Financial Adviser Misconduct and Labor Market Penalties: Uncovering Racial Disparities in the Absence of Gender Gaps

Abstract

Using a comprehensive matched employer-employee dataset for U.S. financial advisers from 2008 to 2018, we revisit established evidence on labor market penalties following financial misconduct. Prior studies report that female advisers are 20% more likely to exit their firms following misconduct and that similar disparities exist for non-white advisers. However, by disaggregating misconduct into distinct disclosure events - differentiating those that nearly always trigger job terminations from those that do not - we show that the apparent gender gap vanishes, while significant racial disparities persist. Specifically, non-white advisers face approximately 24% higher job separation rates than their white counterparts. Robustness checks confirm these findings across alternative specifications, suggesting that race-based differential treatment in the labor market is a distinct phenomenon warranting further investigation.