By Liz Hoffman and Susan Pulliam
When Charles Scharf took over at Wells Fargo & Co. last year, tasked with moving the bank past a fake-accounts scandal, he brought in a cleanup crew of former colleagues from his long career on Wall Street.
A new chief operating officer and heads of public affairs, credit cards and strategic planning had all worked with Mr. Scharf at JPMorgan Chase & Co. or Bank of New York Mellon Corp. Another longtime JPMorgan executive joined the board. All are white men.
As nationwide protests over racial justice stretched into a fourth week, Mr. Scharf promised to do better. In a June 16 memo to employees, he said the firm would tie executives' bonuses to the diversity of their units and double the number of Black senior leaders by 2025.
The next day, he introduced Wells Fargo's new head of wealth management: Barry Sommers, a white man who had worked at JPMorgan.
Executives in every industry are confronting their diversity track records, pressed by a national reckoning over racial justice. But Wall Street's task is taller: Finance remains stubbornly white, even after years of lip service paid to the need to recruit and retain people of color, and millions of dollars spent on the effort.
Nowhere is that more apparent than at the top. The chief executives of the biggest American banks are white men, as are the bulk of leaders of the asset managers, private-equity firms and hedge funds that pull the levers of power on Wall Street.
Go another level down, and the picture is much the same. Of the roughly 100,000 executives at financial firms in 2018, only 2,644 were Black and 3,682 were Hispanic, according to the U.S. Equal Employment Opportunity Commission.
Overall less than 10% of nonclerical and nonlaborer workers at U.S. financial firms were Black or Hispanic, well below their share of the broader population. The numbers haven't budged since 2009, despite a decade in which banks hired diversity czars and made changes to their recruiting and promotion rules.
Executives are pledging changes. "We need to do better," said BlackRock Inc. Chief Executive Officer Laurence Fink, who aims to increase the number of Black employees by 30% by 2024.
Lester Owens, an African-American executive, will join Wells Fargo later this month as head of firmwide operations. In his June 16 memo, Mr. Scharf said the bank's regulatory troubles have made it harder to cast a wide net for top jobs.
"The unfortunate reality is that there is a very limited pool of Black talent to recruit from with this specific experience," he wrote.
The causes of Wall Street's whiteness are deeply rooted and defy quick fixes. Recruiting pipelines still favor elite private colleges. An apprenticeship model allows managers to favor trainees whose backgrounds mirror their own. And the racial wealth gap in the U.S. means that top clients -- wealthy families, hedge-fund managers and corporate CEOs -- are mostly white and often perceived, fairly or not, to want their money managed and their deals done by people who look like them.
Stephani Mason, a former private banker at JPMorgan who is now an assistant professor at DePaul University's business school, said minority bankers often struggled to get onto promising teams at the bank.
"The perception is that this person doesn't know any wealthy people, except maybe rappers and ballplayers," said Ms. Mason, who is Black and left JPMorgan in 2008. "Finance is a proxy for where the assets are and who owns them."
The financial system itself hasn't always served Black Americans well -- or at all. Banks for many years refused to lend in low-income, Black neighborhoods. Redlining is illegal now, but many communities are still struggling to fix the damage done by once-common racist lending policies.
Wall Street has a long history of division on ethnic lines, with firms such as Goldman Sachs Group Inc. and Lehman Brothers welcoming Jewish bankers who were kept out of white-shoe firms.
Those walls fell -- Goldman is now among Wall Street's elite -- but the racial gap persists.
At securities firms in New York City, Black and Hispanic representation has actually fallen since 2005, when each group made up between 9% and 10% of finance workers, according to the state comptroller. Both groups lost their jobs at twice the rate of whites in the post-2008 downsizing and today make up 6% and 8%, respectively, of industry employees in the city.
The problem starts early: Banks and asset managers hire thousands of recent college graduates each year to fill their junior ranks. Historically, most have targeted a short list of elite private colleges. Those pipelines are reinforced over the years as alumni return to campus to interview candidates, often leaning on informal networks such as Greek organizations and athletics.
