By the end of 2020 — a year in which the murder of George Floyd at the hands of Minneapolis police officer once again brought national attention to matters of racial justice — only 3.4% of executives at the largest U.S. investment firms were Black. For Latinos, the number was 3.2%.
Those numbers are far below those groups' U.S. demographics — 13.6% and 18.9% of the total population, respectively.
Though figures like that are depressing to many, the mere fact that they're public knowledge is a triumph of sorts. And for that, activists and observers owe a tip of the hat to the U.S. House Committee on Financial Services' subcommittee on diversity and inclusion.
Founded in January 2019 following the Democrats' takeover of the House two years into the Trump administration, the subcommittee has found success in getting large institutions like asset managers, banks and insurance companies to
Democrats now control the House by a slim margin. Their 220 seats to the GOP's 212 — plus three vacancies — mean Republicans need only six seats to regain control.
House subcommittees can easily be swept away in the political tides. They owe their existence to committee chairs, who themselves are appointed or reassigned by whatever party is in control of the House at a given time. So a relatively new Democrat-sponsored panel like the subcommittee on diversity and inclusion might seem like something Republicans could be tempted to brush away. That's especially true given the animosity many in the GOP have shown recently toward corporate diversity efforts and other forms of what some deride as "woke capitalism."
In her first policy speech following the formation of the subcommittee, U.S. Rep. Maxine Waters, the California Democrat and the first Black woman to lead the finance committee,
"Minorities and women have particularly low representation at the senior management levels within the financial services industry," she said. "This needs to change. Diverse representation in these institutions, and particularly at the management level, is essential to ensure that all consumers have fair access to credit, capital and banking and financial services."
And at least one close observer of the subcommittee's work thinks there's reason for hope that its work won't die regardless of the midterm results. Paul Thornell, a board member of the National Association of Securities Professionals, which advocates for diversity in the industry, said current House GOP lawmakers could have simply ignored the subcommittee altogether. Instead, at least some of the Republicans assigned to the panel have made it a point not only to attend hearings but also contribute to the proceedings.
Thornell particularly credits two Republican members — U.S. Reps. Ann Wagner of Missouri, the subcommittee's ranking Republican member, and Anthony Gonzalez, a Republican from Ohio — for attending meetings and taking the work seriously.
"While that's a low bar, it's important to note that it's clear there has been no active attempt to limit Republican participation on the subcommittee," Thornell said.
Should Republicans prevail in the midterms, the chairmanship of the Financial Services Committee would likely go to Patrick McHenry, a North Carolina Republican who's now the panel's ranking member. Thornell said he similarly has seen no signs that McHenry is opposed to the subcommittee's work. Attempts to reach McHenry were unsuccessful.
"Whether or not he might roll its jurisdiction in with another subcommittee's is one question," Thornell said. "But given his positive engagement to date, it would be very unfortunate if he eliminated the subcommittee entirely."
Kamila Elliott, a financial advisor at Atlanta-based Collective Wealth Partners and the first Black chair of the Certified Financial Planner Board of Standards, said she has met with Waters' chief of staff to discuss ways to bring financing planning to more Black Americans. She said the subcommittee's work complements those endeavors and that many clients are eager to have more data on diversity in the workforce and among asset managers.
Like many supporters, Thornell said the subcommittee's biggest accomplishments lie in lifting the veil on the lack of diversity in the C-suites, boardrooms and subcontractor offices of large investment firms, banks and insurance companies. In March of 2021, Waters and subcommittee chair Joyce Beatty, a Democrat from Ohio, sent letters to 31 investment firms with assets over $400 billion asking them about their diversity numbers and policies. Because responses weren't mandatory, not all the firms that were solicited provided answers. But the
The subcommittee found, for instance, that even though many of these large financial institutions had made public commitments to diversity, few had shown progress on that front. From 2016 to 2019, the proportion of these firms' executive positions held by women went from 25% to 26.2%; those held by people of color went from 14.1% to 16.6%.
The figures on firms that outsource asset management services to women- and minority-owned firms were just as telling. Only nine companies responded to inquiries along these lines; among them, they directed an average of 0.57% of their spending on asset management to women-owned firms and 3.96% to minority-owned firms.
The subcommittee's report also tries to hold firms accountable for their public commitments to diversity. It notes that the asset management giant BlackRock has committed to doubling its number of Black executives by 2030, while also finding that its proportion of Black employees increased only from 5.4% in 2019 to 5.8% in 2020.
The subcommittee has produced similar reports on large banks and insurance companies. Because voluntary submissions can sometimes produce spotty results, panel members have devoted much of their time to bills that would make responding to these sorts of inquiries mandatory.
But like so much legislation these days, many of the subcommittee's legislative priorities have stalled. No matter, said Thornell.
"Over the last four years, more of these firms than ever have received letters and answered questions in hearings and responded to inquiries that have found their way into reports to both the committee and subcommittee," he said. As a result, there is a much greater sense that business diversity is something that they have to be intentional about."
- Additional reporting by Financial Planning chief correspondent Tobias Salinger
