How advisers can close the industry’s gender pay gap

InvestmentNews‘ Women’s Issue last week uncovered many realities about life in the financial advice industry. One seemingly positive finding: The gender pay gap is smaller for financial advisers than for the labor force as a whole.

Women make about 86 cents to a man’s dollar as advisers, which compares to a national overall median of 79 cents.

That 86 cents looks even better when compared to the 74 cents for women in management and financial operations roles. A more depressing statistic? The World Economic Forum recently reported it will take 118 years to close the gender pay gap worldwide at the going rate of change.

So the advice industry can gloat, right?

Hardly. Any disparity in compensation for people with the same level of experience — in the case of advisers it’s 10 years for women and men — is concerning.

To fix the situation we need to pinpoint what’s causing it. A deeper dive by our research department into its 2015 InvestmentNews Adviser Compensation and Staffing Study provides some empirical insight.

Turns out, women are “stuck” in lower-level adviser roles at firms longer than their male colleagues. The glass ceiling is evident when we look at support advisers (the lowest of three levels indicated in the InvestmentNews study). While men make up the majority of advisers in this role with experience up to 10 years, it becomes 74% female when looking at people in this position who have more than 10 years of experience. The promotions into client-facing roles just aren’t coming for as many women.

At the next level up, service adviser, those with more than 10 years’ experience still skew toward women, though less so — at 56% to men’s 44%.

Only at the top level do men become the majority when looking at people in the role with more than 10 years of experience. Lead advisers, who are the primary managers of client relationships and are responsible for formulating and implementing advice, break down as 75% men and 25% women.

OWNER DISPARITY

What’s more, a significant pay divide came to light when looking at advisory owners. Male owners with eight to 10 years’ experience make 14% more than females with the same experience, and the disparity only grows over time. At 30 years or more, men make 35% more than women.

That’s a real head-scratcher, because owners pay themselves. How can what is acknowledged bias in employer/employee dynamics possibly bleed over into self-pay?

Well, here there really is good news. Our research team found that when controlling for firm size, many women owners actually do make about the same as their male peers. Female solo practitioners, for example, make about $246,000 versus a man’s $250,000. We actually see a reverse gap at super ensembles (firms with $10 million-plus in revenue), where a woman owner makes about $384,000 to a man’s $342,000.

It’s at the firms in between — those with fewer adviser owners and revenue up to $10 million — where the disparity comes in. But that mostly can be attributed to men getting higher profit distributions. Given demographics of the early days in this industry, it’s likely men have more years in the ownership role than women at these mid-tier firms. As more women become owners and have that position longer, this profit discrepancy should change.

So how do we correct the 86 cents for female advisers? Take a note from Katty Kay, lead anchor of BBC World News America, who spoke at the Raymond James Women’s Symposium earlier this fall. She said women will apply for a promotion when they have 100% of the needed job skills, whereas men will go for it when they have 60%. Owners, managers, supervisors out there: Be aware that many women in your firm can do the jobs above those they’re currently in, but might not recognize it themselves.

You need to give that woman who’s working damn hard the added boost of confidence she needs to go for that promotion. You’ll benefit from having her in a higher position at your firm as much as she will.