Investment Committee Membership: Professional Significance Isn’t Enough

– First Published on Nasdaq –

Investment Committees have historically been formed based on members’ professional experience. But in today’s climate, would these committees stand up to the scrutiny of diversity, equality, and inclusion (DEI), I wonder?

Like many areas of the financial services industry, much lip service is paid to DEI, yet despite accepted benefits in terms of profitability and productivity, the sector remains primarily white (~80 percent) and male (~80 percent).

Sadly, this is true of many industries and their governing bodies or committees reflect that. Here, I am focusing on financial investment committees and their responsibility to make well-informed, non-emotional decisions.

Money decisions, behavior

Most investment committees have an apparent mission: Serve as stewards for assets of the organization they represent.

Let’s assume that those forming these committees are fully cognizant of what DEI means. One would expect to see a range of experience and talent represented. But remember, each member would bring a decision making and emotional behavioral style with them.

Whether thinkers, initiators, analyzers, persuaders, strategists, or spontaneous, all will have a natural decision-making behavior that needs to be revealed and managed. The complexity of the committee’s decisions certainly doesn’t need behavioral variability to take it off track.

As individuals, these representatives probably make flawless decisions – but put them together in a group to form a committee that makes significant investment decisions, and behavioral diversity in decision making takes over. Emotion takes over. Bias steps in. And the behavioral pull of money pollutes the decision-making process.

DEI + behavioral diversity

So, where does DEI fit in this scenario?

DEI must go beyond socio and ethnic representation – that’s a given. It must also include behavioral diversity. Members possessing differing viewpoints, different decision-making approaches, creative attitudes to money, and a deep understanding of the emotional pull of money must be represented.

Investment Committees have historically been formed based on members’ professional experience. But in today’s climate, would these committees stand up to the scrutiny of diversity, equality, and inclusion (DEI), I wonder?

Like many areas of the financial services industry, much lip service is paid to DEI, yet despite accepted benefits in terms of profitability and productivity, the sector remains primarily white (~80 percent) and male (~80 percent).

Sadly, this is true of many industries and their governing bodies or committees reflect that. Here, I am focusing on financial investment committees and their responsibility to make well-informed, non-emotional decisions.

Money decisions, behavior

Most investment committees have an apparent mission: Serve as stewards for assets of the organization they represent.

Let’s assume that those forming these committees are fully cognizant of what DEI means. One would expect to see a range of experience and talent represented. But remember, each member would bring a decision making and emotional behavioral style with them.

Whether thinkers, initiators, analyzers, persuaders, strategists, or spontaneous, all will have a natural decision-making behavior that needs to be revealed and managed. The complexity of the committee’s decisions certainly doesn’t need behavioral variability to take it off track.

As individuals, these representatives probably make flawless decisions – but put them together in a group to form a committee that makes significant investment decisions, and behavioral diversity in decision making takes over. Emotion takes over. Bias steps in. And the behavioral pull of money pollutes the decision-making process.

DEI + behavioral diversity

So, where does DEI fit in this scenario?

DEI must go beyond socio and ethnic representation – that’s a given. It must also include behavioral diversity. Members possessing differing viewpoints, different decision-making approaches, creative attitudes to money, and a deep understanding of the emotional pull of money must be represented.

Let’s look to a four-part solution:

  1. Be committed to removing biases and ego.
  2. Uncover the behavioral patterns of committee members, concerning their approach to money.
  3. Engage a tech solution: preferably a highly validated one that also can provide adoption via API, enabling firms to easily layer it into their existing tech stacks.
  4. Secure a behavioral solution that reveals financial behavioral variability in individuals and groups.

When the financial services industry comes to terms with the importance of measuring the impact of human behavior on a range of transactions and decision-making that require human judgment, they will fulfill regulatory requirements and, bonus, build their businesses. The winning methodology: Pursue DEI in earnest, plus go one step further by layering in the functionality to assess and leverage behavioral diversity.

The marriage of these two disciplines is a passion of mine. Please reach out if you or your firm has a perspective or experience to share regarding the synergy of DEI and behavioral science.

See Leon’s other writings for Nasdaq here.

Leon Morales

Leon Morales

Chief Relationship Accelerator

Human Behavior Advisor, Human Capital Management, Customer Experience Specialist

Leon Morales is a builder of successful people driven organizations. With a deep conviction that organizational success is only achieved when leadership really understands each employee, Leon is certified in the DNA Behavior. Method and Birkman Method of personality assessment and has crafted his professional career around high-impact consultative roles. These include serving as Business Development Principal and Leadership Practice Principal for Innovar Collective, LLC and in various corporate leadership roles during his 17-year tenure with Cox Communications.