Amid DEI abandonment, what progress can firms show?

It has been almost five years since the murder of George Floyd at the hands of a Minneapolis police officer jolted many wealth management firms into redoubling their efforts to diversify the industry.

But with the anniversary of Floyd's death coming on May 25, firms are more likely to be backing away from their previous diversity, equity and inclusion (DEI) commitments rather than embracing them. Political pressures from the Trump Administration have prompted many of the biggest names in wealth management to either abandon or scale back their DEI-related goals in their annual reports. 

Wells Fargo, for instance, removed language stating that employees  "at every level" and "in every role" are expected to "champion diversity and inclusion," while still reporting that the proportion of its workforce that is white had fallen to 51% from 53% the year before. Morgan Stanley retained its commitment to "to diversity and inclusion" while adding new language about how "Meritocracy is at the heart of Morgan Stanley's talent development." The megabank reported that roughly 35% of its U.S. workforce was "ethnically diverse," and that women make up 40% of its global workforce.

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Citi — whose CEO, Jane Fraser, is the only woman leading a large Wall Street bank and whose chief financial officer, Mark Mason, is Black — announced in February that it was eliminating DEI-related goals it had adopted three years before. In a note to staff employees, Fraser said the bank would "aim to retain the benefits that come from having a global and diverse colleague base."

'Illegal DEI'

The about-faces come following an executive order Trump signed in January calling for a halt to "illegal DEI" in federal hiring and contracting. Among other things, the order bars governmental officials from trying to urge "contractors to balance their workforce based on race, sex, gender identity, sexual preference, or religion."

To advocates for diversity in wealth management, the retreat from DEI puts at risk the already meager gains of the last few years. Kamila Elliott, the CEO of the RIA Collective Wealth Partners and the first Black advisor to be the chair of Certified Financial Planner Board of Standards, said diversity, equity and inclusion policies are too often dismissed as being part of a "woke" political agenda.

In reality, though, they're simply good business practices for firms that are seeking to bring in new clients and appeal to a wider swath of the general public, she said.

"As the U.S. population becomes more diverse, representation of these diverse populations will help meet the needs of clients," Elliott said. "This is not a quota. It can be representation of a lot of things — age, or people with disabilities, or veterans even."

Many critics of DEI policies are quick to dismiss them as "window dressing," or something firms do to make themselves appear better without enacting real changes. Elliott, though, said she thinks large firms in particular have made commendable progress under the DEI policies adopted in the past five years.

Her hope, she said, is that many wealth managers are merely eliminating some of the language of DEI without abandoning the underlying goals.

"I hope they realize DEI is not just a nomenclature or a marketing tool," Elliott said. "It's good for business."

Industry diversity by the numbers

The last time big asset managers lifted the veil on their DEI progress in any type of systematic way came in their responses to inquiries circulated by a now-defunct Congressional subcommittee on diversity and inclusion. U.S. Rep. Maxine Waters, while chair of the House Financial Services Committee in 2021, asked 31 firms with at least $400 billion under management to supply their employee demographics.

In the end, only 28 asset managers responded to the voluntary survey. The results weren't entirely flattering.

The survey found that 17% of the executive positions at the firms surveyed were held by people of color, who then made up 38.4% of the total U.S. population. And women, who constituted just over half of the population, held 28% of the executive jobs.

And exercise in disclosure was not to be repeated. Republicans took control of the House in 2022 and replaced the subcommittee on diversity and inclusion the following year with one dealing more with digital assets and financial technology.

Data on the industry's diversity has since been less likely to come from individual firms and more from industry organizations. The CFP Board, for instance, provides monthly updates of demographic data for its mark holders, who are certified for upholding various professional and ethical standards. The CFP reported in March that just under 2% of its 103,206 certificate holders were Black — a figure unchanged from two years before.

The proportion of Hispanic CFPs has held steady at just under 3% and of Asians and Pacific Islanders around 4%. Meanwhile, just about 24% of CFP holders were women at the start of March, also a percentage that has barely budged since 2023.

