, according to Penta. Systems have to be developed that filter out these unconscious biases. So Penta recommends checklists and places an emphasis on developing nuanced client onboarding protocols. “The first 90 to 120 days of client experience is an indicator of future success for wealth management clients,” she said. “They have to have a really good, really smooth, really well-served onboarding experience.”

Staffing is also key. “Having diversity throughout our business,” Penta said, “but especially at senior levels, is a huge bonus.” There is ample evidence that a diverse team, both in terms of background and perspectives, generates better outcomes. So firms need to work those considerations in as well.

“The story of our industry over the next 50 years is going to be diversification of wealth,” Penta said. And while her work at the Center for Women and Wealth concentrates principally on how advisers can best serve women, gender is only one aspect — and potentially the easiest aspect — of the challenge confronting the sector.

“We’re focused on women because they’re 51% of the population,” Penta said. “If we can’t get that right, then we have a really big problem.”

Recommended Reading

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/enisaksoy


Key Takeaways

  1. Adrienne Penta says that the story of the wealth management industry over the next 50 years is going to be diversification of wealth.
  2. Lack of diversity on staff, both in terms of background and perspectives, is a significant headwind for the wealth management industry. Without that diversity, it can be hard to create an environment where clients can share their whole lives in an authentic way.
  3. Raising awareness, training, and processing are necessary for advisers to create, spread, and manage conscious inclusion in how they talk to their clients and work with them.


Adrienne M. Penta

View the full transcript (PDF).

About the Author(s)
Paul McCaffrey

Paul McCaffrey was formerly the editor of Enterprising Investor at CFA Institute. Prior to that role, he served as an editor at the H.W. Wilson Company. His writing has appeared in Financial Planning and On Wall Street, among other publications. He is a graduate of Vassar College and the Craig Newmark Graduate School of Journalism at CUNY.

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