Making it on Wall Street is tough. If you are a minority, it's even tougher, according to civil rights leader the Rev. Jesse Jackson.
"Historically, Wall Street has had nepotism," he said in an interview with Traders Magazine. "It had an incestuous relationship with the Harvard Club, the Yale Club…They locked people out." [see interview, page 31. ]
Today, minority groups account for about one-quarter of the American work force. Minorities on Wall Street, they complain, too often are working in lower echelon jobs. Minorities in the U.S., in fact, are represented more in professions such as law and medicine than they are in trading rooms and brokerage offices.
A survey by the Securities Industry Association, which campaigns for diversity in hiring practices on Wall Street, noted that African-Americans, Hispanics, Asians and other non-whites, comprise 13 percent of the headcount in institutional and investment banking. Retail brokers and registered representatives account for about six percent.
According to the U.S. Equal Employment Opportunity Commission, some 20,000 African-Americans work as traders or as other securities professionals in the U.S., in an industry that employs hundreds of thousands – mostly white male pros. The Rev. Jackson and other advocates of diversity say minorities are underrepresented in Wall Street upper management.
The reasons why minorities – that is, people identified as non-white – have not caught up with the white population on Wall Street is the subject of debate and much controversy.
Some pros, whites and minority people, believe the days are gone when minorities endured blatant discriminated in the American work force. They argue that efforts to ensure the minority population on Wall Street reflects their numbers on Main Street is a dated and unacceptable form of social engineering.
The Rev. Jackson, however, is adamant that pressure must be kept up to ensure minorities get a fair shake.
"We want a balance of trade," Jackson said. "If you trade with us we want to be part of the board of directors, the management team, the employment, the vendors, the legal team. We want to be trading partners vertically and horizontally."
Some minority Wall Street entrepreneurs agree. "The money management business, the brokerage and trading business, have not been inclusive of women and minorities," said Ted Siedle, founder and president of the minority-owned investment banking firm, Benchmark Financial Services in Lighthouse Point, Fla.
The industry, nonetheless, is changing. More minorities than ever have hung out their shingle. A small number have risen to the very top. An African-American, E. Stanley O'Neil, was named to head Merrill Lynch's brokerage operations about a year ago. Some firms have introduced programs to hire more minorities.
On the business side, some minority-owned firms have become successful in state, municipal and corporate programs. The roots of that success date back to the 1970s and 1980s when several cities and states set aside business in affirmative action programs. A firm qualifies as minority-owned if at least 51 percent of its owners are minorities. The firm must also be actively managed or controlled by minorities. Ron Blaylock who once worked for PaineWebber, runs the first minority-owned firm to spearhead a corporate bond underwriting initiative for the Tennessee Valley Authority, valued at $300 million. In recent years, the courts issued rulings that have whittled away the amount of business available.
There are no affirmative action type laws that compel corporations and pension funds to steer some of their business to minority-owned firms. Nonetheless, several Fortune 500 companies and some funds voluntarily direct their equity and fixed income transactions to these firms.
Benchmark's Siedle pointed out that a corporate giant like Coca Cola would direct a portion of its brokerage business to minority-owned firms, in part because it knows that many of its customers, and some of its workers, are minorities.
Herewith are profiles on some of Wall Street's minority-owned firms.
Utendahl Capital Partners
One of the largest black-owned investment banking and trading firms, New York-based Utendahl Capital Partners was founded in 1992 by John Utendahl, a former corporate bond trader at Merrill Lynch and Salomon Smith Barney. The firm established a name for itself by becoming the first black-owned firm to co-manage a Federal Home Mortgage Loan Corp. deal. Over the past several years, it has played a major role in structuring or underwriting over $250 billion worth of securities.
Today, Utendahl is owned 80 percent by Utendahl and his partners and 20 percent by Merrill Lynch. Its affiliate company, the buyside firm Utendahl Capital Management, manages some $3 billion dollars for a number of top-tier institutional clients.
Williams Capital Group
Williams Capital Group L.P. (WCG) was founded in New York six years ago by Chris Williams, 43, after a career as a derivatives trading pro at Lehman Brothers. Williams had backing from Jefferies & Company. (In 1999, the firm bought out Jefferies interest.)
Tapping his extensive list of corporate finance contacts, Williams built a debt and equity underwriting business that he says has generated some $4 billion in capital. The firm has an equity trading desk in listed and over-the-counter stocks for institutional clients that include public and private pension funds. The firm's domestic equity trading volume was 343 million shares last year, compared to 200 million the previous year. The desk has nine trading pros, including four sales traders, four international traders, and a research sales person.
All told, WCG has 50 employees scattered among its New York headquarters and in its London office, as well as in offices in Atlanta, Boston, and Shreveport, La. The London subsidiary, Williams Capital International Ltd., specializes in trading international equities for U.S. and foreign institutional investors.
Two years after forming his own firm the derivatives business went into a slump. So Williams decided in 1994 to reinvent his firm by setting up an equity trading desk. "The most difficult part of being a start-up is overcoming and addressing all the obstacles to growth – experience of the firm, breadth of capabilities, longevity, and credibility," Williams said. His firm has participated in several prominent IPOs, including MetLife, AT&T Wireless and Tycom Ltd. Race plays no role in making it on the Street, according to Williams. "The one thing good about Wall Street is that it is very much values the bottom line," he said. "If our clients feel that we know what we are doing and we give best execution, then we will continue to get the business."