To be sure, a surging increase in the total number of certificate holders means that there have needed to be strong influxes from all these groups for the percentages to remain the same. The number of CFPs has risen to above 100,000 from 95,000 at the end of 2023. The CFP Board reported in January that the number of certificate holders coming from ethnically and racially diverse groups had surpassed 10,000 for the first time after showing an annual growth rate of 8.8%.

"CFP Board recognizes that a broad range of perspectives, backgrounds and experiences in the profession enhances consumer choice and strengthens financial planners' ability to serve all individuals and families," a CFP Board spokesman said.

Other industry groups have found similar results. Surveying nearly 500 registered representatives and other employees at independent broker-dealers, the Financial Services Institute reported in early 2022 that just 18% of advisors at those firms were women, 2% were Black, 2% Hispanic and 3.5% Asian American.

The wealth management industry's lack of diversity has long been a cause of consternation. While certain groups have been able to make inroads into some of the professions — women now make up 41% of all lawyers, according to the American Bar Association — the majority of financial planners remain white men. The CFP Board reported in its latest demographic that just over 80% of its certificate holders at the beginning of March were white males. And somewhat frequent lawsuits alleging discrimination and settlements over similar charges show that many people still believe the industry has a ways to go.

CEOs' embrace of DEI

After Floyd's death nearly five years ago sent droves of activists out into the streets to protest police brutality and injustices, many Wall Street CEOs responded with pledges to reduce their industries'  perceived barriers to hiring women and minorities. JPMorgan CEO Jamie Dimon announced a plan in fall 2020 to set aside $30 billion for a Racial Equity Commitment set up to fight unfair discrimination in society. Among other things, Dimon pledged to increase the diversity of the firm's own workforce.

JPMorgan's website still contains a DEI page noting statistics showing that 58% of its new hires come from ethnically and racially diverse groups and that 49% globally are women. Dimon has shown less willingness in recent interviews than other CEOs to back away from diversity, equity and inclusion goals.

A spokesperson for JPMorgan said DEI means many things to different people, adding "For us, it's about doing what we've done for decades — trying our best to ensure that every customer and employee has a fair opportunity and that we serve communities and grow our company."

At LPL, an independent broker-dealer with nearly 29,000 advisors, CEO Rich Steinmeir recently sent employees a note acknowledging the current "complex political environment" but pledging to maintain a priority "on inclusion and belonging for every employee."

An LPL spokesperson said, "Like any regulated business, we are evaluating our programs, policies, and procedures against an ever-evolving legal and regulatory landscape. This may mean we need to make modest adjustments, but nothing that wavers from our overall commitment."

Spokespeople for other firms either declined to comment or pointed to recent public statements executives had made. Speaking at the Economic Club of Washington, D.C., in February, for instance, Bank of America CEO Brian Moynihan said "We have a diverse team, we stress inclusion. So when you're at our company, you can be who you want to be, and be successful."

Staying the course

Outside of publicly traded companies, privately owned wealth managers are showing a bit more boldness when it comes to reaffirming their DEI commitments. Casey Jorgensen, the head of the Dynasty Institute for Adaptive Leadership at Dynasty Financial Partners, said diversity policies are actually easy to defend from a business perspective.

That's especially true, she said, in an industry like wealth management, which the consulting giant McKinsey has estimated will be short by about 100,000 advisors by 2034.

Dynasty, which provides an array of support services to member advisory firms, held an event for participants in a women's network last month in Tampa, Florida. And to honor Women's History Month in March, the firm is continuing its Trailblazer Series social media campaign to call attention to the accomplishments of its female employees, whom Jorgensen said make up about 46% of its headcount.

Jorgensen noted women constitute not only just over half of the U.S. population but are also projected to control two-third of the wealth by 2030.

"This isn't just about equity; it's about economic reality," Jorgensen said. "Firms that choose to scale back on supporting and empowering women are overlooking a crucial, burgeoning market."

Elliott thinks not all is lost even if big firms move away from DEI commitments for a few years. For one, organizations like the CFP Board will continue providing scholarships and taking other steps to diversify  the industry.

"Many people just recently discovered diversity, equity and inclusion because of what happened in 2020," Elliott said. "But this is not something that's new. Organizations have realized for a long time it's about representation and equity if they want to continue to grow."