By Liz Hoffman and Susan Pulliam
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 3, 2020).
When Charles Scharf took over at Wells Fargo & Co. last
year, tasked with moving the bank past a fake-accounts scandal, he
brought in a cleanup crew of former colleagues from his long career
on Wall Street.
A new chief operating officer and heads of public affairs,
credit cards and strategic planning had all worked with Mr. Scharf
at JPMorgan Chase & Co. or Bank of New York Mellon Corp.
Another longtime JPMorgan executive joined the board. All are white
men.
As nationwide protests over racial justice stretched into a
fourth week, Mr. Scharf promised to do better. In a June 16 memo to
employees, he said the firm would tie executives' bonuses to the
diversity of their units and double the number of Black senior
leaders by 2025.
The next day, he introduced Wells Fargo's new head of wealth
management: Barry Sommers, a white man who had worked at
JPMorgan.
Executives in every industry are confronting their diversity
track records, pressed by a national reckoning over racial justice.
But Wall Street's task is taller: Finance remains stubbornly white,
even after years of lip service paid to the need to recruit and
retain people of color, and millions of dollars spent on the
effort.
Nowhere is that more apparent than at the top. The chief
executives of the biggest American banks are white men, as are the
bulk of leaders of the asset managers, private-equity firms and
hedge funds that pull the levers of power on Wall Street.
Go another level down, and the picture is much the same. Of the
roughly 100,000 executives at financial firms in 2018, only 2,644
were Black and 3,682 were Hispanic, according to the U.S. Equal
Employment Opportunity Commission.
Overall less than 10% of nonclerical and nonlaborer workers at
U.S. financial firms were Black or Hispanic, well below their share
of the broader population. The numbers haven't budged since 2009,
despite a decade in which banks hired diversity czars and made
changes to their recruiting and promotion rules.
Executives are pledging changes. "We need to do better," said
BlackRock Inc. Chief Executive Officer Laurence Fink, who aims to
increase the number of Black employees by 30% by 2024.
Lester Owens, an African-American executive, will join Wells
Fargo later this month as head of firmwide operations. In his June
16 memo, Mr. Scharf said the bank's regulatory troubles have made
it harder to cast a wide net for top jobs.
"The unfortunate reality is that there is a very limited pool of
Black talent to recruit from with this specific experience," he
wrote.
The causes of Wall Street's whiteness are deeply rooted and defy
quick fixes. Recruiting pipelines still favor elite private
colleges. An apprenticeship model allows managers to favor trainees
whose backgrounds mirror their own. And the racial wealth gap in
the U.S. means that top clients -- wealthy families, hedge-fund
managers and corporate CEOs -- are mostly white and often
perceived, fairly or not, to want their money managed and their
deals done by people who look like them.
Stephani Mason, a former private banker at JPMorgan who is now
an assistant professor at DePaul University's business school, said
minority bankers often struggled to get onto promising teams at the
bank.
"The perception is that this person doesn't know any wealthy
people, except maybe rappers and ballplayers," said Ms. Mason, who
is Black and left JPMorgan in 2008. "Finance is a proxy for where
the assets are and who owns them."
The financial system itself hasn't always served Black Americans
well -- or at all. Banks for many years refused to lend in
low-income, Black neighborhoods. Redlining is illegal now, but many
communities are still struggling to fix the damage done by
once-common racist lending policies.
Wall Street has a long history of division on ethnic lines, with
firms such as Goldman Sachs Group Inc. and Lehman Brothers
welcoming Jewish bankers who were kept out of white-shoe firms.
Those walls fell -- Goldman is now among Wall Street's elite --
but the racial gap persists.
At securities firms in New York City, Black and Hispanic
representation has actually fallen since 2005, when each group made
up between 9% and 10% of finance workers, according to the state
comptroller. Both groups lost their jobs at twice the rate of
whites in the post-2008 downsizing and today make up 6% and 8%,
respectively, of industry employees in the city.
The problem starts early: Banks and asset managers hire
thousands of recent college graduates each year to fill their
junior ranks. Historically, most have targeted a short list of
elite private colleges. Those pipelines are reinforced over the
years as alumni return to campus to interview candidates, often
leaning on informal networks such as Greek organizations and
athletics.
