Same work, huge gender pay gap at banks and credit unions

A woman who is a director in a bank or credit union-based wealth management business earns about $65,000 less than a man with similar tenure, qualifications and duties, a new study found.

In terms of statistical significance, the director's gender displayed almost as much correlation to pay disparity as the number of branches at the bank or credit union, the age of their compensation plan, whether they oversee sales managers or got hired from another firm or promoted from within and, at 90%, the same importance as the amount of financial advisors under their supervision, according to research released last month by Kehrer Group, a consultancy focused on investment services businesses at banks and credit unions of all sizes. Kehrer Group tested nearly 40 other factors that didn't show as much of a correlation as gender.

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The finding came just before fresh research suggesting women will inherit tens of trillions of dollars in assets from their spouses in coming decades — adding to the business reasons for industry efforts to recruit and retain female financial advisors alongside the moral case for reforming the "old boys club" culture of the industry. And, in recent years, the bank and credit union-based channel of wealth management has turned into a key recruiting segment among the largest independent brokerages such as LPL Financial, Osaic and Ameriprise. Advisor teams based in branches have proven pivotal to wirehouses and other megabanks as well.

The pay gap was "maybe not surprising, but disappointing," said Kehrer Group co-founder Ken Kehrer.

"When I shared this with some women directors, they weren't surprised. It's a longstanding issue in society," Kehrer said. 

He noted that the data presents a professional development problem for bank and credit union-based wealth management businesses seeking to convince top-performing women advisors to advance to supervisory roles after generating "compensation with lots of zeros" in their current positions. 

"People tend to have a feeling of wanting to move up into management," Kehrer said. "And the question is, 'Well, should you?'"

Kehrer's first-of-its-kind data from a survey of 55 directors who are comparable to supervisors in the position of branch manager or above in the rest of the wealth management industry reflects gender-based compensation disparities among advisors and, in fact, most professionals. 

Women who are "personal financial advisors" got about 75 cents on the dollar compared to men in median weekly earnings in 2023 and $27,560 less in annual pay, according to the U.S. Bureau of Labor Statistics. With a count of 412,000 such professionals in the country, the federal government's data classified about 100,000 more people as financial advisors than the general industry figure of around 300,000. 

At a tally of 37% female, the data also presented a much higher proportion than industry sets in which fewer than a quarter of certified financial planners are women, or others estimating they represent an even smaller share of advisors. However, the larger gender pay gap among the bank-based directors jibes with a general trend across all industries called out last year on Equal Pay Day by the Bureau: the fact that the gender-based disparity "generally is larger in occupations with higher median earnings."

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Apart from all-too-common allegations of sexual harassment or assault, many veteran advisors who are women can tell stories of double standards that dissuade prospective female professionals from working in wealth management and present barriers to their growth. The Kehrer Group study findings reminded Cary Carbonaro, a managing wealth advisor and the women and wealth ambassador in the New York office of Ashton Thomas Private Wealth, of receiving a lower starting salary for a management training program when she began her career at a large bank, she said. 

The data points to the need for mentor-sponsors in the profession who will "talk about you when you're not in the room," according to Carbonaro. In addition, it underscores a divergence in treatment between men being "looked at as competent, aggressive and someone you want on your team" when they negotiate for a higher salary, compared to a woman being "looked at as the b-word" for doing the same thing, she said.

"I don't look at it as a DEI issue. For me, it's a dollars-and-cents issue. It's, 'Do you want to capture this multitrillion-dollar marketplace,'" Carbonaro said. "We were all supposed to be equal, coming in the same. And I know for a fact that the guys made $3,000 more than the girls."

In the Kehrer Group survey, the gender gap among bank and credit union-based directors held true even when controlling for differences in tenure, professional designations, number of branches and how long they had their current compensation plan, according to Kehrer. Without adjusting for any of those factors, the women directors earned an average of $240,022, while their male counterparts took home $343,814. 

"The women directors earn 30% less than the male directors," the firm's director compensation study said. "But the women directors tend to work in credit unions and smaller firms."

There were no women among the directors that had the highest average pay, those managing more than 50 advisors. Interestingly, the study found the largest gender pay gap in bank and credit union wealth businesses with up to seven advisors; the smallest disparity at programs with eight to 24 of them; and an amount similar to the overall average at those that had 25 to 50.

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At least among bank and credit union-based directors, the results indicate that directors of any gender will make more money by going to a larger firm or an institution that is making acquisitions, Kehrer said. The data don't show much in the way of incentives for that group of managers to stay at the same firm or seek a professional designation, he noted. That is disturbing when considering that the directors are "the person in the bank or credit union who the bank says is running this business," Kehrer said.

Regardless, the survey highlights the need for further study after the firm's first compensation survey.

"We're a believer that, if things are more transparent, then markets are more efficient," Kehrer said. "Employers don't like to overpay, and employees and the directors don't want to be underpaid. But, if you have some basis for figuring that out, things work better."