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.