Citi, JPMorgan, Others Say They Want Financial Services To Look Like The Clients They Serve

Citi, JPMorgan, Others Say They Want Financial Services To Look Like The Clients They Serve

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Like Silicon Valley tech firms, some Wall Street leaders have been promising publicly for years to increase the diversity of their workforces and hire more people from traditionally underrepresented populations including people of color and women.

A new Wall Street initiative called “The Diversity Project” has the goal of ensuring that professionals in the investment business are as diverse as the clients and communities they serve.

Citigroup Inc., JPMorgan Chase & Co. and Fidelity Investments are among more than a dozen financial services firms that are joining the new initiative to increase diversity in the asset management world, Bloomberg reported.

Diversity Project
A JPMorgan building. AP Photo

The problem is that most diversity programs don’t increase diversity. “Companies are basically doubling down on the same approaches they’ve used since the 1960s—which often make things worse, not better,” wrote Alexandra Kalev and Frank Dobbin in “Why Diversity Programs Fail” for the Harvard Business Review.

The Diversity Project

The Diversity Project will be discussed publicly for the first time on Oct. 12 at the general meeting of NICSA, the industry trade association sponsoring The Diversity Project.

If financial services are a brand, the brand has problems, said Dan Houlihan, an executive at Northern Trust and chairman of the board at NICSA.

“We have a brand challenge across the financial services industry — where the brand is not very diverse, as we all know and acknowledge,” Houlihan said, according to a Bloomberg report.

NICSA has almost 200 member organizations, with senior leaders participating from some of the biggest firms in the industry, including Broadridge Financial Solutions Inc., the CFA Institute, Columbia Threadneedle Investments, Capital Group Cos., Deloitte, Eaton Vance, MFS Investment Management, Northern Trust, Sionna Investment Managers, State Street Global Advisors and Starpoint Solutions.

People of color will be the majority in the U.S. by 2044. Companies that promote racial equity will gain a competitive advantage by finding new markets and discovering overlooked talent, Impact Alpha reported:

Investing through a racial-equity lens may also give investors a competitive advantage. Kapor Capital, the $350 million venture firm of Freada Kapor Klein and her husband Mitch Kapor, invest in companies closing the income inequality gap. When it discloses returns next year, Kapor Klein says “We will easily be in the top quartile of VC funds.”

Calls to increase diversity in Wall Street have come from outside the industry, according to Bloomberg. In March, the Congressional Black Caucus asked leaders of lobby groups for mutual funds and hedge funds to encourage their members to increase Black representation at the companies they invest in.

Businesses started caring a lot more about diversity after high-profile lawsuits rocked the financial industry, Harvard Business Review reported. In 2013, Bank of America Merrill Lynch settled a race discrimination suit for $160 million. Cases like this brought Merrill’s total 15-year payout to nearly half a billion dollars, according to the 2016 HBR report:

“It’s no wonder that Wall Street firms now require new hires to sign arbitration contracts agreeing not to join class actions. They have also expanded training and other diversity programs. But on balance, equality isn’t improving in financial services or elsewhere.”

Cornerstone Capital Group, which recently passed the $1-billion mark for assets under management, shares its  investment strategy to advance racial equity, Impact Alpha reported:

  • Access to capital. Investors can make fixed-income investments into community development finance institutions and community investment notes, which support small business in low-income communities. They can put their cash in Black-owned banks and community banks in communities of color. 
  • Access to housing. Investors put money into an array of alternative investment vehicles expanding access to housing including affordable housing private-equity funds, community land trusts, co-op funds and more.
  • Income inequality. Investors can make active, public investments in companies with policies and practices that support living wages, pay equity, strong diversity policies, or invest directly in funds and companies that promote good jobs.