The Truth About the Pay Gap Between Male and Female Financial Advisors

Do men and women advisors get paid equally for doing the same work?

The working paper, “Examining the Gender Pay Gap Among Financial Professionals: A Blinder-Oaxaca Decomposition,” mentioned in a recent FA magazine article, argues that yes, women get equal pay for equal work.

But we’d like to say that, no, that’s not the case — and based on our personal experiences as women in the industry, we assert that the findings in the study are absolutely incorrect.

“Explainable” reasons

Derek T. Tharp, one of the study’s authors, says that “unequal pay for equal work” is not a major contributor to the gender pay gap among financial planners.

Instead, the study points to “explainable” reasons for the gender pay gap, saying 91 percent is explainable and only 1.8 percent is not.

“Explainable” reasons include job role, experience, team structure, hours worked, revenue produced, professional designation status, marital status, and psychological factors such as degree of motivation by income potential, performance pay, work-life balance, and stable pay.

While this study provides an interesting look at the gender pay gap, reducing the issue to “explainable” reasons is missing the point.

“Statistically significant factors related to income”

The study says that the “statistically significant factors related to income” were experience, role, team structure, work hours, revenue, and psychological motivators.

“Having 20 to 30 years of experience was positive. Being an associate advisor or an executive (both compared with a lead advisor) was a negative. Working in an ensemble firm, when compared to working as a solo advisor with support, was positively associated with income. Higher work hours and higher revenue also led to more income. Being less motivated by work-life balance also led to more income.”

How can you have “20 to 30 years of experience” when there isn’t a solid career re-entry program in place for mothers? How can you be “less motivated by work-life balance” when you’re the one expected to take care of the kids? How can you expect to work more hours and have higher income when you have to manage children, aging parents, and career with an inflexible work culture?

And for the many of us who did work the extra hours at the expense of giving up quality family time, we still face gender discrimination: we’re drastically underpaid compared to our male peers.

The study absolutely misses the point. If women financial planners want to be compensated fairly, they need roles that allow them the flexibility to manage life and career, they need to be paid what they are worth (it’s not happening), and they need to have the female leaders/mentors to help them succeed, which is NOT happening at the traditional male-led firms.

Career path “choice”

The study says men often choose more “variable-compensation-based paths,” while women choose “stable-income/salary-based paths.”

And because women don’t take “variable-compensation-based paths,” that’s why they have unequal pay later down the line. As the study puts it: “The difference in compensation of men and women in the later years may be more a function of that choice about compensation path than unequal pay for genders that choose the same type/path.”

But is this “compensation path” that women end up on — the path to less income — really a choice?

Women advisors are expected to take the stable, salary-based path. The title of this Newsweek article, “Women aren’t risk-averse — society teaches them to be that way, study says,” sums it up perfectly. In our society, women are often told to be risk-averse, while men are told to be daring.

The Newsweek article concludes, “Exploring risk aversion could provide clues as to why men and women sometimes opt for different careers, and why women suffer from a gender pay gap, the authors wrote.”

Yet in the study referenced in FA magazine, one of the authors says, “It’s not clear why men appear somewhat more likely to choose one path and women another, and why men tend to have more years of experience building their client base.”

It’s pretty clear why.

Aspiring women financial advisors

The authors say that this news — that women and men are paid equally for equal work — should be a relief to women wanting to become financial advisors.

“Speaking only for myself, I do hope that these findings may be encouraging to women who may have been discouraged from pursuing a career in financial planning due to the large gender pay gap among financial advisors commonly referenced in the media,” Tharp said. “I can certainly understand why anyone would feel discouraged from entering a profession if they felt that they would not receive equal pay for equal work.”

Another author of the study, Katherine S. Mielitz, also echoed these sentiments. “I was very excited when I first read through our preliminary results. The idea that a gender pay gap does not appear to be a result of unequal pay for equal work is very encouraging. Women are very important to the growth and sustainment of our field. That equal pay for equal work seems to be available should be one of many things that encourages women to seek out this profession.”

But this study’s clinical view of the gender pay gap isn’t something to celebrate, and it isn’t a way to encourage more women to enter the industry. There are still deeper issues our industry needs to address — from the nonexistent recruitment efforts throughout the school years, limited mentorship and sponsorship opportunities, women being excluded from networking opportunities, to the lack of women in leadership roles in finance.

Equita Financial Network

Financial advisors are not robots. Yes, we have careers — but we also have lives, family, emotions, unexpected changes, and everything else.

Both Bridget Grimes and I (Katie Burke) know that the gender pay gap issue can’t be dismissed because of “explainable” reasons,” “statistically significant factors related to income,” and “compensation paths.” It is why we have dedicated our professional lives to empowering female financial planners to create the careers they have always envisioned for themselves — careers in which they feel valued and are appropriately compensated for their vast contributions.

If you want to become an Equita member firm and join a supportive and experienced network of women financial advisors, reach out to us today.

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