Gender Pay Gap in Financial Services Is One of the Widest

CFA Institute’s Bennett says a lack of women in executive roles leads to hidden biases when it comes to promotions

Research shows that women are underrepresented at every level of the financial profession, which is likely leading to one of the highest gender pay gaps compared to other industries.  

According to a recent study from Glassdoor, the insurance and finance industries have two of the highest gender pay gaps after accounting for factors such as age, education, experience, location, occupation, job title and company. Within the insurance industry, the gender pay gap for women in the United States is 7.2%—the second highest gap. And within the finance industry, the gender pay gap for women is 6.4%—the seventh highest gap.

Another report from 24/7 Wall St. that’s based on the U.S. Bureau of Labor Statistics’ release of earnings data from the Current Population Survey for 2014 finds that of the five occupations with the largest gender wage gap, three are in finance: financial managers; securities, commodities, and financial service sales agents; and personal financial advisors.

For financial managers, women’s earnings as a percentage of men’s is 67.4%. For sales agents, women earn 65.1% as a percentage of men’s earnings. Meanwhile, personal financial advisors that are women earn 61.3% that of men in the same occupation.

“We definitely have a pay gap within the industry,” Leah Bennett, cofounder of the CFA Institute’s Women in Investment Management Initiative and vice president of Westwood Trust, told ThinkAdvisor.

Bennett believes part of the reason the pay gap continues to exist in the financial services field is the lack of women in the field overall and the lack of women in executive positions.

Bennett, while she considers herself “very fortunate” to not have experienced pay inequity, decided to start the CFA Institute’s women’s initiative with Margaret Franklin, president of BNY Mellon Wealth Management Canada, because they noticed a gender diversity problem in the industry.

“As our careers have progressed, we see less and less women around us,” Bennett told ThinkAdvisor. 

Bennett, as well as a slew of research, makes the case that there is a link between pay equity and greater gender diversity.

In fact, the Institute for Women’s Policy Research finds that “occupational segregation” is a primary contributor to the lack of significant progress in closing the wage gap.

“Women have made tremendous strides during the last few decades by moving into jobs and occupations previously done almost exclusively by men, yet during the last decade there has been very little further progress in the gender integration of work,” according to IWPR.

According to a CFA Institute report released recently, women are underrepresented at every level of the financial profession.

Compared with their male counterparts, the top female investment professionals only hold 9.8% of chief executive officer roles, 10.2% of chief investment officer roles, 11% of chief financial officer roles, 14.9% of portfolio managers, 15.1% of investment consultants and 17.3% of personal financial advisors or planners. Women are also more likely than men to have jobs that support or service those in investment management (22% for women versus 16% for men).

“Because there are fewer women at the top…because you have a lack of exposure there, there are hidden biases. You tend to promote people that think and look like you,” Bennett said, adding, “because there are fewer women, they tend to get frustrated with the industry. We lose [a lot of] women mid-career.”

Bennett said women in the financial services field often leave mid-career for two reasons: a work-life balance gap that disproportionately affects women and a lack of promotions available to women at the height of their careers.

Internal labor market data from Mercer shows that the exit rates of women in financial services in the mid-part of their careers are not only higher than those of their male colleagues, but also significantly higher than in other industries, according to an Oliver Wyman report “Women in Financial Services.” Female managers, senior managers and executives in financial services are 20% to 30% more likely to leave their employer than their peers in other industries.

“That is what helps perpetuate that wage gap that exists,” Bennett said.

The “Women in Financial Services” report does find that female representation is growing on financial services boards and executive committees globally, albeit slowly.

Globally, women occupied 20% of board level positions at the beginning of 2016, up from 18% in 2013; and 16% of executive committee members are women, up from 14% in 2013. The U.S. is slightly above the global average with 20% of executive committee members in financial services who are women.

“I think all of this is going to take a long time,” Bennett said.

In fact, the World Economic Forum forecasts that it may take 118 years to close the gender pay gap. A bit more promising, the IWPR predicts it will take 44 years—or until 2059—for women to finally reach pay parity.

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