Wall Street group CFA running away from its embrace of DEI

The CFA Institute has begun to downplay its controversial DEI initiatives – a major retreat from the once-popular but now dubiously legal hiring framework, On The Money has learned.

“Under CEO Margaret Franklin, the CFA Institute has tax-exempt dollars building what is now the largest DEI coalition in the world by assets under management,” said one CFA member who asked not to be named. “Now it appears they are rewriting the rules, but the damage has already been done.”

Obtaining a CFA charter is among the more prestigious private label designations for wealth managers. The institute bills itself as the “gold standard in ethics and transparency in finance.”

It boasts 200,000 professionals working at some of the world’s largest financial companies, managing trillions of dollars of global wealth, so its reach into the financial system is deep.

Critics of Franklin say while she focused on issues like DEI, she has neglected more glaring problems at the institute. They point to criticism by some members that she has centralized control over policymaking, giving members less input (a CFA rep denies the centralization charge).

They also point to the recent indictment of the institute’s former chief marketing officer who was charged with embezzlement of the outfit’s funds — around $5 million to pay for club memberships, travel expenses and an engagement ring, according to Manhattan DA Alvin Bragg.

The nonprofit – whose grueling test has for decades been a rite of passage for Wall Street’s “chartered financial analysts” – has quietly removed a link on its website to the signatories to its DEI code of conduct, sources said.

The apparent reversal comes after CFA Institute CEO Margaret Franklin pushed through sweeping DEI initiatives in 2023, according to CFA members who spoke to On the Money.

The former executive has denied the charges.

Courts have recently issued rulings casting significant doubt on DEI’s legality. The Trump administration has taken steps to prevent companies from employing so-called intersectional metrics in hiring decisions.

In response, many large companies such as Paramount, Walmart, Lowe’s, Harley-Davidson, John Deere, McDonald’s, Amazon, Target, and financial institutions like Goldman Sachs, JPMorgan Chase, and Citigroup have begun to rewrite or totally unwind their DEI policies under threat of legal action.

“Given recent court decisions and executive orders, CFA Institute is reviewing its content and policies to ensure it meets the new requirements. That is why some of the content is not on our website,” CFA Institute spokesperson Matthew Hickerson told On The Money.

Hickerson said the Institute was not under pressure from the signatories to remove their names amid the legal dispute over DEI, but the organization informed of the move.

The CFA’s strict DEI code appears to have been launched just months before the Supreme Court outlawed using race as a factor in college admissions, casting legal doubt on equity hiring decisions. By signing on to the code of conduct, companies ensured that they would use DEI in job-related decisions including the promotion of wealth managers who manage money for small investors based on their race or sex.

“The DEI Code also requires signatories to amplify the impact of their commitment by making the economic, business, and moral case for diversity, equity, and inclusion,” the institute stated in a June 2023 press release announcing the effort.

The institute also provided its interpretation of “equity,” the key metric in DEI that critics say allow for discrimination.

“Equity is distinct from equality… Note that essentially the same support for everyone regardless of the starting point is equality, but that may not provide an equitable solution. Equity offers those who need it targeted support to reach their full potential,” the DEI code states.

Even though the code was voluntary, the CFA institute asked the that the companies that signed on have the organization review their compliance, a massive undertaking given the numbers and sizes of the companies involved.  

CFA touted in its June 2023 release that more than 100 finance industry organizations across the United States and Canada have signed up for what it called “the industry’s first voluntary Diversity, Equity, and Inclusion Code for the Investment Profession in the United States and Canada.” 

They included the likes of CalPERS, the massive California public employee pension fund, Morgan Stanley Asset Management, Oaktree Capital, Nuveen and MFS Investment management.

“Signatory organizations together represent around $11.2 trillion in assets under management — approximately 10 percent of the investment industry’s assets under management globally* — as well as some $9.5 trillion assets under advisement.” the CFA said.