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Female Advisors More Likely to Be Fired for Misconduct Than Male Advisors: NBER Study

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It’s been well-documented that women earn less than men for the same or equivalent job and are less likely to be promoted than their male counterparts. Now a study released by the National Bureau of Economic Research has unearthed what they call a “new type of discrimination” in the financial services industry: discrimination in job termination.

They found that even though female financial advisors account for just 3% of incidents of misconduct as opposed to 9% for men — and the misconduct by women costs firms 20% less than misconduct by men, who are more also likely to be repeat offenders — female advisors were 50% more likely to lose their jobs and 30% less likely to find a new one in the industry within one year after their firing.

The study, titled “When Harry Fired Sally: The Double Standard in Punishing Misconduct,” also found that female advisors who had transgressed were 67% less likely to be promoted compared with just 19% of men found guilty of recent misconduct.

“The financial industry is willing to give male advisors a second chance, while female advisors are likely to be cast from the industry,” the study concludes. It was conducted by researchers from Stanford University, the University of Chicago and Unviersity of Minnesota and released by NBER.

Even before the firings, women advisors are subjected to “relatively more complaints” than their male counterparts, according to the report.

Fifteen percent of the male advisors and 8% of the female advisors had disclosures on their records, which can be complaints by investors or notices of suspensions or terminations.  

The study said its results suggest that the different, more severe treatment of women compared to men following misconduct “are driven by the gender composition of firm executives…. Male executives seem to be more forgiving of misconduct by men than women.”

For example, female advisors at firms with no female executives or owners were 42% more likely to be fired from their jobs for misconduct than male advisors at the same branch.

If a female advisor had a prior record of misconduct, she was less likely to be hired than a male advisor with a similar record.

In contrast, firms with equal representation of men and women at the executive or ownership levels were found to discipline advisors of either sex at similar rates.

Unfortunately, for female advisors, 83% of firm managers and 83% of firm executives and owners are men, according to the report.

The study was based on monthly data from the Financial Industry Regulatory Authority on 1.2 million registered advisors — defined as “investment advisers and brokers” — from 2005 to 2015 that includes registrations, licenses and industry exam history; employment history in the industry, which for many dated back before 2005; and any disclosures about customer disputes, disciplinary events and other financial matters including personal bankruptcies. It noted that female advisors comprise 25% of the advisory industry.

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