When the SIA announced the findings of its survey on women and minorities in the securities industry this spring, the statistics were underwhelming.

"No surprises," says Kathleen Flanagan, co-chair of the SIA Diversity Committee, which created the poll and published the results in a report for member firms.

Minority retail brokers are scarce in this business. They represent just 3.7% of the sales force at firms responding to the survey. And women reps have a long way to go before their numbers reflect society in general. Only 12.2% of the registered reps at responding firms are female.

However, the statistics don't tell the whole story, committee members say. More importantly, the survey shows that most member firms are sensitive to the issue of diversity and have established programs to improve the situation.

"The thing that was most encouraging and gratifying was the level of activity we found in this area," says Flanagan, who is also corporate communications manager at John Nuveen & Co. in Chicago. "There is a widespread focus on diversity throughout the industry."

For example, more than half of the firms surveyed have recruitment efforts aimed at attracting women to entry-level positions and 41.7% have programs aimed at hiring minorities for entry-level positions.

Minority Leadership Is Lacking One of the most striking--if not surprising--statistics uncovered in the survey is the near nonexistence of minorities in retail management. Just 1.2% of the branch, regional, division or district managers within the firms surveyed are ethnic minorities. The leadership figures are somewhat better for women, which represent roughly 8.4% of the managers.

However, members of the diversity committee are quick to point out that the survey results are not projectable across the entire industry. A total of 74 firms answered the "demographic" parts of the questionnaire, representing just 25% of the industry's total employers.

Bernard Beal, co-chair of the committee and CEO of M.R. Beal & Co. in New York, also wonders if the numbers might improve as research in this area expands.

"What those numbers should be, professionally, I really don't know," Beal says. "Personally, I'd like to see them higher. I think that there are very talented people out there who could fill those roles."

Respondents Blame Intolerance, Exclusivity Blamed One hundred percent of the survey's respondents believe minorities are "underrepresented" in the industry. Why? "Because the industry is generally intolerant of anyone who is 'different' [than] white, male brokers," writes one respondent. Others say minorities don't typically have family connections to the industry, which often serve as an introduction for aspiring brokers.

The assessment is a little brighter for women. About 84% of the survey respondents say women are "underrepresented" in the industry, 6% don't think so and 10% say they don't know if they are or not.

Again, respondents blame the low numbers of females on industry "exclusivity." "Women are generally accepted as qualified support staff, but are limited for career advancement or career development," one respondent writes.

Indeed, the survey says women represent 44.9% of the industry's retail work force, indicating that women are much more likely to participate in administrative roles.

Among the different types of firms, larger retail firms (with 1,000 or more employees) seem more welcoming to women and minorities. Women and minorities are more likely to hold management positions at these large firms than they are at firms of all sizes.

Repair Efforts Minimal Formal diversity programs are scarce. Just 10 firms say they have written mission statements that go beyond equal employment opportunity. A larger number of the firms have some kind of informal plan in place. For example, 15 firms have active corporate diversity committees and 10 employ a diversity manager.

Overall, the most effective methods used by these groups to encourage diversity are corporate policies against sexual harassment, minority-recruitment efforts for entry-level positions, internship programs for women and minorities, general employee-development programs, and recruitment efforts at mid- and senior-level positions. A total of 95 firms answered the survey questions about diversity initiatives.

Some of the "most innovative" initiatives, according to the authors of the report, are partnerships with colleges and universities, alliances with community groups and policies that support work/life balance.

"Accountability" is also a buzzword in the diversity initiatives. Roughly 21% of the firms say management is held accountable for diversity. Of those firms, 46% say the success or failure of diversity initiatives could affect an executive's performance appraisal, 30.8% say it could affect executive bonuses and 23.1% mention promotion potential. But none of the respondents say an executive's salary is affected. Therefore, very few executives have tangible incentives for promoting diversity.

What motivates the firms? More than 80% say their mission is to provide everyone with an equal opportunity to succeed, while 70% want "a more stimulating, innovative and responsive organization." About 50% want to avoid legal or public relations problems, 40% want to attract more talent and 40% see diversity as a way to reach more investors. A few firms (14%) say diversity is "required by customers."

Finally, both the report and the diversity committee members presenting it acknowledge freely that the industry has just begun to address its lack of diversity. No magic bullet will transform the industry and no one-size-fits-all approach will succeed either, the report says.

Adds Flanagan, "This isn't going to happen overnight."

As a result of the survey and report, the SIA Diversity Committee has established eight goals for 1999:

1) Bring three new minority-owned firms into its membership of 740 firms. (It currently has 17 minority-owned member firms.)

2) Create a "best practices guide" on recruitment, training, mentoring and partnering with community organizations.

3) Promote firm participation in minority career fairs.

4) Explore partnerships with SEC, National Association of Securities Professionals, America's Promise (a group run by General Colin Powell) and the Wall Street Project (a group organized by the Rev. Jesse Jackson).