"People hire people they're comfortable with, résumés that
resonate," said Reginald Browne, a senior executive at GTS, a
high-speed trading firm.
Mr. Browne was the only Black trader when he started on the New
York Stock Exchange floor in 1992, he said. He later learned his
bosses, at a predecessor of UBS Group AG, had privately discussed
whether he could hack it there. "Unless there is a conscious
effort," he said, "it will be very difficult to diversify these
institutions."
Many firms have set targets and expanded recruiting efforts into
more-diverse state schools. Some use video-interview software to
widen the net further.
JPMorgan's 2019 incoming class in the U.S. was 13% Black and 16%
Hispanic. The cohort joining Goldman Sachs this summer is 11% Black
and 14% Hispanic, and the bank last year began requiring managers
to interview two diverse candidates for open jobs. Blackstone Group
Inc. will now recruit at 44 colleges, up from nine in 2015, to get
a more diverse pool.
But getting more diverse recruits in the door doesn't mean they
will stay. Minority employees have long complained about internal
practices and client biases that make it harder to advance, and
their sparsity in senior ranks suggests they leave in larger
numbers than their white co-workers.
Mellody Hobson, a board member at JPMorgan and co-CEO of Ariel
Investments, one of the country's largest Black-owned money
managers, said companies too often point out their efforts and
gloss over their scant progress.
"Remember in school you used to get credit for showing your
work, even if you got the wrong answer?" said Ms. Hobson, who
favors tying executive bonuses to clear diversity metrics.
Positions that put employees in direct contact with CEOs and
wealthy clients -- most of whom are white -- have proven especially
tough to crack for Black employees.
"You're selling to an audience," said Mr. Browne. "It's
perceived to be difficult to put diverse candidates in those slots
because you're fearful of the outcome."
A study from Texas A&M University last month found that
minority stock analysts were less often called on to ask questions
of CEOs than white analysts, which can make it hard to publish
original research and gain a following among investors.
Challenges are acute in private banking, a rarefied corner of
finance where advisers cater to millionaires. Less than 1% of
Morgan Stanley's roughly 16,000 wealth advisers are Black,
according to a lawsuit filed last month by a former broker and head
of diversity, Marilyn Booker, who alleges racial discrimination.
The firm disputes Ms. Booker's claims and said it would vigorously
defend itself.
Kathy Frazier was a star broker at Merrill Lynch when Morgan
Stanley recruited her in 2007 under a rising-star program to its
Honolulu branch, which managed billions of dollars for wealthy
clients.
Within a year, she says, her prospects began to fade. When a
group of brokers left the firm, she says she was all but shut out
when Morgan Stanley redistributed their $2 billion in client
accounts.
"Everyone else's boat floated up," the 58-year-old said last
week. "Mine dropped precipitously." Ms. Frazier quit in 2013 and is
part of a discrimination lawsuit against Morgan Stanley that is
pending in Manhattan federal court.
A Morgan Stanley spokeswoman denied Ms. Frazier's allegations,
adding that "we are committed to promoting a diverse culture." She
said that Ms. Frazier received account distributions in keeping
with the company's policies, including one that limits
distributions to brokers in their first year at the firm.
Ms. Frazier said that those policies were applied selectively
and that two brokers who had also been with Morgan Stanley for less
than a year were given tens of millions of dollars in client
accounts in the $2 billion redistribution.
Ms. Frazier said that client accounts were doled out 30 or 40
times in her six years at the firm and that "I can't think of one
where I received a good distribution." Once, she said, a manager in
charge of assigning new clients told Ms. Frazier that some clients
don't want Black advisers.
After one financial adviser left, Ms. Frazier said she was given
his younger brother's account -- with $740 in it. She tried
unsuccessfully to join teams that might have lifted her career, she
said.
"People see who is not receiving support from the firm," said
Ms. Frazier, who now works at UBS.
--David Benoit and Ben Eisen contributed to this article.
Write to Liz Hoffman at liz.hoffman@wsj.com and Susan Pulliam at
susan.pulliam@wsj.com
(END) Dow Jones Newswires
July 03, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Aug 2024 to Sep 2024
JP Morgan Chase (NYSE:JPM)
Historical Stock Chart
From Sep 2023 to Sep 2024