What Betterment’s diversity data says about the firm, and the industry
On June 1, as millions around the country protested the killings of George Floyd, Breonna Taylor and Ahmaud Arbery, Betterment CEO Jon Stein sent a letter to customers, pledging that the firm would “not stand for the unequal treatment of people of color in our company” and would “will advocate for our Black colleagues, friends, and fellow citizens.”
As part of that effort, Betterment evaluated its workforce demographics and, in an unusual move for a wealth management firm, published the results on its website.
“We realize that we have a lot of work to do,” says Betterment vice president of communications Joe Ziemer.
Of Betterment’s 293 employees, 71% are white. Only 5% are Black or African American, and another 5% are Hispanic or Latinx — far below their respective shares of the U.S. population at 13.4% and 18.3%, according to Census Bureau data. Fifteen percent of Betterment employees are Asian, while another 4% identify as two or more races.
While 43% of Betterment’s staff is women, the number drops to 36% among the leadership team and 23% on the engineering team.
Publishing diversity statistics does not solve the problem. But transparency, Ziemer says, is an important step towards change.
“Other companies are ultimately saying that diversity in the industry is bad, but are hesitant to talk about their own company,” he says. “Hopefully they will start to do something about it.”
Sonya Dreizler, a consultant on ESG and impact investing, says she is glad Betterment released diversity data. She’d like to see the data get even more granular, such as representation of Black women on the leadership team, and hopes every firm starts publishing similar information as well as year-over-year progress.
“I hope that companies are ready to flip the script and truly listen to those employees and community members that have typically not had a seat at the table, especially women of color,” Dreizler says.
Willingness to disclose representation data varies widely across the industry. Charles Schwab publishes data similar to Betterment’s.
“A diverse and inclusive culture is not only the right thing to do, it is critical to our long-term success as a firm,” a spokesperson for Charles Schwab said in a statement.
BNY Mellon publishes employee demographic data in an annual corporate social responsibility report. In 2019, the company reported 35% of its workforce is an ethnic or racial minority and provided additional detail on representation regarding race and gender. The company does not segment information specific to Pershing, it’s custody and clearing division.
After finding that 8% of its financial advisors are Black and just 21% are women, Edward Jones published a five-point plan to improve diversity and inclusion.
A recent lawsuit filed by a former head of global diversity at Morgan Stanley claims the firm only employs about 100 Black advisors out of a brokerage force of 15,400. A spokesperson for Morgan Stanley says the only data the firm can provide is that 50% of hires into its advisor training program are diverse.
Many other wealth management firms do not share information on diversity in their workforces, and finding accurate industry wide metrics is difficult.The Bureau of Labor Statistics, which uses a broad definition of financial advisors, reports 82% of advisors were white in 2019, compared to 6.9% Black and 6.3% Hispanic.
Keeping representation data hidden allows firms to blame the industry at large for diversity issues without taking responsibility for its own representation, Betterment’s Ziemer says.
“Other companies are ultimately saying that diversity in the industry is bad, but are hesitant to talk about their own company,” he says. “But if we’re not addressing the problem, we’re part of the problem.”
Releasing the data holds the firm accountable for making improvements, he says. To that end, Betterment is spearheading an effort to get other fintech firms to publish representation data, plans to improve diversity and regular updates on progress towards enhancing access to financial services in underserved communities. Twenty-one companies have so far signed up what Betterment is calling the Fintech Equality Coalition.
Betterment detailed plans to improve its hiring process, increase internal data collection and amplify the work of employee groups such as Black at Betterment. It also has a Call-to-Action group brainstorming ways to combat bias within the company and product.
“It can’t just be positive PR for us,” Ziemer says. “We have to follow through and deliver some action.”
Dreizler says the changes are appreciated, and would like to see improvements in hiring and retention of employees who are Black, Indigenous or people of color reflected in executive compensation.
“If the goal is truly to have the team better reflect the communities and customers they serve … progress toward those goals would ideally be reflected in compensation at the management and leadership levels,” Dreizler says.
So how will the company ultimately measure success on its efforts? There isn’t a benchmark or ideal ratio of racial diversity Betterment is trying to reach, Ziemer says. Instead, the goal is to create ongoing, measurable progress.
“Just certainly more diverse than it currently is,” he says.