Wide Wage Gap for Plan­ners

Fe­male ad­vi­sors earned just 59 cents for ev­ery dol­lar their male peers earned last year. Here are 10 rea­sons that the ad­vi­sory pro­fes­sion should be con­cerned.

Financial Planning - - CONTENTS - BY AN­NA­LYN KURTZ

Fe­male ad­vi­sors earned just 59 cents for ev­ery dol­lar their male peers earned last year. The ad­vi­sory pro­fes­sion should be con­cerned.

The ad­vi­sory in­dus­try has the largest pay dis­par­ity of all oc­cu­pa­tions tracked by the U.S. Depart­ment of La­bor. Here are 10 things to know about the gap.

1. The pay gap is huge for ad­vi­sors.

Over­all in the U.S. econ­omy, women earned about 82 cents for ev­ery dol­lar male work­ers earned in 2017. Crit­ics of that statis­tic will point out that the wage gap can partly be explained away by the dif­fer­ent in­dus­tries in which women and men tend to work. Drilling down to spe­cific oc­cu­pa­tions, how­ever, paints a par­tic­u­larly bleak pic­ture for fe­male ad­vi­sors: They earned just 59 cents for ev­ery dol­lar their male peers earned last year. To be clear, that statis­tic in­cludes only full-time ad­vi­sors who work 35 hours a week or more, so it’s not dra­mat­i­cally dis­torted by women who may work part time. The pay mea­sure also in­cludes salaries and com­mis­sions, but not one-time pay­ments such as an­nual bonuses.

2. The gap is per­sis­tent.

The pay gap isn’t a statis­tic to be proud of, and the CFP Board wants the per­sis­tent dis­par­ity to change. Ear­lier this year, the in­dus­try group ap­pointed Kath­leen Mc­quig­gan, a wealth man­ager for Artemis Fi­nan­cial Ad­vi­sors and long­time women’s ad­vo­cate, to serve as a spe­cial ad­vi­sor on gen­der di­ver­sity. She de­scribes a “myth of the mer­i­toc­racy” at fi­nan­cial firms. “Ev­ery firm is claim­ing to be a mer­i­toc­racy,” she says, but once firms drill down into their data, they of­ten find a pay gap. She rec­om­mends firms adopt more-trans­par­ent com­pen­sa­tion struc­tures and stan­dard­ized job de­scrip­tions to even­tu­ally get the in­dus­try to pay eq­uity.

3. It’s bet­ter in other ar­eas of fi­nance.

While fi­nance in gen­eral has his­tor­i­cally not been known as an egal­i­tar­ian place for women, other fi­nan­cial pro­fes­sions re­port a nar­rower pay gap than the ad­vi­sory route. Fe­male ac­coun­tants, for ex­am­ple, earn 77 cents on the dol­lar, and fe­male fi­nan­cial an­a­lysts earn 86 cents to a man’s dol­lar.

4. Ex­pe­ri­ence and pro­duc­tiv­ity don’t ex­plain it.

Per­haps male ad­vi­sors are more ex­pe­ri­enced than women? Or maybe they’re more pro­duc­tive? Nope. Those things don’t ex­plain the gap, ei­ther. Even ac­count­ing for ex­pe­ri­ence, rev­enue pro­duc­tion and own­er­ship sta­tus, fe­male ad­vi­sors earned $32,000 yearly less than their male coun­ter­parts in 2013, an Aite Group Study com­mis­sioned by the CFP Board found. That num­ber is in line with more re­cent La­bor Depart­ment find­ings, which show fe­male ad­vi­sors earned some $35,000 less than men in 2017. The me­dian an­nual earn­ings for male ad­vi­sors was $86,424 and for women, just $50,908.

