The CFA Institute seems to be downplaying its previously bold DEI (Diversity, Equity, and Inclusion) initiative, a notable shift from what was once a celebrated framework for legal adoption.
A CFA member, who preferred to remain anonymous, commented, “Under CEO Margaret Franklin, the CFA Institute is gathering tax-free dollars and forming the largest DEI coalition globally, managing substantial assets. Now, it appears they’re changing course, but I think the damage has already been done.”
Holding a CFA charter is highly regarded among wealth managers, with the Institute branding itself as a “gold standard in ethics and transparency within finance.”
With a vast reach, the financial system is shaped by around 200,000 professionals who oversee trillions of dollars in global wealth.
Critics of Franklin argue that she’s ignoring more pressing concerns while focusing on peripheral issues. Some members have voiced that she centralizes decision-making, reducing member input (CFA officials refute claims of centralization).
There’s also discontent regarding the recent indictment of the Institute’s former chief marketing officer, accused of misappropriating approximately $5 million intended for attire and travel expenses, as highlighted by Manhattan District Attorney Alvin Bragg.
The nonprofit has subtly removed links to signatories of its DEI Code of Conduct from its website, signaling a significant turnaround after it had been a rite of passage for Wall Street’s chartered financial analysts for years.
This shift comes as CFA members note that CEO Margaret Franklin championed the DEI initiative throughout 2023.
The former executive has denied any wrongdoing.
A recent court ruling has cast doubt on the legality of DEI policies, particularly as the Trump administration seeks to limit businesses from implementing intersection metrics in their hiring practices.
In light of this, large corporations including Paramount, Walmart, Lowes, Harley-Davidson, McDonald’s, Amazon, Target, Goldman Sachs, JPMorgan Chase, and Citigroup are either adjusting or altogether retracting their DEI policies amid potential legal repercussions.
The CFA Institute has acknowledged that recent court rulings and executive actions prompted a review of its content and policies to align with new requirements, leading to some materials being removed from their website.
Hickerson remarked that while there hasn’t been direct pressure from signatories to withdraw their names related to the legal disputes over DEI policies, the organization recognized the need for the change.
Interestingly, the CFA’s comprehensive DEI code was introduced several months before the Supreme Court prohibited the use of race in university admissions, bringing legal scrutiny to recruitment decisions regarding financial roles. By endorsing the Code of Conduct, companies pledged to incorporate DEI considerations in hiring-related choices, including promotions based on race and gender for wealth managers assisting smaller investors.
The Supreme Court’s ruling has, unsurprisingly, engendered legal questions about such recruitment practices.
The DEI Code aims for signatories to significantly enhance their commitments through creating compelling economic, business, and ethical arguments for embracing diversity, equity, and inclusion.
In a June 2023 press release, the Institute outlined its interpretation of “fairness,” a pivotal aspect of DEI, which critics argue could permit discrimination. The code explains, “Fairness differs from equality; while everyone deserves equal support, it doesn’t always deliver an unbiased outcome. Equity aims to provide targeted support to those who need it, helping them realize their full potential.”
While companies are not mandated to adhere to the code, the CFA Institute suggested a compliance review for participating organizations.
In that same June press release, the CFA celebrated that over 100 financial organizations across the US and Canada had endorsed what they termed the “industry’s first voluntary diversity, equity, and inclusion code for the US and Canada investment profession.”
These organizations include Calpers, Morgan Stanley Asset Management, Oaktree Capital, and Nuveen, among others.
According to the CFA, these signatories collectively represent around $11.2 trillion in managed assets, roughly 10% of the global investment industry’s assets, with about $95 trillion in advisory context pertaining to approximately $9.5 trillion.