5) Distribute the Stock Market Game to more minority high schools and colleges.

6) Develop a minority "talent pool" from member firms to serve on committees and to serve as speakers or panelists.

7) Create a resource guide of consultants and diversity training programs.

8) Use the SIA Web site (www.sia.com) to update members on the committee's progress.

For the most part, African-Americans are sitting out the "greatest wealth-building opportunity in American history," according to a study published in May by Chicago-based Ariel Mutual Funds and Charles Schwab & Co.

Just 38% of blacks surveyed own individual stocks versus 54% of the whites surveyed. One reason African-Americans are reluctant to invest in the stock market is that they don't trust stockbrokers. Of the 813 blacks surveyed (all with household incomes of $50,000 or more), 57% of the men and 41% of the women think that financial advisers "are more interested in making money for themselves than in giving good advice." Overall, 37% of the 816 whites surveyed agree with that statement.

Other cultural and demographic factors lead African-Americans to invest more in real estate and life insurance policies. But building trust remains a major challenge.

"The financial services industry won't reach the African-American investor through traditional marketing methods alone," says Michael DelFlorimonte, vice president in charge of Schwab's African-American marketing initiatives. "We must continue to build long-term relationships with institutions blacks kn ow and trust." Once that foundation of trust is built, it appears the African-American community is eager to invest.

According to the survey, 48% of the African-Americans who do not own stocks or mutual funds say they intend to begin investing in the next 12 months. For a copy of the Black Investor Survey, call Noelle-Elaine Media at 212/370-5483.

The SEC broke new ground this summer in its effort to encourage diversity in the industry. On Saturday, July 24, it hosted the first-ever career fair for women and minorities. The symposium, held in New York's Marriott Marquis hotel, was organized by the Securities Industry Committee on Equal Opportunity, a group of representatives from broker/dealers, regulators and the SEC.

About 35 companies sponsored the event, setting up booths to interview attendees and participating in panel discussions throughout the day. Exhibitors included Merrill Lynch, Salomon Smith Barney, PaineWebber, Prudential Securities and other national and regional firms.

At press time in June, about 500 attendees were expected at the event. Half were students and half were professionals, says Claretta Daniels, an associate with Salomon Smith Barney who helped coordinate the fair.

The symposium was advertised in local and national newspapers including the New York Times, and promoted with direct mail campaigns aimed at universities across the country, Daniels says. Admission was free to qualified attendees.

Prudential Securities Branch Manager Carl Davis takes a leading role in addressing diversity concerns. One problem he sees: Sensitive cultural issues interfere with frank communication.

Unlike most wirehouse offices, Prudential Securities' Torrance, Calif., branch keeps a low profile. The office is hidden away in a ground floor suite of a low-rise office building with no sign out front. "We're good at giving directions," says Branch Manager Carl Davis, who's had more than one client get lost on the way in.

Low profile describes Davis as well, yet he does stand out as a true rarity in the brokerage business--a minority BOM. He only recently agreed to talk to reporters about racial issues on Wall Street and the work he does with the 14-year-old National Association of Securities Professionals (NASP), a group founded to support minorities and women in the industry. Davis serves as chairman of the group's retail conference.

In fact, Davis remained faceless to his first clients. He prospected and did business via the telephone as a rep with EF Hutton in Santa Monica, Calif., where he started in 1976. Davis says he built his book by remaining "voice neutral" on the phone to better attract clients, the majority of whom were white. "In 1977 and '78, race was an issue."

Race is still an issue, although not to the extent it was 20 years ago. African-American reps still face impediments their white counterparts don't. "The majority [race] is not necessarily comfortable with me because they see me as different," Davis explains. "It's the same thing for women brokers. There are certain expectations about what they can do and what they're comfortable with."

Don't misinterpret Davis when he discusses the problems African-Americans have on Wall Street. The opportunities today are better than ever, he says. For one thing, business is good. He sees a steady stream of early retirees with rollovers who have "a big time need" for investment advice--a trend that will continue. For another, the industry is sincere in its attempts to become a more welcome place for minorities.

So what's the solution to Wall Street's lack of diversity? "I honestly don't know," he says. "But I think you need a recruit who is cornered--who has no other option but to succeed in this business." That describes Davis to a degree, who admits to "having some problems with authority" and being someone who doesn't fit in a highly structured corporate environment.

That's where the NASP retail conference comes in. Scheduled for Sept. 10, 1999, in Washington, D.C., the conference is open to any broker. (Contact 202/371-5535; www.naspnet.org.) Minorities especially can benefit from having a forum free from corporate sensibilities.

"Imagine you've got a black broker who's not doing something right and is criticized by his manager. The broker's got a chip on his shoulder and misinterprets the criticism as racism." The manager can't confront the misperception without provoking more distrust, but Davis and other NASP members can. "The frank conversation that can't happen in the corporate environment can occur at our conference," Davis says.