5. Dif­fer­ing skill sets play a role.

Busi­ness mod­els and dif­fer­ences in com­pen­sa­tion struc­tures might be one key fac­tor. While more men work in com­mis­sion

roles, a higher per­cent­age of women are paid salaries. Around one in five fe­male ad­vi­sors were em­ployed by a bank in 2013, com­pared with one in 10 men. That’s a mean­ing­ful dif­fer­ence, be­cause, as Mc­quig­gan notes, “banks and credit unions pay dif­fer­ently than a Mor­gan Stan­ley or a big wire­house. Banks tend to hire more salaried em­ploy­ees ver­sus the vari­able and com­mis­sioned com­pen­sa­tion mod­els.” In­deed, in 2013, 32% of fe­male ad­vi­sors were salaried, ver­sus 13% of men. When a higher pro­por­tion of pay is based on com­mis­sions or bonuses, there’s more room for up­ward growth. “Women may be more in­ter­ested in the re­la­tion­ship side of the busi­ness, and they may be found less in sales cul­tures,” says El­yse Foster, the found­ing prin­ci­pal of Har­bor Fi­nan­cial Group in Boul­der, Colorado. “If that’s true, they won’t make as much money.” Among RIAS, women tend to have less ex­pe­ri­ence in sales and as bro­kers than their male peers, but more back­ground in op­er­a­tions and ad­min­is­tra­tion, a 2014 Charles Sch­wab sur­vey shows. It’s pos­si­ble those skill sets aren’t val­ued equally.

6. Women still are a mi­nor­ity in the in­dus­try.

As of 2017, women made up only 33% of full-time ad­vi­sors, the La­bor Depart­ment data shows — which is about where it was a decade ear­lier. The lack of progress looks even direr if you limit the sam­ple to plan­ners with the CFP des­ig­na­tion. Women make up only a quar­ter of CFP pro­fes­sion­als — and that num­ber also hasn’t budged in a decade. Mean­while, in the RIA space, nearly half of all ad­vi­sors say they have no fe­male ad­vi­sors at their firms.

7. There are fewer women at the top.

Women are less likely than men to be in top lead­er­ship roles. About 39% of women owned all or part of their prac­tice in 2013, ver­sus 63% of men, the Aite Group study shows. And at RIAS, only 20% of firm eq­uity goes to women, the Sch­wab study shows.

8. Un­fair treat­ment is part of the prob­lem.

When ad­vi­sors en­gage in mis­con­duct, women are not judged on equal foot­ing with men. In fact, a 2017 aca­demic study shows

Around one in five women ad­vi­sors were em­ployed by a bank in 2013, com­pared with one in 10 men.

fe­male ad­vi­sors are pun­ished at sub­stan­tially higher rates rel­a­tive to male ad­vi­sors, even when they com­mit er­rors that are far less costly. That study, called “When Harry Fired Sally,” also wasn’t shy about nam­ing spe­cific firms. Wells Fargo was the worst of­fender. There, women were 27% more likely than men to ex­pe­ri­ence a “job sepa­ra­tion” af­ter en­gag­ing in mis­con­duct. Next on the list were A.G. Ed­wards & Sons (which is now part of Wells Fargo) and Sun­trust In­vest­ment Ser­vices. The au­thors are con­vinced the study shows ev­i­dence of in-group fa­voritism, mean­ing men are nicer to fel­low men than they are to women. It also could ex­plain part of the wage gap, be­cause when women are pun­ished more harshly than men, they’re also less likely to get pro­moted or find an­other job, says one of the au­thors, Gre­gor Matvos, a fi­nance pro­fes­sor at the Uni­ver­sity of Texas at Austin. When asked about the study, Wells Fargo spokes­woman Kim Yurkovich told Fi­nan­cial Plan­ning that the firm had “sub­stan­tial is­sues with the au­thors’ method­ol­ogy, data and vari­ables.” In an email, she said, “As al­ways, our fo­cus is on pro­vid­ing a di­verse and in­clu­sive work en­vi­ron­ment, while we con­tinue to serve the needs of our clients.” Sun­trust also dis­agreed with the con­clu­sions of the re­port, a com­pany spokesman said. “We con­ducted our own re­view and did not find ev­i­dence of bias,” the spokesman wrote in an email. ”We have a strong cul­ture of in­clu­sion and com­mit­ment to treat­ing our em­ploy­ees fairly and eq­ui­tably.”

