The analysis suggests that 91% of the 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 pay gap of 1.8%.
Co-author D. Allen Ammerman of West Texas A&M University said in an e-mail that he thinks the study results suggest “there's equal opportunity for male and female advisors to make a nice living. Career choices and preferences may affect compensation, but gender directly (in the sense of gender-based discrimination) probably doesn't, at least not significantly.”
Tharp stressed the study was not discounting that discrimination could play some role in the pay gap. He pointed to a particular passage in their working paper that addresses some of the many ways that it could be relevant:
"Discrimination could be present in various other forms, including, to name a few, discrimination during the stages of developing human capital (e.g., education and training), consumer discrimination, discrimination via social mechanisms which influence workplace preferences, discrimination in hiring or promotion, and/or the presence of a hostile work environment that is not equally open to individuals of all backgrounds."
In looking at discrepancies between this and other studies, Kitces noted in an e-mail that prior studies finding a huge gender wage gap in financial services weren’t sufficiently controlling for other factors that this research did take into account, particularly with respect to the years of experience and the kinds of jobs that men and women take in the industry.
This new study suggests that men may choose more variable-compensation-based paths, while women appear more likely to choose stable-income/salary-based paths, Kitces said, and “that 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.”
Still, though, Kitces continued, 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.
Kitces said that those differences could relate to opportunities for men vs. women in the past. For example, while women receive similar pay to men for similar work, they may not have had as many hiring opportunities to move into client-facing advisor roles or could have been limited by family responsibilities that traditionally fall disproportionately to women. It could also be that firms have not provided sufficient support to women. Kitces noted independent advisors who are women tend to have no maternity support.
Annual income was the dependent variable in the study, and advisors who reported individual income of more than $1.5 million were excluded. The study looked at several independent variables, including advisors’ CFP designation status, experience, business role within the advisory firm, team structure, hours worked, revenue from clients an advisor worked with or was responsible for, psychological motivators for choosing a financial services career and marital status.
The study found that for male advisors, the characteristics that were statistically significant in relation to income were their marital status, experience, role, team structure, work hours, revenue and psychological motivators. For example, being single was negatively associated with income, while experience was a positive. Having four years or less of experience was negatively associated with income, while having 20 to 30 years was a positive. Working as a solo advisor was a negative as well as working longer hours, but revenue was a positive. Performance pay was also a strong motivator for men.