Women in Finance: Where’s the Respect? | by Alan Morantz | October 2023

Female investment analysts are considered unfit for promotion if they don’t persist in selling their ideas

A picture from Fabian Blank we Unsplash

Wsigns working in finance are haunted by unconscious prejudices, the most prominent of which is that they are more sensitive to investment risk than men. A study a few years ago showed this clients were more likely to downplay the investment advice of female analysts than male analysts. And this despite the fact that even female analysts performed the same way – in some market conditions even better — as male analysts in forecasting returns and stock prices.

Such prejudices prevent women not only from providing full value to their investment clients, but also from growing within the ranks of investment firms.

The fact that women represent less than one in five Chartered Financial Analyst charter holders “is an immediate red flag,” Blake Steenhoven, a business researcher at Canada’s Queen’s University, told me. “But it’s also worrying that their representation is falling when you look at higher levels in the organisation, so they’re not being promoted at the same rate as their male peers.”

Women in finance have to work twice as hard to get half as far, and Steenhoven and his Cornell University colleagues (Robert J. Bloomfield, Kristina Rennekamp and Scott Stewart) wanted to know why. Is prejudice responsible for this leaky talent pipeline?

The researchers went straight to the source. For their study, recruited 179 investment professionals and asked them to rate research analysts as candidates for promotion to a higher position at a hypothetical hedge fund. In this scenario, the male or female nominees either insisted on their stock options after the meeting was voted on or abandoned their stock options entirely.

As the researchers hypothesized, their exercise revealed a form of gender bias that can limit women’s career paths in finance. Study respondents rated analysts as less worthy of a promotion when they chose not to continue with an investment selection, but only if the analyst was a woman. Male analysts suffered no such reputational penalty.

The bottom line is that when women are not persistent, it is interpreted as evidence that they are not suited for the role. The same behavior of men is attributed to contextual factors.

These perceptions hold enormous power in male-dominated industries where performance management is ambiguous. Steenhoven says there are different types of perception at play.

The first are the so-called descriptive norms or stereotypes regarding men and women. For men, these characteristics include traits such as aggressiveness, assertiveness, and competence. For women, they include cooperation, kindness and warmth.

There are also stereotypes associated with roles such as “analyst” or “manager”, largely shaped by how people in those roles look and behave. In male-dominated industries such as finance, these stereotypes are more like male characteristics, so a stereotypical analyst looks more like a stereotypical male.

Stereotyping occurs when an investment analyst violates the expectations associated with the position, such as not enforcing a stock recommendation after it has been voted down. When the analyst is female, Steebhoven says, gender provides a convenient explanation for not acting “masculine enough,” so that behavior is interpreted as saying something about the analyst. When the analyst is male, gender is not considered an issue, making it easier to attribute unexpected behavior to some other factor.

Although the researchers were unable to determine the gender of the investment professionals who were part of the study, it probably doesn’t matter. Research suggests that male and female managers are likely to exhibit this bias. This is because descriptive norms about men and women are commonly applied across age and gender.

Based on these findings, Steenhoven advises women in finance—or any women in male-dominated industries—to at least understand the biases they may be exposed to during the evaluation process.

However, navigating these biases is a challenge. If a woman isn’t seen as aggressive enough to earn a promotion, Steenhoven suggests she emphasize the many ways in which she possesses those qualities. “It might have helped for Jennifer (the fictitious investment analyst in the study’s script) to say something like, ‘Well, I’m going to let it go this time,’ to remind everyone how often she behaves the way people on Wall Street expect her to.”

Going in the opposite direction—behaving like an über-man—could just as easily backfire. Women in finance run the risk of being perceived less favorably if they do not exhibit typical female characteristics. As the researchers note in their paper, “Expectations of aggressive behavior force women to choose between violating analyst expectations and violating gender expectations, both of which can have negative consequences.”

Investment firms are in a better position to make progress in mitigating the negative consequences of gender bias. The quickest measure is to reduce or even eliminate subjectivity in hiring and promotion decisions. Using appropriate metrics and applying them consistently can level the playing field.

A longer-term project would be to highlight a diverse group of successful women in finance with the goal of changing the characteristics people associate with a “successful female analyst.”

“This can help change the reference point that evaluators use when comparing an analyst to their idea of ​​what a successful analyst looks like,” says Steenhoven. “Also, behaviors associated with stereotypes about women are less surprising.”

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