Diversity was great when it was in fashion. Now, in President Trump’s Washington, the financial advice business wants nothing to do with focused efforts to hire more women, Blacks and other minorities to work as financial advisors.
President Trump in January issued executive orders that took aim at diversity, equity and inclusion efforts and work, both in the federal government and private industry.
The wealth management industry has quickly fallen in line, and it’s appalling.
Industry news website AdvisorHub has reported that Citigroup Inc., Wells Fargo, Morgan Stanley, Ameriprise Financial Inc. and Raymond James Financial Inc. have all recently indicated they are tamping down or moving away from diversity, equity and inclusion work and goals. Those are the industry's big guns and employ or service tens of thousands of financial advisors.
The Financial Industry Regulatory Authority Inc., a private regulator of the brokerage industry, is the latest to ditch Its diversity focus. Industry news website CityWire reported this week that Finra is shutting down its “industry diversity committee” amid the industry’s broader retreat from DEI.
Finra’s exit from diversity work, along with the host of major financial institutions, shows how morally and ethically weak the industry can be at times.
“It’s incredibly unfortunate to the point it’s almost ludicrous,” said one senior female industry executive who spoke about the matter privately to InvestmentNews. “Firms and people don’t want to lose business, so they’re disbanding specific initiatives for DEI groups.”
Running away from the hard work of making the wealth management industry more diverse is groupthink that undermines the industry, which repeatedly produces reports declaring that the wealth management business is running out of financial advisors.
Indeed, the lack of diversity among the 320,000 working financial advisors and registered representatives has always been an embarrassment for the financial advice business.
How can financial advisors reach women and minority clients if there are almost no such people working a large firm’s office?
What’s more, the wealth management industry has a long, well documented history of discrimination and treating women and minorities poorly.
The industry moved several years ago to do something about consistent lack of diversity and now appears to be throwing in the towel.
As this column noted at the time, having a diverse set of workers strengthens any business or endeavor because of the range of talent, experience, intelligence and perception of such a workforce.
After the murder of George Floyd, the financial advice industry made some efforts to at least look as if it cared about the issue.
In 2020, a few months after the Floyd murder, Merrill Lynch took the unusual step of releasing statistics about the diversity and makeup of its 17,500 financial advisors.
The data showed improvement at Merrill, but not nearly enough. Notably, there was an increase in women as a percentage of advisors, 21%, compared to 18% five years earlier. Meanwhile, 23% of advisors were "ethnically diverse" at Merrill last year, compared to 15.5% in 2015.
Of course, the wealth management industry is full of great people with hearts as big as Rockefeller Center. Look at the charitable work many financial advisors do and which is highlighted by organizations such as Invest in Others.
But collectively the financial advice industry is falling on its face by backing away from DEI.
Of course, the industry has exhibited this kind of head in the sand mindset before.
Broker-dealers looking the other way while asset managers jacked up commissions on certain alternative investments for years, just so a financial advisor could pay for that second house by the lake or that divorce for the third wife, comes to mind as a low point for the financial advice industry.
And one of those “Help me, I don’t know how to get up” moments is happening right now, with executives on Wall Street and at wealth management shops across the country turning their backs on efforts that were supposed to make the roughly 320,000 client facing, licensed financial advisors a more diverse group.
“Firms are worried that they will piss off shareholders or get sued if they stick with diversity,” the executive said. “It’s really a shame.”
Even we here at InvestmentNews share the blame. We used to honor the industry with awards for diversity, equity and inclusion but stopped recently. That decision, however, is more due to changes in staff and resources rather than the political climate.
According to a lawsuit filed in 2020 by a former head of global diversity at Morgan Stanley, less than 1% of that firm’s 16,000 financial advisors at the time were Black. How can the financial advice industry pretend, because of politics, that doesn’t matter?
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