Wall Street’s diversity push will be tested by next bear market
Financial companies are all too happy to support diversity programs during good times — but what happens in a bear market?
That’s the question posed by Carla Harris, vice chairman of wealth management at Morgan Stanley, who spoke Tuesday at the Center for Financial Planning’s inaugural Diversity Summit in New York. Firms need to foster diversity as a commercial priority or their pipeline of candidates will run dry every few years, she said.
“Diversity and inclusion has been a bull-market phenomenon, when things are going well, we spend lots of money” to recruit and promote women and people of color, she said. “But the minute we hit a bear market environment, it doesn’t go away, but the intensity goes from 10 to 1,” with job cuts hitting less-represented groups hardest.
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This month is shaping up to be the worst October in a decade for stock markets as investors question how long the bull run can last against a backdrop of rising U.S. interest rates, escalating U.S.-China trade tensions and geopolitical flareups from Italy to Saudi Arabia.
Wall Street firms have struggled to recruit and retain a workforce that is reflective of the U.S. population. In the U.S., less than 3.5% of the 80,000 professionals with the certified financial planner designation were black or Latino in 2017, according to a study released Tuesday by the Center for Financial Planning.
For Merrill Lynch, it’s important for diversity initiatives to weather the business cycle, Andy Sieg, head of Bank of America’s wealth-management unit, said in an interview at the event.
“There are as many things that can distract you in a bull market as in a bear market,” Sieg said. “You’ve got to find the time. You’ve got to make sure that this topic is on the agenda every week, every month, every quarter, and we’re holding ourselves accountable.”
Merrill Lynch has seen “strong progress” in diversity after introducing it as a metric for field leaders last year, Sieg said. Managers can receive an A rating on their scorecard only if they focus on diversity as part of their responsibilities and show results, he said.