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October 01, 2013 at 08:00 PM
Bank of America-Merrill Lynch recently moved to settle a lawsuit filed in Chicago with some 700 black brokers to the tune of $160 million and also agreed to pay $39 million to resolve a lawsuit filed in Brooklyn, N.Y., involving about 4,800 female advisors who work or have worked previously for the firm.
“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.
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.
Experts say that the number of black financial advisors nationwide is hard to pin down but remains quite low, despite 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.”
As for the gender-discrimination lawsuit, “We are pleased to resolve this matter, which was filed in 2007 before Merrill Lynch was acquired by Bank of America,” the bank said in a statement. “The resolution includes a number of additional and enhanced initiatives that will enrich our existing diversity, inclusion and development programs, providing even more opportunities for women to succeed as financial advisors.”
In the lawsuit, the advisors charged Bank of America-Merrill Lynch with gender discrimination tied to certain policies, from account redistribution to how advisors were put into teams. “This settlement helps ensure that Merrill Lynch is a place where women can thrive and be successful,” Cara E. Greene, a lawyer for the plaintiffs, said in a statement shared with Bloomberg “Hopefully others will follow Merrill Lynch’s example.”
As part of the settlement, the company, which made no admission of wrongdoing or liability, agreed to put in place certain measures that will be overseen by an independent monitor. These issues include team formation and partnership agreements, business generation, account distributions, manager evaluations, promotions, training and complaint processing and procedures.
