Female brokers punished more harshly for misconduct than males

Female financial advisers face harsher punishment and have a harder time finding work again after bad behaviour than males, a comprehensive study of the disciplinary records of 1.2m US advisers and brokers has found.

Women are 20 per cent more likely than men to lose their jobs for misconduct at brokerages, even though men are more than twice as likely to engage in problematic behaviour, according to a working paper published by the National Bureau of Economic Research.

The authors, who teach at the University of Chicago, Stanford University and the University of Minnesota, suggested the difference represented “taste-based discrimination” in the industry.

“The financial advisory industry is willing to give male advisers a second chance, while female advisers are likely to be cast from the industry,” they wrote.

The study examined all advisers and brokers in the database kept by the Financial Industry Regulatory Authority (Finra), the industry watchdog, from 2005 to 2015, spanning about 1.2m people, or about 10 per cent of all workers in the finance and insurance industry.

On average, about one in every 11 male financial advisers has some history of misconduct, compared with one in 33 of their female counterparts, the research found.  

Investment advice has long been a male-dominated industry. Only a quarter of US financial advisers are women, a number that has been flat for the past decade. 

Broker misconduct, such as violations of investment rules, has been a thorny issue for the industry in recent years as Finra has looked to clamp down on harmful behaviour and change perceptions that some advisers are ripping off ordinary Americans.

The researchers wrote that women were 50 per cent more likely to be fired for misconduct than men, and subsequently suffer longer unemployment spells, with a 30 per cent smaller chance of finding a new job in the industry within a year.

“Our results suggest that firms, and the industry as a whole, exhibit substantial discrimination against women when doling out punishments following misconduct,” they wrote.

Brokerage firms with a higher proportion of male executives also tended to punish female brokers more severely for misconduct, the study found. More than 80 per cent of advisory managers are male and, for companies with no women at the top, female brokers were 42 per cent more likely to be fired for misconduct than men. “Male executives seem to be more forgiving of misconduct by men relative to women,” the study said.

Senator Elizabeth Warren has pushed Finra to rein-in broker misconduct, last year sending the watchdog’s chief executive a letter calling for action to “protect families looking to invest their hard-earned savings”. Finra said in January it would “devote particular attention” to brokers who pose a high risk to customers, following a broad review last year of culture and ethics at brokerage shops.