Do Broker Hiring Practices Lead to Discriminatory Environments?
The way major brokerages allow their financial advisors to hire assistants out of their own pockets helps create an environment highly prone to harassment and discrimination lawsuits, industry experts tell Bloomberg.
Companies including UBS, Merrill Lynch and Morgan Stanley allow advisors to hire assistants out of their own commissions if they want more help than what’s provided by the firm, according to court cases and people familiar with the arrangements cited by the news service. This type of leeway given to advisors in personnel hiring doesn’t happen anywhere else in corporate America, Melissa Mahoney, chief operating officer for the trade group International Association of Administrative Professionals, tells Bloomberg. And it creates an environment that’s bound to lead to abuse, according to Mary Blair-Loy, a founding director at the Center for Research on Gender in the Professions at the University of California at San Diego, the news service writes.
“Whenever there are individuals going out, recruiting, and paying their assistants from their own pocket, it is a sexual-harassment, gender-discrimination lawsuit waiting to happen,” she tells Bloomberg.
In March, for example, Michael Ladge, a former Morgan Stanley advisor, was sued by Lorena Alcantara, his former assistant, who claims he hired her despite her lack of experience in the industry in order to attract clients as well as to pursue a sexual relationship with her. Back in 2011, a jury awarded $10.6 million to a UBS sales assistant who claimed she had been subjected to sexual harassment and retaliation, Bloomberg writes. The company said at the time that it would put a stop to such conduct, according to the news service. The same year, Merrill Lynch was sued in a class action on behalf of thousands of assistants, for creating “a culture ripe for hostility and bias” because female assistants depended on advisors for their compensation, Bloomberg writes.
The bias claim was dropped and the suit settled for $12 million two years later over overtime pay claims, and the firm denied the allegations, according to the news service.
But most harassment cases are settled privately and often through mandatory arbitration contracts, employment lawyers tell Bloomberg.
Meanwhile, one out of 11 male advisors has a misconduct record, which is three times higher than misconduct records for female advisors, according to a 2017 study cited by the news service. And male advisors are more likely to get away with smaller sanctions than female advisors and to get rehired elsewhere, Bloomberg writes.