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Gender Gap In Investing: How Talking About Ethics Could Reduce It

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Women’s perception of unethical behaviour among finance professionals may contribute to how underrepresented they are in the industry, according to a recently published article I co-authored with colleagues at Zhejiang University and Creighton University.

We administered surveys to nearly 3,000 college students in the U.S. and China, describing 10 scenarios in which a character makes an ethically questionable decision. Students were asked to rate how ethical the action was and what percentage of investment managers they believe would act in the same way.

By a statistically significant margin, women in the U.S. ranked the characters’ actions as more unethical than men did. However, they also proved more pessimistic about financial professionals’ ethics, presuming that a significantly higher percentage of investment managers would take the same action. In other words, female respondents in the U.S. perceived a larger discrepancy between their own ethical views and what they believe about investment managers.

For example, in one scenario, a financial adviser suggests a risky fund to an elderly client. It will potentially provide a better return for the client, but also a substantial commission for the adviser. Of the men in our sample, 38.8 percent felt that a relatively low number of financial professionals – less than 40 percent – would take this questionable action. By comparison, only 26.7 percent of women felt that a low number of financial professionals would take this action. Just 29.5 percent of men felt that a high percentage of financial professionals – more than 60 percent – would recommend the risky portfolio, compared with 38.3 percentage of women.

Based on our surveys, however, women in China appear to have more favourable perceptions of investment manager ethics than men do, by a statistically significant margin.


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These differences seem to mirror some differences in gender representation in the industry in the U.S. and China. In 2018, for current or future investment professionals taking the CFA exam in the U.S., only 29 percent were women, while in China, 52 percent of test-takers were women.

Gender gap in investing: Why it needs attention

Many reasons have been proposed to explain why women in the U.S. have been less likely to pursue careers in finance, particularly in investment management, such as a lack of role models and industrywide cultural norms.

Universities and professional organisations have been trying to boost the number of women in finance careers for many years. However, recent evidence suggests that the percentage of female fund managers has not improved over the past two decades. Only 18 percent of investment professionals who have earned the CFA designation in the U.S. are women.

This participation rate significantly trails other professions, as women represent 37 percent of active doctors, 38 percent of attorneys at law firms and 62 percent of accountants and auditors.

Researchers and women’s advocates have outlined a slew of factors contributing to women’s slow advancement in many traditionally male-dominated fields, from bias and discrimination to difficulty balancing work and child care to a preference for less competitive environments. Given women’s faster progress in other fields, however, we hope to isolate factors specifically associated with investment management to better understand the lack of progress.

What still isn’t known

Our research suggests that the many institutions interested in recruiting more women into finance careers should devote effort to addressing concerns about ethics and modifying poor perceptions of the field.


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However, it is unclear where these ethical perceptions are formed and how well they reflect reality. For instance, do women overestimate the occurrence of ethical misbehaviour or do men underestimate it? Can these perceptions be altered by ethics training or highlighting the rigorous ethical standards employed by professional organisations such as the CFA Institute Code of Ethics – or are these views already ingrained by the time students arrive on college campuses?

Although devising the most effective reforms is a difficult path, we hope that understanding differences in ethical perceptions will lead to more successful efforts in recruiting diverse pools of financial professionals going forward.

Tyler Jensen, Assistant Professor of Finance, Iowa State University published this article first on The Conversation.