From the June 2007 issue of Research Magazine • Subscribe!

June 1, 2007

Morgan, Female FAs Reach $46 Million Settlement

Morgan Stanley's Global Wealth Management Group has settled a gender class-action lawsuit involving current and former women financial advisors and registered trainees.

Under the terms of the settlement, subject to the district court approval, the brokerage firm will adopt new programs in such areas as account redistribution, training, and management development designed to enhance the success of women financial advisors. In addition, it is setting up a process through which women financial advisors who believe they were historically disadvantaged because of their gender may submit monetary claims to a special master jointly appointed by the parties. A $46 million pool has been established to pay such claims and related costs.

"We are firmly committed to the initiatives we will be undertaking to attract and retain women financial advisors and help them be as successful as possible, and pleased to resolve a legal matter stemming from the past. Our goal - across the organization - is to be the employer-of-choice for talented women," says Caroline Gundeck, head of diversity for the wealth-management group.

The firm intends to adopt new methods to ensure women aren't discriminated against when accounts of brokers who depart or go into management are redistributed. The parties have estimated that some $7.5 million could be spent on training and that female brokers' pay should increase by some $16 million over the next five years, according to Dow Jones.

The suit reportedly includes about 2,700 claimants, some of whom said they were discriminated against in August 2005, when some 1,000 advisors were let go.

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What's Next?

In the recent settlement reached with female FAs, Morgan Stanley's global wealth management group has agreed to:

o Implement a branch-management assessment and development program;

o Tie branch-manager compensation to diversity;

o Change its "Power Ranking" system for account distribution by giving recent performance heavier weightings, eliminating parental and short-term disability leave periods from the system, automating the process, and limiting exceptions;

o Issue a comprehensive account distribution policy statement that covers retiring and other departing FAs, as well as leads, call-ins and walk-ins;

o Include FAs on short-term leave in such account distributions;

o Direct all client prospects to the "FA of the Day," to be assigned alphabetically; and

o Work with female FAs named in the suit to appoint a diversity monitor, external and independent of Morgan Stanley but reporting directly to the COO and president of global wealth management.

Source: Morgan Stanley, U.S. District Court in Wash., D.C.

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Where are the Women?

Some experts estimate that women make up 16-18% of the registered reps in the U.S., but others say the real industrywide figure -- excluding sales assistants -- is lower.

o Edward Jones has 1,632 women FAs worldwide out of 10,436 FAs; inclusion initiatives started in 2000; mentoring and networking groups are offered.

o Raymond James has 625 women FAs worldwide out of 4,620; it has a network for women advisors, advisory council and resource center, and stages a yearly symposium.

o LPL says about 16% of its roughly 7,900 FAs are women.

o Merrill Lynch says 16.6% of its 12,930 FAs are women; programs include a women's network, FA symposium, mentoring programs, etc.

o Smith Barney says about 16.4% of its 13,200 FAs are female.

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Panel Asks Merrill to Reinstate Sumner

A three-person arbitration panel recently upheld a July 2004 decision that Merrill Lynch must give former broker Hydie Sumner a job as an advisor in the firm's San Antonio branch, where she worked from 1991 to 1997, and give her the chance to attend the firm's management-assessment program.

Sumner won a $2.2 million sexual-discrimination claim against the firm about three years ago, when she and some 900 claimants argued that Merrill discriminated against women in promotions. Recently, Merrill had offered her direct entry into management as associate director at the firm's East Bay complex in Oakland, Calif.

"Merrill's offer of a direct appointment to a managerial position did not comply with the reinstatement award," the panel says.

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Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.

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