"People hire people they're comfortable with, résumés that resonate," said Reginald Browne, a senior executive at GTS, a high-speed trading firm.
Mr. Browne was the only Black trader when he started on the New York Stock Exchange floor in 1992, he said. He later learned his bosses, at a predecessor of UBS Group AG, had privately discussed whether he could hack it there. "Unless there is a conscious effort," he said, "it will be very difficult to diversify these institutions."
Many firms have set targets and expanded recruiting efforts into more-diverse state schools. Some use video-interview software to widen the net further.
JPMorgan's 2019 incoming class in the U.S. was 13% Black and 16% Hispanic. The cohort joining Goldman Sachs this summer is 11% Black and 14% Hispanic, and the bank last year began requiring managers to interview two diverse candidates for open jobs. Blackstone Group Inc. will now recruit at 44 colleges, up from nine in 2015, to get a more diverse pool.
But getting more diverse recruits in the door doesn't mean they will stay. Minority employees have long complained about internal practices and client biases that make it harder to advance, and their sparsity in senior ranks suggests they leave in larger numbers than their white co-workers.
Mellody Hobson, a board member at JPMorgan and co-CEO of Ariel Investments, one of the country's largest Black-owned money managers, said companies too often point out their efforts and gloss over their scant progress.
"Remember in school you used to get credit for showing your work, even if you got the wrong answer?" said Ms. Hobson, who favors tying executive bonuses to clear diversity metrics.
Positions that put employees in direct contact with CEOs and wealthy clients -- most of whom are white -- have proven especially tough to crack for Black employees.
"You're selling to an audience," said Mr. Browne. "It's perceived to be difficult to put diverse candidates in those slots because you're fearful of the outcome."
A study from Texas A&M University last month found that minority stock analysts were less often called on to ask questions of CEOs than white analysts, which can make it hard to publish original research and gain a following among investors.
Challenges are acute in private banking, a rarefied corner of finance where advisers cater to millionaires. Less than 1% of Morgan Stanley's roughly 16,000 wealth advisers are Black, according to a lawsuit filed last month by a former broker and head of diversity, Marilyn Booker, who alleges racial discrimination. The firm disputes Ms. Booker's claims and said it would vigorously defend itself.
Kathy Frazier was a star broker at Merrill Lynch when Morgan Stanley recruited her in 2007 under a rising-star program to its Honolulu branch, which managed billions of dollars for wealthy clients.
Within a year, she says, her prospects began to fade. When a group of brokers left the firm, she says she was all but shut out when Morgan Stanley redistributed their $2 billion in client accounts.
"Everyone else's boat floated up," the 58-year-old said last week. "Mine dropped precipitously." Ms. Frazier quit in 2013 and is part of a discrimination lawsuit against Morgan Stanley that is pending in Manhattan federal court.
A Morgan Stanley spokeswoman denied Ms. Frazier's allegations, adding that "we are committed to promoting a diverse culture." She said that Ms. Frazier received account distributions in keeping with the company's policies, including one that limits distributions to brokers in their first year at the firm.
Ms. Frazier said that those policies were applied selectively and that two brokers who had also been with Morgan Stanley for less than a year were given tens of millions of dollars in client accounts in the $2 billion redistribution.
Ms. Frazier said that client accounts were doled out 30 or 40 times in her six years at the firm and that "I can't think of one where I received a good distribution." Once, she said, a manager in charge of assigning new clients told Ms. Frazier that some clients don't want Black advisers.
After one financial adviser left, Ms. Frazier said she was given his younger brother's account -- with $740 in it. She tried unsuccessfully to join teams that might have lifted her career, she said.
"People see who is not receiving support from the firm," said Ms. Frazier, who now works at UBS.
--David Benoit and Ben Eisen contributed to this article.
Write to Liz Hoffman at firstname.lastname@example.org and Susan Pulliam at email@example.com