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Bank of America-Merrill Lynch (BAC) is moving to settle a lawsuit initially filed on behalf of some 700 black brokers who charged the firm with discrimination, the bank said Wednesday. The news came before President Barack Obama spoke at the Lincoln Memorial commemorating the 50th anniversary of Martin Luther King’s “I Have a Dream” speech.
The amount of the preliminary settlement, which will not be reviewed by a federal judge until Tuesday, is reportedly $160 million.
“We are working toward a very positive resolution of a lawsuit filed in 2005 and enhancing opportunities for African-American financial advisors,” the bank said in a statement. It declined to confirm the amount of the settlement or disclose the current number of black advisors at the firm.
As of June 30, the number of financial advisors at Bank of America-Merrill Lynch was 15,759, while the total headcount for client-facing financial professionals was 19,689.
The Chicago legal firm representing the advisors, Stonewall & Friedman, did not return phone calls about the lawsuit.
Nashville-based advisor George McReynolds brought the case to the courts in order to address the lack of support he said he received from management and co-workers. His allegations date back to 2001.
Ironically, many of the suit’s claims stem from issues that arose during the leadership of Stanley O’Neal, who is black. O’Neal joined Merrill in 1986, was CFO from 1998 to 2000 and became head of the private-client operations in 2000, though he had never been an advisor.
In 2001, O’Neal was tapped as president of Merrill, and he moved into the role of CEO and chairman in 2003, a role he held until 2008. He was forced out for starting merger talks with Bank of America and Wachovia without first consulting with Merrill’s board of directors.
In a deposition, O’Neal said that it was possible that black brokers could have a difficult time building a book of business at Merrill since many of the firm’s prospective clients were white and might not trust brokers who were of a different ethnicity, according to a New York Times report.
Speaking Thursday about ethnic relations and economic mobility in the United States, New York Attorney General Eric T. Schneiderman said, “Though we have accomplished much in the past 50 years, our aspiration for equality has not subsided, and the pursuit of equal justice under law must continue … Today, let us not only celebrate the culmination of the great movement-building of Dr. King’s era, but also let us recommit to taking our part in his mission of greater justice and greater equality with each generation.”
Experts say that the number of black financial advisors is hard to pin down but remains quite low nationwide, not reflecting the fact that African-Americans account for some 13% of the U.S. population.
In addition, a study released by Prudential Financial in May found that only about one-fourth of African-Americans feel any financial-services company has effectively shown support of the black community. Across all income levels, African-Americans are 13% less likely than the general population to have been contacted by a financial advisor.
A 2012 study from the University of Illinois-Chicago found that black financial advisors at a major firm earned about 33% to 40% less than their white counterparts. Only 2% of advisors at the company were black, and more than 85% of the firm’s offices had no black advisors.
Isolation limited their ability to join brokerage teams, the study concluded. Close to 42% of non-black financial advisors were able to join advisor teams, but less than 12% of black brokers could.
Diversity programs seemed to compound the challenges of black advisors, the report concluded, saying such efforts “typically have little impact on discriminatory workplace barriers and often do more harm than good.”
Check out African-Americans Remain a Viable, Untapped Advice Market by Savita Iyer-Ahrestani on ThinkAdvisor.