9. Bar­ri­ers make net­work­ing dif­fi­cult.

Erin Hil­ton, an in­de­pen­dent ad­vi­sor in Austin, Texas, learned how to play golf, hop­ing she would be able to fit in bet­ter with her mostly male peers and po­ten­tial clients. But she was dis­mayed to find out that at some coun­try clubs in Texas dining rooms are still re­stricted to men only. Whether the bar­ri­ers to women are that bla­tant or more sub­tle, male bond­ing rit­u­als make it harder for women to net­work among other ad­vi­sors and at­tract high-net-worth clients, she says. “The cliché of the so-called goodold-boy net­work in which male ad­vi­sors

“The cliché of the so-called good-old-boy net­work ... is not far from the truth,” says ad­vi­sor Erin Hil­ton.

take their clients to the bar to drink scotch and make deals while they smoke cigars and pat each other on the back is not far from the truth,” she says. “I am just try­ing to peek my head into the good-old-boy world.” Reshell Smith, who now owns her own in­de­pen­dent prac­tice in Or­lando, Florida, de­scribes how male col­leagues at a prior job used to go deep-sea fish­ing on Satur­days. “Women were not go­ing on that,” she says. “We just weren’t in­vited.” As a black woman, Smith says that when she at­tends in­dus­try con­fer­ences, she of­ten goes with the ex­pec­ta­tion that “I am go­ing to be the only one in the room.” Like Hil­ton, she too has learned how to golf — it’s cru­cial to net­work­ing in Florida, she says — but she also puts her own spin on at­tract­ing clients. She hosts “Money and Moscato” wine tast­ings, which tend to at­tract more women clients. It’s harder to reach prospec­tive male clients, she says, be­cause she doesn’t fit the typ­i­cal im­age of an ad­vi­sor. “You would ex­pect that the fi­nan­cial ad­vi­sor is go­ing to be a white male,” she says. “If there’s a choice, I do be­lieve you’re go­ing to choose a white male. That’s what you’re fa­mil­iar with. That’s what you know.”

10. Ac­counts may be passed down dif­fer­ently.

In some busi­ness mod­els, such as bro­ker­ages, it may also be harder for women to have clients passed down from re­tir­ing ad­vi­sors. In 2002, 17 women filed a class-ac­tion suit against Amer­i­can Ex­press Fi­nan­cial Ad­vi­sors, al­leg­ing wide­spread sex dis­crim­i­na­tion, in­clud­ing that the most lu­cra­tive ac­counts were dis­pro­por­tion­ately al­lo­cated to men, whether they were new or passed down from de­part­ing bro­kers. The firm agreed to a $31 mil­lion set­tle­ment and a con­sent de­cree that re­quired the com­pany to cre­ate a gen­der-neu­tral sys­tem for al­lo­cat­ing ac­counts to ad­vi­sors. Some­times, pro­cesses can be un­fair, and at other times, sub­tle un­con­scious bi­ases are at play, Mc­quig­gan says. “Who gets placed on which teams? Who gets ac­cess to which ac­counts? Who gets to sit where on a cer­tain floor? Who gets to pick the in­bound calls of the day?” she asks. “I do think there are some sub­tle in­equities, not at all firms, but if you peel back the onion and look at in­ter­nal pro­cesses and sys­tems, we find there are still pro­cesses and ways that firms could be more con­scious in what op­por­tu­ni­ties are given to what per­son,” she adds. Some fe­male ad­vi­sors are op­ti­mistic that the fee-only move­ment and em­pha­sis on the fidu­ciary stan­dard could en­cour­age more gen­der par­ity in the fu­ture. “Our in­dus­try is mov­ing more and more away from com­mis­sions and to­ward fee-based plan­ning, and this could be the wave that catches up women more and al­lows them into the in­dus­try,” says Renée Snow, chair­woman of the fi­nan­cial plan­ning pro­gram at UCSC Ex­ten­sion Sil­i­con Val­ley, the pro­fes­sional ed­u­ca­tion arm of the Uni­ver­sity of Cal­i­for­nia, Santa Cruz. “I’m glad that the in­dus­try is mov­ing away from a sales men­tal­ity, which is not nec­es­sar­ily in the client’s best in­ter­est. I think women are go­ing to do very well in that en­vi­ron­ment,” she says. Mc­quig­gan also notes two other things that might help: More firms are en­gag­ing in in­ter­nal pay eq­uity au­dits, and laws in some ju­ris­dic­tions are mak­ing it il­le­gal for em­ploy­ers to ask about com­pen­sa­tion his­tory. “We’ve had this vi­cious cy­cle,” she says. “But I think those things are lev­el­ing the play­ing field.”

“You would ex­pect that the fi­nan­cial ad­vi­sor is go­ing to be a white male,” says ad­vi­sor Reshell Smith.

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