Study Finds a Misconduct Double Standard for Women Advisors

New research concludes that financial advisory firms, and the industry as a whole, “exhibit substantial discrimination against women when doling out punishments following misconduct.”

While male advisers are more than two times as likely to engage in misconduct, female advisers are 20% more likely to be fired for engaging in misconduct – and are 30% less likely to find new employment. The paper, provocatively titled “When Harry Fired Sally: The Double Standard in Punishing Misconduct,” notes that male financial advisers make up 75% of the financial advisory industry, and are responsible for a disproportionately large amount of the misconduct in that industry. On average, roughly 1 in 11 male advisers has a record of past misconduct, compared to only 1 in 33 female advisers. Male advisers are, thus, more than three times as likely to engage in misconduct, according to the researchers.

Not only are female advisers less likely to engage in misconduct than their male counterparts at the same firm, time and location, and with the same qualifications and experience, the researchers found no evidence that women are substantially less productive employees. Moreover, female misconduct is less costly, and female advisers are less likely to be repeat offenders, according to the report. Nevertheless, female advisers’ job separation rates are higher than men’s following misconduct, and females suffer longer unemployment spells and are less likely to be hired by other firms following misconduct even after being employed for several years. Overall, according to the report, the evidence suggests that differences in characteristics, or statistical discrimination, are not a likely reason for these gender differences.

Complaint Deportment

The researchers found that that a disproportionate share of complaints initiated against female advisers comes not from customers, but from their employers. For male advisers, 55% of misconduct complaints are initiated by customers and 28% by their employers, while for female advisers, employer-initiated instances of misconduct are almost as frequent as those initiated by consumers – 41% versus 44%. “These results suggest that employers may be the primary source of gender discrimination and are consistent with the recent survey evidence which suggests that a large majority of women believe there is gender discrimination within firms,” according to the report.

The researchers further find that female advisers at firms with no female representation at the executive/ownership level are 42% more likely to experience job separation than male advisers at the same branch following an incidence of misconduct, while firms with equal representation of male and female executives/owners discipline male and female advisers at similar rates. Similar results were found when it comes to hiring advisers with misconduct records. Overall, the researchers conclude that gender differences in labor market outcomes following misconduct are driven by the gender composition of executives at financial advisory firms – and that male executives seem to be more forgiving of misconduct by men relative to women.

Looking for other explanations, the researchers note that a form of statistical discrimination could arise if bad apples among female advisers were rarer, but the extent of misconduct were more severe, requiring a larger punishment – but they found that male advisers engage in misconduct that is 20% more costly for firms to settle. Another alternative – that female advisers are less likely to engage in misconduct unconditionally, but are more likely to be repeat offenders – is again refuted by data that shows that male advisers are more than twice as likely to be repeat offenders in the future. Both these results suggest that firms should punish male advisers more severely than female advisers, according to the report.

Nor did assets under management (AUM) account for the difference in treatment.

The report’s authors cite 2008 Census Bureau information in noting that personal financial advisers have among the largest gender earning gaps across occupations, and noted other survey data that found that nearly 88% of female financial service professionals believe that gender discrimination exists within the financial services industry. Moreover, it cites a recent report from management consultant Oliver Wyman (2016) that not only found that women face a glass ceiling, but that it was the No. 1 cause for concern for women in the industry.

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