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Wirehouses Tend to Settle Age Discrimination Suits, Federal Records Show

By Miriam Rozen October 13, 2020

Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo tend to settle age discrimination lawsuits filed against them by former employees in federal courts, according to court documents reviewed by FA-IQ.

In 12 of 19 such lawsuits filed since January 2015, the wirehouses have either settled, or told courts without further explanation that they and the plaintiffs jointly agreed to dismiss the claims, court records show. The joint dismissals usually signal that a settlement occurred, employment lawyers say.

Wirehouses are inclined to settle if FAs claim discrimination led to their termination and forced them to forsake multiple years of future earnings, raising the threat of eight-figure liabilities for employers, lawyers Christopher DeGroff and Sidney Gold say.

The potentially steep liabilities in age discrimination claims are “what gets everyone’s attention in these situations,” says DeGroff, a partner at Seyfarth Shaw law firm in Chicago. DeGroff says he has defended employers, including those in the financial advice industry, against more than 100 age discrimination claims during his 24 years in practice.

If FAs at wirehouses earn $1 million in annual compensation and claim that age discrimination led to their termination and deprived them of a decade’s worth of earnings, for example, then their economic damages could equal $10 million, according to DeGroff.

Wirehouses are also inclined to settle when branch managers or colleagues of FAs utter commonplace comments that plaintiff lawyers argue demonstrate age bias, DeGroff and Gold say.

Examples of such comments that should not be made are “Isn’t it time you called it a day?” and “We’ve got to get out with the old guard, and in with fresh minds,” says Gold, a principal shareholder in Sidney Gold & Associates law firm in Philadelphia. Gold says he has represented 25 brokers and financial advisors who have alleged age discrimination against their employers during his 45 years in practice. 

“Legitimate age-neutral decisions can be tainted by even a casual age-related remark or joke,” DeGroff adds.

Many FAs are 40 or older and therefore qualify for protection under federal anti-age discrimination laws. About one-fifth of FAs are 65 or older, and the average age is 55, according to a 2019 survey by market research consultant JD Power.

Morgan Stanley, UBS and Wells Fargo did not respond to FA-IQ’s request for information about their FAs’ ages and the steps the firms take to prevent age discrimination. Merrill Lynch declined to answer. All four wirehouses state on their websites that they don’t tolerate discrimination.  

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Most firms offer training to prevent age and other forms of discrimination, but employers should further emphasize the risks of discrimination, DeGroff says.

Firms should also consider conducting audits of how managers distribute clients of departing FAs to see if older FAs at the firm are getting their fair share of those clients, DeGroff says. If the audits show a pattern of older FAs consistently missing out on client distribution, the firms should investigate why that happens, he says.

The findings from such audits will help firms discover whether discrimination occurs, and not only when they are “neck-deep in litigation,” DeGross says. The audits should be conducted by lawyers and protected under attorney-client privilege, he suggests.

Gold says client distribution practices are among the red flags that FAs can observe if they suspect age discrimination at their firms. FAs should reach out to lawyers when they see the red flags and, if possible, prior to any threat of termination, he says.

When already faced with termination, FAs should attempt, with a lawyer’s help, to negotiate the language contained in their Form U5 termination disclosure prior to the employer filing it, Gold says. When FAs are considering an employer’s proposal to arbitrate claims before JAMS, formerly known as Judicial Arbitration and Mediation Services, they should — prior to agreeing to that plan — ask how much the employer has paid in claims for other, unrelated arbitrations before JAMS, Gold says.

An economic downturn may prompt an uptick in age bias claims nationwide because such claims tend to rise when “labor market conditions deteriorate,” according to a National Bureau of Economic Research study, “Age Discrimination Across the Business Cycle,” published in July by Gordon Dahl and Matthew Knepper. Dahl is a professor of economics at the University of California San Diego and Knepper is an assistant professor of economics at the University of Georgia's Terry College of Business.

So far this year, however, only two age-discrimination lawsuits have been filed in federal court against any of the four wirehouses, according to federal court records reviewed by FA-IQ as of October 12. Four were filed against the wirehouses in 2019, three in 2018, and four in 2017, the federal dockets show. Plaintiffs may also file the lawsuits in state courts, however.

Do you have a news tip you’d like to share with FA-IQ? Email us at editorial@financialadvisoriq.com.   

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