Merrill Lynch and Wells Fargo Learn Tough Lessons from Discrimination Suits
When Merrill Lynch and Wells Fargo Advisors agreed, separately and four years apart, to settle class action race discrimination law suits, they signed pacts that required them to fork over altogether a total of almost $200 million. But they also each agreed to make changes to their recruitment, training and management of African-American advisors.
Each of the brokerages agreed – as part of the terms of their separate settlements – to hire coaches for African-American advisors, set up more business development resources for those advisors, and schedule regular sessions for them to meet with top executives at the brokerages. During those scheduled sessions, the executives and advisors, it was hoped, would share ideas about how to revise policies to help more African-American advisors succeed and thrive, since relatively few had done so previously.
“The managers get to see that the African-Americans have the same dreams, desires, goals, and work ethics. It’s debunking myths,” says Linda Friedman about the meetings. Friedman, of Chicago’s Stowell & Friedman, represented the Merrill Lynch and Wells Fargo African-American advisors in the lawsuits. In 2013, she negotiated a $160 million settlement with Merrill Lynch. In 2017, she negotiated for her clients a $35.5 million settlement with Wells Fargo.
Even though Merrill Lynch is no longer required to abide by its settlement terms, since the deal expired in 2016, the wirehouse has continued the coaching and to schedule meetings between African-American advisors and top executives. Indeed, Merrill Lynch executives and African-American advisors attended just such a meeting last week. The sustained efforts by Merrill Lynch — despite the settlement terms’ expiration – reflect the depths and integrity of its management’s commitment to changing the culture so diverse advisors who work there may succeed, according to both Friedman and Merrill Lynch executives.
When she recently met with Merrill Lynch executives to evaluate the wirehouse’s progress on race questions, Friedman says, “I was prepared to be furious” about possible backsliding on race bias issues.
But instead she was pleasantly surprised.
“We had a very thoughtful conversation about race. They are listening,” she says. The African-American advisors who came to her initially about the discrimination allegations “are not complaining that Merrill Lynch executives are just going through the motions,” Friedman says.
She thinks the contact between the executives and the African-American advisors has made the difference. “They are putting white executives in the room with African-American advisors. Maybe the executives had never sat in a room where they were outnumbered by African-Americans,” Friedman says.
“It makes me smile,” says Eric Schimpf when he hears Friedman’s conclusions, and he agrees with them. A Merrill Lynch managing director and Southeast Division executive, Schimpf serves as the executive sponsor for the Merrill Lynch Wealth Management Black and African-American Leadership Council.
“We have a spent a lot of time together and in a lot of different settings,” he says about Merrill Lynch’s top executives and African-American advisors. On a quarterly basis, Schimpf reports about the progress the wirehouse is making in improving its hiring, retaining and promoting diverse advisors to Andy Sieg, who became head of Merrill Lynch Wealth Management in March 2017.
Sieg has embraced the goal of making Merrill Lynch a place where African-American advisors succeed, Schimpf says. “The tone is set through Andy and myself,” Schimpf says.
But their attitudes influence others. For the meetings scheduled last week, so many of Merrill Lynch’s executives and advisors wanted to participate that prior to the event Schimpf worried there might not have been enough hotel rooms reserved. “They come because they want to and they are glad to participate,” Schimpf says about the executives attending.
Aubrey Lee, an African-American with 31 years of experience as a financial advisor who is now a sales manager for Merrill Lynch’s office covering the Greater Detroit area, agrees that encouragement from the top brass makes all the difference. Lee also serves as chair of his wirehouse’s Black and African-American Leadership Council.
At a meeting last year, when Sieg spoke and took questions from an audience of about 170 African-American advisors, the Merrill Lynch leader was scheduled to be at the podium for 45 minutes, Lee recalls. “But the discussion was so robust, we just let it continue. It was unbelievable. It crystalized for me that our senior leadership really got it. He really understands,” Lee says.
A federal judge approved Wells Fargo’s settlement of the bias case against it in May 2017. The terms of that settlement stipulated the wirehouse must continue taking steps to figure out ways to recruit, train and manage African-American advisors so they succeed for at least four years. Because Wells Fargo has operated under the settlement terms for only one year, plaintiff lawyer Friedman wants to wait before she issues her opinion on whether the wirehouse has progressed towards eliminating biased practices and bolstering odds that African-American advisors succeed.
“It’s too early,” she says, to tell if management is committed to change. Wells Fargo’s recent other controversies have captured headlines — and most likely distracted the focus of the wirehouse’s executives, she worries. In September 2016, the federal government issued a $185 million fine against the bank after allegations its employees secretly issued credit cards without customers' consent. Then, earlier this year, Wells Fargo agreed to pay $480 million to settle a class-action claim from shareholders who said they were harmed by the bank’s false statements about its misdeeds related to the sham accounts.
For this story, a spokesperson for the firm issued this statement: “Wells Fargo Advisors is committed to providing a diverse and inclusive work environment where our team members feel valued and can thrive. We know unique perspectives and experiences can lead to new ideas that drive growth and innovation. As we embrace inclusiveness and foster new ideas, we continue to advance our journey through hiring diverse leaders and next-generation talent as well as supportive resources for existing team members.”
David Dawkins, a 40-year veteran African-American advisor who serves as senior vice president and as an advocate coach for minority advisors, expresses confidence about Wells Fargo’s commitment to diversity.
“Wells Fargo has always been committed to diversity. Certainly, the Slaughter settlement was a catalyst to accelerate to do things differently,” Dawkins says, referring to the case name of the lawsuit filed by African-American advisors that the wirehouse settled in 2017.
In Wells Fargo Wealth Advisors’ trainee program, more than 40% of the hired candidates are diverse, including women, African-Americans, LGBTQ, and other underrepresented minorities. Among those hired there is a greater than 80% retention rate, he says.
Dawkins joined Wells Fargo Advisors in 2011 and has held financial advisor and complex-manager roles before becoming a diversity coach for the firm. “When I first came into this business in 1979 I was told directly to my face, ‘We are not hiring you because you are black.’"
Although such overt discrimination is less prevalent, implicit discrimination still exists, he says. “You have to figure out a way to rise above it,” he says. That’s what he attempts to teach the African-American advisors he coaches.
Historically, in the brokerage business, “the average black advisor is the one and only where they sit in the branch. You’re almost cocooned,” Dawkins says. But by sending out veteran black advisors to talk with newcomers about “how we rose above it and how we found success,” Wells Fargo helps them succeed, Dawkins says.
Dawkins is so certain Wells Fargo is taking the right steps to help achieve diversity in its ranks that he encouraged the youngest of his three daughters, who had been working at Goldman Sachs, to join Wells Fargo.
“I believe in our industry and our firm so that my daughter, who is the love of my life, is a Wells Fargo financial advisor,” he says.