Increasing Diversity in the Financial Services Industry

It’s been a highly unusual and disruptive year—from the Covid-19 pandemic to natural disasters—our daily lives have changed dramatically. Most notable is the social awakening that has taken place this year following the deaths of Ahmaud Arbery, Breonna Taylor, and George Floyd and several other African-Americans. These deaths and the civil unrest and protests that have followed in streets and neighborhoods across America have sparked national conversations around systemic racism in a profound way that we have seen only a few times in our nation’s history.

And systemic racism appears not only in the contexts highlighted by these tragic deaths and nationwide protests. It also unfortunately haunts the financial services industry and legal profession. Banks and, more generally, financial institutions struggle with diversity and while banks are generally integrated in entry-level positions, as management responsibility increases, diversity decreases.

A recent study found that executive levels consisted of 29% women and 7% men, for example. But even starker: whites made up 81% of the executive suite.

Recognizing this persistent problem, Katten hosted a diversity panel discussion on Oct. 1 to kick off its annual Financial Markets Litigation Enforcement Symposium.

The panel was led by financial markets and funds partner Carl Kennedy and included Glen A. Rae, deputy general counsel, global markets & international, Bank of America; Robin Lenhardt, professor of law at Georgetown University Law Center; Jane Hong Shissler, general counsel of Destra Capital; and Katten Chief Executive Officer Noah Heller. They focused on how to increase the pipeline of racially diverse attorneys in the financial services industry.

It brought a sense of optimism, hope, and renewed energy to building and nurturing diversity and inclusion efforts at law firms and, more specifically, in the financial services industry.

Conversations about reversing inequality by increasing the pipeline of racially diverse attorneys and other business professionals in the financial services industry are not new and, arguably, the biggest concern is that these conversations have been happening for decades but have not resulted in any appreciable change.

The representation of racially diverse attorneys and other business professionals within the industry has not improved in over 10 years. For example, in 2010, African-Americans represented 5% of the legal population and Asians represented 2% of the legal population. In 2020, those statistics remain the same.

These statistics show that diverse individuals’ representation in the U.S. population is not commensurate with their representation in the legal field. A recent study found that this problem is particularly acute in the financial services profession. In addition, in the financial services industry, board diversity generally does not reflect the diversity of the same institutions’ workforce.

The panelists candidly talked about systemic racism within the financial services industry specifically and legal profession more broadly and its stifling and pervasive effects. They also noted witnessing one reoccurring theme over the last several months—people want to help and want to do the right thing.

Whether looking for opportunities to get involved in pro bono projects related to racial injustice, partaking in internal allyship programs, or hosting a diversity panel during a financial services symposium, firms and companies are pushing for change.

Finally, the panelists talked about the need for the industry and profession to go beyond diversity training and grievance procedures. They shared personal thoughts on potential solutions and actions that centered on mentorship and sponsorship programs, holding outside vendors and law firms accountable for promoting diversity within their ranks, and targeted recruitment and retention efforts.

Mentorship and Sponsorship

A hallmark of success in the legal industry is networking and exposure to new opportunities. The goal of mentorship and sponsorship programs, whether informal or formal, is promotion and inclusion. Sectors like the financial services industry struggle to recruit diverse attorneys because there are fewer diverse partners and associates in those groups. This makes the purposeful mentorship and sponsorship relationships that much more important.

Outside Vendors

From a business perspective, it is increasingly important to have a diverse workforce that serves and reflects the diverse population in the U.S. Studies show there is a strong business case to having diverse leadership and diverse business and legal teams: “Companies in the top-quartile for ethnic/cultural diversity on executive teams were 33 [percent] more likely to have industry-leading profitability.”

In-house attorneys can have an impact on how seriously their service providers take increasing diversity representation by using scorecards and having candid conversations with their stable of outside law firms before engaging them to work on new projects.

Recruitment and Retention

The mystery of financial markets and products can inhibit diverse attorneys from entering the field due to a lack of familiarity and comfort. Law school partnerships with law firms provide an excellent way for students to learn and explore multiple and unfamiliar legal topics.

Law firms and in-house legal departments also need to reassess their recruitment efforts by expanding the number and types of colleges and universities they host for on-campus interviews, focusing on, for example, historically black colleges.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Carl Kennedy is a partner with Katten Financial Markets and Funds. He formerly was a senior in-house counsel at a large investment bank and a top policy adviser at the Commodity Futures Trading Commission, where he served as a primary drafter of several CFTC rules and a key player in the CFTC’s adoption of guidelines implementing the Dodd-Frank Act.

Nicole Saleem is an associate with Katten Litigation and concentrates on the financial services industry, federal securities laws, and regulatory and internal investigations. She represents companies and individuals before various regulators and prosecutors, including the CFTC, the Securities and Exchange Commission, and the New York attorney general, and serves as co-chair of the firm’s Minority Associates Committee.