Examining the gender pay gap among financial planning professionals: A Blinder‐Oaxaca decomposition

Abstract

The financial planning industry has been identified as having one of the largest gender pay gaps. This study examines whether male and female financial planners receive equal pay for equal work. Using detailed data on the backgrounds and practices of 710 financial planners, an unadjusted pay gap of 19% was observed between male and female financial planners. Blinder‐Oaxaca decomposition analysis suggests that 91% of this pay gap can be explained by a model accounting for differences in important individual characteristics including 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; resulting in an unexplained gender pay gap of 1.8%, which is much smaller than the commonly cited pay gap among male and female financial planners. This unexplained pay gap may suggest unequal pay for equal work but could alternatively result from other unobservable differences. Degree of motivation by performance pay and revenue production explained the largest portions of the pay gap. Implications regarding gender‐based discrimination in financial planning are discussed.

Exploring Gender Differences in Marriage and Parental Income Premiums among Financial Advisors

“…51% of this gender pay gap could be explained by other factors considered in this analysis. While the explained portion of the gender pay in this study is less than explained portions in prior studies of the financial advisory industry-e.g., Tharp et al (2019) found 91% of the gender pay gap could be explained by factors considered within their model-the data within the present dataset did not include the psychological factors that were found to explain the largest portion of the gender pay gap among financial advisors. The present finding is largely consistent with the gender pay gap literature, as the gap after controlling for other factors is smaller yet still indicative of higher income for men.…”

“…Characteristics that highlight their femininity (e.g., being a mother) tend to accentuate their perceived "lack of fit" with the masculine occupation (Heilman & Okimoto, 2008;Heilman & Parks-Stamm, 2007). According to Current Population Survey (CPS) figures published by the U.S. Bureau of Labor Statistics, financial advisors have one of the largest unadjusted pay gaps of all tracked occupations (Fottrell, 2018;Kurtz, 2017Kurtz, , 2018Zulz, 2016), with female financial advisors earning 65 cents for every dollar earned by male financial advisors, 5 although this gap has been found to be smaller when adjusting for relevant advisor characteristics (Tharp, Lurtz, Mielitz, Kitces, & Ammerman, 2019). Examining how family structures like marriage and parenthood differentially affect men and women is important in this environment.…”

“…Although prior studies have examined gender pay gaps (Tharp et al, 2019) and other gender disparities in financial advisors' family characteristics, such as divorce rates (Lurtz, Tharp, Mielitz, Kitces, & Ammerman, 2020), the datasets used in prior studies did not contain crucial family-related variables for examining marriage and parental income premiums. This study therefore uses a novel dataset that contains not only highly detailed information about financial advisors and their business operations, but also detailed family characteristics (e.g., parental status, prior use of parental leave, spousal employment status) that have not been surveyed in prior studies.…”

“…The 2019 KRS asked respondents about highly detailed information regarding both their business operations and family characteristics. Whereas the 2018 KRS has been used to examine questions related to the gender pay gap among financial advisors (Tharp et al, 2019) and the gender divorce gap among financial advisors (Lurtz et al, 2020), the 2018 KRS did not survey participants regarding a number of family characteristics relevant to the present analysis (e.g., parental status, parental leave status, and spousal employment status).…”

“…One possibility is that gender differences in preferences for stable versus variable compensation could influence these findings (Tharp et al, 2019). If men show an inclination toward variable compensation, then a stay-at-home spouse may help give them more time and support to grow their variable income.…”