Wells Fargo and a group of African-American advisors have reached a preliminary settlement that awards the advisors a total of $35.5 million. The deal, attorneys say, should be approved later this month and finalized shortly afterwards.
“The amount is larger than that of many other settlements, [since] these are high-paying good jobs and involved high rates of attrition and big gaps in pay –– with significant disparities in earnings between white and African-American financial advisors who had substantial economic losses,” said attorney Suzanne Bish of Stowell & Friedman, in an interview with ThinkAdvisor.
“Also, we have been litigating this case for a long time. It was filed in 2013,” Bish explained.
The class-action settlement, which the law firm representing about 335 registered representatives negotiated with Wells Fargo Advisors, “provides comprehensive programmatic relief designed to increase the representation of and opportunities for African-American financial advisors and FA trainees, as well as substantial monetary relief for settlement class members,” Bish said in a Dec. 30 court filing.
The advisors and licensed trainees affected by the suit include those employed by Wells Fargo’s Private Client Group or WFA’s bank-brokerage channel from September 2009 through December 2016. The number of advisors benefitting financially from the settlement could top 400 as more find out about it, according to the attorney.
“Defendant [Wells Fargo] has agreed to revise its policies and practices and to take action designed to enhance opportunities for employment, earnings, and advancement of African-American FAs and trainees,” Bish added.
Other Settlement Terms
In addition, Wells Fargo will set up a $500,000 fund to support these advisors over the next four years and help them grow their practices.
Furthermore, Wells Fargo “will not impose mandatory arbitration or class-action waivers on African-American financial advisors and FA trainees for claims of race discrimination and related retaliation,” according to the document.
Also, new advisors and trainees will no longer be obliged to reimburse Wells Fargo for any training costs after they leave the company.
“We do not agree with the claims in the lawsuit, but believe that putting this matter behind us is in the best interests of our team members, clients and investors. Resolving this matter allows Wells Fargo Advisors to continue to focus on providing a diverse and inclusive work environment where all of our team members can thrive through industry leading recruiting, coaching, leadership and business development practices. We will also update our policies and procedures to provide greater opportunities for inclusiveness,” a spokesperson said in a statement.
Along with the $500,000 Business Development Fund, Wells Fargo says it will:
(1) Have a recruiting contact whose primary responsibility will be the recruitment of African American FAs and FA trainees;
(2) Create two coaching positions to work with African American FAs and FA trainees, assist them with networking and building relationships, and help them increase productivity and develop their careers;
(3) Establish focus groups in the Private Client Group and Wealth Brokerage Services for African American FAs and trainees to provide feedback to new leadership teams in each business channel, as well as to focus on ideas and initiatives to increase the number of African-American FAs and increase African American productivity, retention and opportunities for teaming.
In 2013, Bank of America-Merrill Lynch settled a race discrimination suit for $160 million, according to Harvard professor Frank Dobbin.
This followed high-profile sexual discrimination cases in the 1990s and 2000s, when Morgan Stanley paid $54 million and Smith Barney and Merrill Lynch over $100 million each. In 2007, Morgan Stanley paid another $46 million to settle another class action.
“There’s always a need for success stories,” Bish said. If the policies and procedures laid out by the Wells Fargo settlement work effectively, “they could catch on elsewhere.” This would mean that organizations “would have the potential to have talent that is now underrepresented in the industry.”
Overall, the attorney is upbeat about the impact the settlement will have when it is finalized.
“Corporations and people change. And individuals who want to work with Corporate America, non-profits and 401(k) plans expect to see all types of advisors,” she added.
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