Watching Davis make the rounds of his 18-broker office, one can't imagine anything getting in the way of his own coaching, which he clearly loves. "There's no dollar figure for the value of having someone succeed and come in your office and say, 'This is great, thanks.'"

Dain Rauscher's Patricia Ternes leads the firm's efforts to empower women.

In October, stockbroker Patricia Ternes will travel from Phoenix to Dain Rauscher's headquarters in Minneapolis to attend a conference with her peers. Ternes and about 80 other female brokers will spend three days networking, discussing technology and sharing sales strategies--all part of the annual meeting of the firm's Association of Women Brokers.

The conference is open to all of Dain Rauscher's 143 female brokers, and Dain Rauscher picks up the entire tab.

"The women brokers who have attended these conferences have shown a decided increase in their production year after year," says Ternes, a member of the association's board of directors and chair of the conference. She wishes more firms--especially wirehouses--would support these types of initiatives. In fact, when Ternes entered the securities business back in 1990, it was with the Phoenix branch of a wirehouse.

"It was like going back 50 years, experiencing those 'good-old-boy' attitudes," Ternes says. She remembers asking herself, "Where are these Neanderthals coming from?"

Apparently, they come from an industry steeped in traditions, few of which encourage diversity. "The industry is an old industry with old embedded prejudices," Ternes says. "Management in this industry has been comfortable maintaining the status quo, and there's been no pressure not to maintain the status quo."

Among the common offenses against women, branch managers have been known to apologize when assigning clients to a woman broker, Ternes says. Plus, some managers still play favorites when dishing out the choice accounts.

Adding insult to injury, due diligence meetings and events for top producers still feature golf tournaments and fishing jaunts--activities traditionally geared toward men, Ternes says. "Why don't we have a selection of other activities, visiting the theater, for example, that would appeal to women?" she asks. "If spouses are invited, my husband has a choice of a day free or a shopping spree. [The bias against women] shows up in every aspect of this business."

But a fundamental shift is slowly forcing brokerage firms to hire and promote more women, Ternes says. As producers move away from transactions and toward financial planning relationships, women will become indispensable. "More and more this is a relationship-building career. And women characteristically have more empathy for their clients," she says.

So, when Dain Rauscher's female brokers meet in Minneapolis this fall, Ternes will tell her counterparts: "Yes, you can be a top producer. You can do these things. Being a female doesn't have to work against you."

Kenneth Robinson's business proves that a good way to reach African-American investors is through home mortgages.

These days prospects don't walk into Kenneth Robinson's office for investment advice. They walk in because they've heard Robinson can help them buy a home.

Nearly a year ago, Robinson and fellow brokers Pierre Dunagan and Norbert Isbell added mortgage brokerage to their fledgling investment firm, DRI Financi al Services in Chicago. The trio left their posts at several large firms in 1997 to develop innovative approaches in targeting the African-American community.

They knew securities commissions alone wouldn't make the firm profitable. "Any young business has to figure out how it can level out revenues," Robinson says. One of the partners, a former mortgage loan officer, suggested mortgages would do the trick. "Investment activity tends to go down in the summer, but summer is home-buying and home-improvement season," Robinson says.

In addition to his duties as a broker, Robinson is a full-fledged mortgage broker, identifying the best lenders and rates, and walking the client from prequalification through close of escrow. It offers better control of the client relationship, he says.

Robinson says that brokers at his former firm offered mortgage services, but clients just filled out a form and sent it to the home office. "Big firms aren't educating brokers, and this will come back to haunt them," he says. "If the client isn't happy with the mortgage, he calls the broker to complain and it hurts the relationship."

Learning the mortgage business is the toughest part of the specialty. "It's a whole different animal than investment brokerage," Robinson says. "You have to learn how to read credit reports, figure debt-to-income ratios, evaluate lenders and qualify customers."

Robinson uses direct mail and seminars to reach mortgage prospects. He averages two seminars a month--small gatherings of current clients and their friends. "The first part of each seminar helps people understand how mutual funds and annuities can help them reach financial goals," he says. "The second part explains the mortgage process and what they need to do to enhance their credit."

The mortgage business is a great way to uncover assets, Robinson says. He knows mortgage clients' income, credit history, everything they own and where it's located before mentioning an investment. "The client will be spending more on his house than on anything else," Robinson says. "He realizes he really needs me to make sure his investments are taken care of, too."

Robinson and his partners hired eight loan officers to handle mortgage paperwork. "We've found it's easier to grow the mortgage division because there are fewer regulatory hoops to bring in loan officers than investment brokers," he says. "It's a lot easier to say, 'Find a prospect looking for a home or a refinance,' than it is to say, 'Find a prospect with $100,000.'" Having help on board enables Robinson, Dunagan and Isbell to prospect and focus on investments. The trio shares the business equally. DRI Financial Services now has about 400 clients and more than $50 million in assets under management.

By offering mortgages, "Clients see me as resourceful," Robinson adds. "We see it as weatherproofing our business."