The Hidden Sexism at Financial Firms

A new survey reveals that female stockbrokers earned less because they received inferior accounts.

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In her based-on-real-life novel Bond Girl, Erin Duffy paints a disturbing picture of what it’s like to be a woman working on Wall Street: Her main character’s colleagues call her “girlie,” make her drive from New York to Philadelphia just to pick up lunch, and don’t give her a proper desk or chair for months after she starts working. Meanwhile, bonuses get handed out like candy and trysts between colleagues end in humiliation.

A new study by University of Pennsylvania professor Janice Fanning Madden suggests that Duffy’s depiction of a sexist culture is grounded in reality. Madden found that female stockbrokers tend to receive inferior accounts and sales opportunities compared to their male colleagues, which leads to women’s lower salaries. About 1 in 3 full-time stockbrokers are women, and on average, they earn two-thirds of the salaries of their male colleagues.

Madden, who served as an expert witness in class-action lawsuits against two brokerage firms about a decade ago, was able to access and analyze data about the gender pay gap. She received the personnel histories of stockbrokers as well as trading and asset records. Compensation was determined largely by commissions, which the brokerage houses argued was fair: Women earned less because they sold less. (Her data all dates back to the mid-1990s.)

But Madden’s analysis found that it wasn’t women’s performance that explains the pay gap. Instead, it was that were assigned “inferior” accounts and inferior support systems, including titles and office space. She found that “women at both firms were less likely to receive the types of accounts that produced higher commissions. This in turn hurt their salaries and their ability to compete for benefits that were awarded based on performance.”

In fact, when the more valuable accounts were transferred to women, Madden found that women performed as well or better than their male colleagues. That suggests that women do not suffer from any innate weakness in the field, nor do they suffer from significant client discrimination against them.

As the Wharton School of the University of Pennsylvania points out, Madden’s study is particularly noteworthy because it shows how women can face discrimination even when working in a performance-based pay system, as brokerage houses typically use. While a commission-based system can seem objective and fair on the surface, it can still lead to an unfair outcome. (The lawsuits that gave Madden access this data ended up settling out of court.)

Two other surveys were released in recent days that also reveal gender differences in the financial world. Financial Finesse, which provides workplace financial education programs, found that women are less likely to have an emergency fund than men are (43 percent versus 63 percent). Women were also less likely to be “comfortable” with their debt levels compared to men (52 percent versus 71 percent). And only 1 in 4 women said they rebalance their investment accounts to maintain their target asset allocation, while about half of men said they do so. Those findings suggest that women could use more targeted advice and assistance when it comes to building financial security.

At the same time, Ameriprise Financial found that women are more likely to talk about money with their families, while men are more likely to provide financial assistance for certain purchases, including cars. About 2 in 3 women in the baby boomer generation said they’ve “adequately” talked about finances with their grown children, compared to just 55 percent of men.

Women in the Ameriprise survey also reported less optimism about their financial futures, a trend that held true throughout the younger generation as well. One in four daughters of baby boomers said they felt “very optimistic” about their financial futures, compared to almost 4 in 10 sons. Young women were also more likely to say they were struggling to pay off debt than their male peers.

The takeaway from these three new reports on gender in the financial world is a disturbing one: Men and women are sometimes navigating different money worlds, from income to savings to debt. And women are usually the ones coming out behind.

Twitter: @alphaconsumer

Corrected on 06/20/2012: An earlier version of the story should have described Bond Girl as a novel.