A pay discrimination lawsuit against broker-dealer giant Edward Jones is casting a spotlight on how wealth management companies that make big promises to improve their diversity could be held accountable for those public pledges.
Edward Jones
That's where things could get ugly for Edward Jones. Depending on what turns up, many employers in wealth management and other industries could learn from following the case, employment attorneys told Financial Planning.
One possibility is that the broker-dealer could be roasted on the coals of its publicly stated goals of increased hiring and support for diverse advisors, and internal data tracking related metrics.
"It will be interesting to see how the plaintiffs utilize those public promises, and how that works to the plaintiffs' advantage," said
Bireda added that the internal data the plaintiffs cited in court papers, which she said didn't look "very good" for Edward Jones, will be interesting to follow as "more and more firms and companies are going to be collecting this type of data" for DEI initiatives.
'Goodknight'
The plaintiffs, who are seeking class-action certification on behalf of other advisors with analogous complaints, allege that they and other "similarly situated" employees were paid less due to their gender, sexual orientation, race and ethnicity. Dixon, a woman who identifies as pansexual, had disclosed to the firm that she was an LGBTQ+ individual in 2020. Gaona identifies as a first-generation Mexican American.
Their case centers on alleged pay disparities enabled by Edward Jones' "Goodknight" program, in which senior advisors transfer client assets and accounts to more junior advisors to help grow their businesses.
"Goodknight overwhelmingly favors white male FAs primarily of US national origin or ancestry," the plaintiffs said in the complaint, citing reports Goana had reviewed as a former regional Diversity and Inclusion Leader at the firm.
The complaint also cites the firm's publicly posted "Purpose, Inclusion and Citizenship"
"These disproportionate hiring statistics show that Edward Jones is aware of its tendency to favor white male FAs over female and diverse FAs," the plaintiffs said, referring to financial advisors, in an amended complaint filed in April 2022.
Reached for comment, a spokesperson for Edward Jones issued an emailed statement
On Friday evening, the firm emailed a statement from Jennifer Kingston, Head of Diversity, Equity and Inclusion at Edward Jones: "We are extremely proud of our five-point commitment to diversity, equity and inclusion, as outlined in our fifth-annual
"I mean, they can see that every day," she said of leaders at Edward Jones. "So any claim that they don't see that there's a problem, really should fall on deaf ears."
Promises to keep
Many wealth management firms and companies at large have
But years later,
"Often companies claim that they didn't intend any discrimination. But not all discrimination claims require proof of intent in a traditional way,"
In recent years, she has seen "a lot of class discrimination claims coming up in various industries … wage cases have frequently extended into industries that have not traditionally seen those types of claims."
In 2022, employment class actions continued to soar, according to a study published in
But that doesn't mean that making diversity commitments opens a Pandora's box for a firm to get sued for falling short, Liss-Riordan said. They still face the risk of getting sued, because "there is more public perception about these problems — which itself leads to more litigation."
If anything, undertaking diversity, equity and inclusion efforts could help an employer ward off the worst of litigation threats. "I think that would paint them in a better perspective, frankly, from the eyes of a decision maker" in court, Liss-Riordan said.
Scrutiny of equity policies
In the case of Edward Jones, the company announced a "five-point commitment" in
In 2021, it
The plaintiffs in Dixon claim that pay equity failed to improve meaningfully in their time at the firm. When they advocated internally for fixes to perceived inequities such as those in "Goodknight," they were dismissed, ignored, and even "suppressed," they said in court papers.
Instead, they alleged, Edward Jones allowed senior white male advisors to give more lucrative accounts, and more often, to their white male colleagues, without any justification based on merit or experience. This translated into higher pay for those men because pay is based "principally" on advisors' assets under management, the plaintiffs said.
"As an institution, if you want diversity, you can't leave things like choosing your successor or who's going to get your account to the old guard," Malecki said.
Edward Jones had monthly Goodknight reports marking "female and diverse FAs with a red asterisk and list[ing] their total assets received from transfers alongside those of their non-diverse colleagues," the amended complaint said. If these documents turn up in discovery, they could be damning evidence.
"Large companies are just going to have to be aware that their practices may very well come under scrutiny. They should be thinking about that when they're making decisions," Liss-Riordan said.
'Cosmetic' incentive
Under the Goodknight program, Edward Jones offered a 10% pay incentive for senior financial advisors to transfer their assets to junior advisors who were women or minorities, the complaint said.
But the firm did not adequately advertise the policy, the plaintiffs said. Many senior advisors in Gaona's region were allegedly "unaware of the 10% incentive," making it "cosmetic" and having "no appreciable impact" on the inequity the plaintiffs allege was widespread at the firm.
Bireda said it seemed that the 10% incentive policy was not publicized in good faith, based on the complaint.
"That does not sound like a practice that allegedly was rolled out with much fidelity," she said. "If you're really serious about it, every single person in the company would need to be aware of it."
The Goodknight incentive was reported in the press
Pay gaps
"It is hardly a secret that women and other protected workers are systemically paid less than their white male colleagues in our economy," George A. Hanson, a lawyer for the plaintiffs at Stueve Siegel Hanson, said in an email.
A 2023 gender pay gap
Overall, female employees in financial services made $0.77 for every dollar a male employee made — compared to a median pay of $0.83 on the dollar for women in all industries. When all factors were controlled, the typical woman in financial services made $0.98 on every dollar a male peer earned — still less than the industry-wide average of $0.99, though.
"Although $0.99 cents may seem very close to $1, small differences in earnings on the dollar can compound over the course of a lifetime career," the Payscale report authors wrote.
The industry has seen a number of high-profile discrimination lawsuits against broker-dealers over the years. In 1996, female advisors sued what was then Smith Barney — which has since been acquired by Morgan Stanley — alleging pay discrimination and harassment, in the infamous "
Merrill Lynch's parent Bank of America in
"Even after a court ruling or large settlements, it's still often hard to change corporate culture. Sometimes it takes repeated attempts," Liss-Riordan said.
Hanson said he hoped the Dixon case, along with a "related case" involving gender-based pay discrimination filed by female advisor
Dixon left Edward Jones in
