Wells Fargo Advisors has reached a $35.5 million settlement with a group of African-American financial advisers who claimed the firm discriminated against them due to their race.
The group of six brokers, with lead plaintiff Lance Slaughter, are joined by 325 confirmed African American brokers or trainees at the firm, said Linda Friedman, the attorney for the class plaintiffs. There could be another potential 200 class members, depending on how those advisers and trainees identify their race, she said.
Federal judge Harry D. Leinenweber has to sign off on the agreement, which was filed last Friday in U.S. district court, the northern district of Illinois. Mr. Slaughter filed his claim in September 2013.
“This is a very significant outcome, based on the number of people and the size of the fund,” Ms. Friedman said. She said the amount each Wells Fargo adviser will eventually receive will not be based on a set formula but rather an assessment of individual claims.
In the most recent amended complaint, the Wells Fargo advisers alleged that the firm provided widely different compensation and business opportunities to advisers based on their race.
“African Americans are underrepresented both as financial advisers and in management and executive positions at Wells Fargo, and are paid substantially less than their counterparts who are not African American,” according to the complaint. “These disparities result from Wells Fargo's systemic, international race discrimination and from policies and practices that serve no reasonable business purpose yet have a disparate impact on African Americans.”
“We do not agree with the claims in the lawsuit, but believe that putting this matter behind us is in the best interests of our team members, clients and investors,” wrote Wells Fargo spokeswoman Helen Bow in a statement. “Resolving this matter allows Wells Fargo Advisors to continue to focus on providing a diverse and inclusive work environment where all of our team members can thrive through industry leading recruiting, coaching, leadership and business development practices. We will also update our policies and procedures to provide greater opportunities for inclusiveness.”
Chief among the claims was that African American advisers at Wells Fargo have been denied access to potentially lucrative client account referrals because they were segregated from teams that typically land referred business.
“Wells Fargo employs company-wide teaming, account distribution and territory and banking support assignment policies and practices that deny African Americans the same business opportunities as employees who are not African American,” according to the complaint. “These policies and practices exclude African Americans from lucrative teams and client account distributions and segregate the firm's work force.”
(See: Wells Fargo eliminates bonuses for advisers selling banking products)
Wells Fargo has 15,000 financial advisers in 1,375 offices in the United States. The settlement covers all African Americans advisers who are or were employees with the firm from September 2009 to the end of last year.
Mr. Slaughter is based in the Washington, D.C., area and has been affiliated with Wells Fargo Advisors, and its predecessor, Wachovia Securities, since 2005.
The brokerage industry over the past ten to 15 years has seen a steady stream of racial discrimination claims, most notably a long-running and highly publicized case that resulted in a $160 million settlement with Merrill Lynch in 2013.
Along with payments to brokers, the settlement also calls for Wells Fargo to create a number of programs focused on African American advisers.
Those include: recruiting, with the firm devoting resources with the primary goal of recruiting African American advisers and trainees; creating two coaching positions to work with those advisers and trainees; and establishing African-American focus group to provide feedback to leadership teams that will focus on ideas and initiatives to increase the number of African-American advisers along with their productivity, retention and opportunities for teaming.
The settlement also calls for a $500,000 fund for African American advisers to fund business development events or activities over a four year period.
(More: Finra slaps 12 firms with $14.4 million fine for cybersecurity issue)