Guzman & Company
In today's high-tech, global marketplace, a broker dealer has more geographical mobility. That fact helped persuade Leo Guzman, a Cuban-American, to abandon the hustle and bustle of New York and move to Miami to set up Guzman & Company in 1987.
"You can now live wherever you want in this business," Guzman said. "That's why I chose Miami. I like living here."
Before starting up his own firm as a one-man shop, Guzman was vice president in the mergers and acquisitions group at Chase Manhattan Bank and a member of the corporate finance department at Lazard Freres & Company.
Guzman was the first Hispanic-owned firm ever to become a member of the New York Stock Exchange. Today, it is also a member of the Boston Stock Exchange and the NASD, and has about 35 employees. More than half of its staff are either Cuban, African-American or Asian.
Over the past 15 years, Guzman has grown into one of the leading minority-owned equity and fixed income execution providers to institutional investors. "We've come a long way baby," Guzman said.
For the last five years, Guzman has ranked among the largest program trading firms on the Big Board. "We especially do business where our business is measured," Guzman said. "We do a lot of business in the basket trading area and in corporate buybacks."
Melvin Specialists
Melvin Specialists was founded in Chicago by Christopher C. Melvin, Jr., 46, in 1991. Melvin is the only specialist firm owned by an African-American. Melvin owns four seats on the Chicago Stock Exchange (CSE) and six on the Boston Stock Exchange. The firm employs 34, including 22 traders. Melvin said his firm traded 970 million shares last year valued at some $54 billion.
Born and raised in Richmond, Va., Melvin graduated in 1977 with a degree in political science from American University in Washington, D.C. He caught the trading bug while working as a clerk at the CSE. "I found the business interesting and so much fun," Melvin said.
Melvin began his career at the Chicago Board Options Exchange as an assistant trader with Bill Kornylak. Melvin later joined Kornylak's firm as a partner. In 1988, Melvin bought a seat on the CSE. Today, Melvin Specialists executes trades for over 150 broker dealers, including Charles Schwab, Merrill Lynch, PaineWebber, Salamon Smith Barney.
The greatest challenge facing minorities on Wall Street? "Getting their foot in the door – or onto the trading floor," Melvin said.
"The traditional way of coming into the business [at the CSE] is through friends or relatives," he said. "That's changed a little. More people are coming from academic backgrounds. But it's still a matter of someone liking someone and being able to relate to them and to trust them with their money. There haven't been consistently enough African-Americans down there [at the CSE] to bring in other African-Americans."
Once you make it to the floor, Melvin said, it all boils down to pure competition. "It's really all about the trade and it's all about the money," he said. "It's not about racism once you are on the floor. It's getting onto the floor that's the real problem."
Loop Capital Markets
Loop Capital Markets in Chicago is a fast growing, black-owned investment bank. The firm primarily focuses on three areas: tax-exempt, taxable fixed income, and equity securities. Loop executes trades for some 100 institutional money managers in the U.S. The firm also repurchases stock for several Fortune 500 companies, including American Express, Exxon, General Mills, Sarah Lee, among others.
The firm was founded three years ago by James Reynolds Jr.; Albert Grace, Jr.; and Sandy Reynolds. Loop has grown from only a handful of employees to a staff of about 40 in sales, trading, underwriting and investment banking. The equity desk trades both Nasdaq and listed stocks and has two traders and five sales traders. Loop has branches in Detroit, Houston, New York, Philadelphia, and Sarasota, Fla.
Reynolds who is the chairman, is a former institutional muni-bond salesperson. He previously headed up Merrill Lynch's mid-west institutional sales office. Loop's president Grace, is a securities attorney by profession. He was formerly president of the buyside firm, Selected Financial Services, a Kemper subsidiary. Sandy Reynolds, managing director, was formerly an institutional sales person at First Chicago.
"There are two things that I always saw on the buyside that make people do business with you – trading acumen and value-added research services," Grace said. "We built up our firm so that we can deliver both of these."
The challenges that an upstart firm like Loop face has nothing to do with race but more to do with adapting to changing technological and business developments, Grace said.
Cheevers & Company
There are many women who have made their mark on the Street. One of the most prominent is Muriel Siebert who became the first woman to own a seat on the New York Stock Exchange. Today, her New York-based discount broker, Muriel Siebert & Co., has some 100 employees and offices scattered in some of the nation's monied locales. Another woman, Kathleen Cheevers, started out as a runner on the Chicago Board Options Exchange, buying a seat on the Chicago Stock Exchange in 1980. Today, Cheevers & Co., has five seats on the CSE, and executes orders for several big firms, including Bear Stearns, J.P.Morgan, Morgan Stanley Dean Witter, as well as for a number of buyside firms.
As a small firm, said Cheevers, minority-ownership opens some doors. "But if you cannot produce," she stressed, "you are not going to get that order flow." Cheevers, the only woman who owns a seat on the CSE, advises young women who are thinking of pursuing a trading career to "believe in yourself, to set your goals, accept your challenges and to find a mentor."
