Edward Jones to Settle Race Discrimination Suit for $34 Million
Edward Jones has agreed to pay $34 million to settle a racial discrimination class action lawsuit filed in 2018 on behalf of current and former Black financial advisors who were allegedly discriminated against by the firm’s training and account distribution practices.
As part of the settlement, St. Louis-based Edward Jones, the largest U.S. brokerage firm by its more than 19,000 brokers, also agreed to revise its policies for recouping training costs and form an advisory council comprising a “diverse cross-section” of brokers at the firm who will consult with senior executives on initiatives to increase diversity and representation of African American Advisors.
“We reached this agreement because it is in the best interest of Edward Jones and allows our firm to move forward,” Edward Jones spokeswoman Regina DeLuca-Imral said in a statement. “We pledged to continue working toward meaningful increases in diversity among our financial advisors and senior leadership – helping all to succeed.”
The suit, originally filed in May 2018 by Wayne Bland, who had worked as a South Carolina-based broker for Edward Jones for two years before leaving in 2016, said that the firm’s practice of recouping training costs when junior advisors left to go to a competing firm disproportionately affected Black financial advisors who failed at higher rates because of lack of equal access to opportunities.
The case also attacked Jones’ Legacy and “Goodknight” account distribution programs, which they said allowed leads to go primarily to non-diverse brokers. (Jones in 2019 revised the Goodknight program to provide production bonuses to experienced brokers who handed over accounts to women or minority advisors.)
As a result, just 6% of Edward Jones advisory force was African American, below the industry average of 8%, according to an amended complaint filed in December.
To address the training program claims, Jones said it would relinquish all financial advisors terminated before January 1, 2021, for payment of alleged training costs of up to $75,000.
The firm also said it would reduce its maximum training cost recoupment from $75,000 to $50,000 going forward, the documents said. The settlement estimated there were $20 million worth of outstanding training costs that would be deemed forgiven.
“Edward Jones has one of the largest advisory workforces, so we are hopeful that this can make a positive impact for African American advisors,” Suzanne Bish, partner at Stowell & Friedman, said. “There is relatively new leadership that seems committed to improving diversity at the firm.”
The case is one of a number of discrimination suits against major brokerage firms over the past decade that have focused on training and account distribution policies. Stowell & Friedman in 2017 secured a $35.5 million settlement from Wells Fargo Advisors in a similar case where there was alleged discrimination against African American financial advisors. In 2013, the firm won a $160 million settlement from Merrill Lynch in another racial discrimination suit.
Wells Fargo in 2017 also agreed to pay $3.5 million to resolve a case brought by Stowell & Friedman over its practice of recouping training costs.
In the Bland case, the lawyers have requested 25% of the settlement in legal fees, or $8,500,000. The three named plaintiffs, including two who were added to the case after Bland’s initial filing, are seeking a $150,000 “service award” each in addition to the amounts they receive from the settlement. Once finalized by a judge, the remaining $25,050,000 will be divided among the class members, excluding some additional court fees.
Bland, who had joined Jones in 2014 after almost four years at LPL Financial and six years at a unit of Vanguard, referred requests for comment to the attorneys. He is not currently registered as a broker or investment adviser, according to licensing records.
-Mason Braswell contributed to this story.