Kaine, Booker, Beatty Introduce Legislation to Increase Diversity in Asset Management, Strengthen Americans’ Retirement Security

WASHINGTON, D.C. —Today, U.S. Senator Tim Kaine (D-VA), a member of the Senate Health, Education, Labor, & Pensions (HELP) Committee, and Senator Cory Booker (D-NJ) introduced the Too Narrow to Succeed Act, legislation to increase diversity in the asset management sector. The bill would instruct the Department of Labor (DOL) to conduct a survey of best practices for increasing the diversity of the asset management firms that invest American workers’ retirement plan funds. This legislation would enable public- and private-sector retirement funds to increase opportunities for women and people of color operating asset management firms and incorporate a greater range of perspectives when managing money, which would help mitigate financial risks. Congresswoman Joyce Beatty, chair of the House Financial Services Subcommittee on Diversity and Inclusion, is introducing companion legislation in the House.

"The most basic financial advice given to people is this—diversify your portfolio.  Diversification mitigates risk and improves long term returns,” said Senator Kaine. “But so often, our financial firms are not diverse in who is making investment decisions. If you have too narrow a perspective, you endanger the financial success of your clients.  This commonsense legislation will help ensure a safer financial future for workers and their families.”

“Studies show that asset management firms run by women and people of color manage only a tiny fraction of investments,” said Senator Booker. “This gap is unacceptable and is not only a disservice to the fund managers, but to all the American workers and retirees whose savings would benefit from their expertise. This bicameral legislation will increase opportunities for women and minority-led firms to manage the retirement funds of American workers. At the same time, the bill will also ensure that we have a stronger, fairer, and more resilient financial system by diversifying which firms manage funds and mitigating financial risk.”

“As chair of the House Financial Services Subcommittee on Diversity and Inclusion, I have been examining the stark lack of diversity in the multitrillion-dollar asset management industry,” said Congresswoman Beatty. “The unfortunate reality is that wealth is still concentrated in the hands of a few financial asset managers and very little opportunity is given to minority- and women-owned firms, even though they perform as well or better than other firms. That is why I’m proud to join with Senator Tim Kaine to introduce the Too Narrow to Succeed Act in the House to shine a light on this diversity desert and expand opportunities for MWO asset management firms.”

Women- and minority-owned firms are significantly underrepresented in asset management. A 2019 report found that minority and women-owned firms managed just 1.3 percent of the sector’s $70 trillion in assets under management. This severe underrepresentation also extends to employment within the industry. This is not due to a lack of diverse talent; multiple studies have shown that diverse-owned asset management firms have similar or better performance on returns as other firms. In fact, diverse-owned firms are overrepresented among top-performing firms.

Specifically, the Too Narrow to Succeed Act would:

1. Increase Transparency by requiring federally-controlled trusts and retirement plans that utilize externally managed funds to report annually on usage of diverse-owned and run asset management firms.
2. Identify Barriers by directing the Employee Retirement Income Security Act (ERISA) Advisory Council to consider barriers to usage of diverse asset management firms among private sector retirement plans, and methods to overcome such barriers.
3. Disseminate Best Practices to expand diversity by instructing DOL to conduct a survey of best practices and issue a report to implement strategies to improve access to diverse-owned asset management firms.

In addition to Kaine and Booker, the legislation is cosponsored by U.S. Senators Mark Warner (D-VA), Patty Murray (D-WA), and Bob Menendez (D-NJ) in the Senate.

Supporting organizations include: the New America Alliance, the Diverse Asset Managers Initiative, the National Association of Investment Companies, the National Association of Securities Professionals, and the United States Hispanic Chamber of Commerce.

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