Asset & Wealth Management Compensation Pulse Survey Results · 2015-06-19 · Asset & Wealth Management Compensation Pulse Survey Results | 2011 2 The Study in Nine Findings • Finding

2011 Asset & Wealth Management Compensation Pulse Survey Results

© 2011 Russell Reynolds Associates, Inc. Russell Reynolds is a trademark of Russell Reynolds Associates, Inc.

Given the immense volatility in the markets, never has the desire to optimize compensation been higher amongst asset and wealth management firms. Nor has speculation and myth-trafficking around this subject been greater.

In response, Russell Reynolds Associates put forth a modest goal: to provide a clear-eyed, data-driven view of the compensation realities in the industry. Across the months of October and November 2011, we surveyed nearly 30 firms to gather their perspectives and practices across the most critical aspects of compensation—from base pay to bonuses to clawbacks. It was an effort driven by the facts as we see them, not prediction based on speculation. In addition, we should note that the end result does not aim to be comprehensive or exhaustive. Rather, it aims to provide a valuable set of directional benchmarks to support the challenging compensation decisions our clients must make.*

We would like to extend a special thanks to the twenty-nine firms who devoted meaningful time and thought to the completion of the survey that served as the basis for the this report. We are deeply grateful for their participation.

We hope you find the information useful and look forward to working with you across the year.

—The Russell Reynolds Associates Asset and Wealth Management Team

* Note: This report is one component of a two-part series. The other piece, titled “Seizing the Moment: Building Tomorrow’s Winning Asset & Wealth Management Leadership,” provides a qualitative review of industry trends based on hundreds of conversations with industry leaders across the year. That document can be found here: http://www.russellreynolds.com/content/asset-and-wealth-management-leadership-trends-2011.

A Letter of Thanks From Our Team

Asset & Wealth Management Compensation Pulse Survey Results | 2011

Table Of Contents

The Study in Nine Findings ...................................................................................................................... 2

• Finding #1: Bonus Pool Predictions Less Pessimistic Than Expected ................................................... 3.

• Finding #2: 2011 Bonus Pool Predictions Fairly Consistent Across Functions; Distribution/Marketing A Notably Positive Exception .......................................................................... 4

• Finding #3.: Compensation Distributions Holding Firm ........................................................................ 5

• Finding #4: Base Pay Gaining Share Broadly, But Modestly ................................................................ 6

• Finding #5: Equity Bonuses Still (Somewhat) Uncommon, But Material When Applied ...................... 7

• Finding #6: Cash Bonus Deferrals Now in Place at Fully One-Third of Responding Firms .................. 8

• Finding #7: Vesting Schedules Remain Static ....................................................................................... 9

• Finding #8: Clawback Provisions Emerging, But Still Rare ................................................................. 10

• Finding #9: Predictions on 2012 Workforce Growth Uneven and Unexpectedly Positive ................. 11

Survey Methodology and Respondent Demographics .......................................................................... 12

Russell Reynolds Associates’ Asset and Wealth Management Team .................................................... 13.


2

The Study in Nine Findings

• Finding #1: Bonus Pool Predictions Less Pessimistic Than Expected (page 3) Despite the challenging economic environment, almost half of respondents report that bonus pools will not shrink in 2011. In addition, nearly one third indicate that bonus pools will actually increase.

• Finding #2: 2011 Bonus Pool Predictions Fairly Consistent Across Functions; Distribution/Marketing A Notably Positive Exception (page 4) Across job categories, bonus pool predictions fall into line with overall (tepid-to-negative) predictions, with the notable exception Distribution/Marketing professionals. 52% of respondents expect bonuses to rise for this group.

• Finding #3: Compensation Distributions Holding Firm (page 5) Across job categories, bonus/base as a share of total compensation continues to match historical expectations and averages.

• Finding #4: Base Pay Gaining Share Broadly, But Modestly (page 6) Nearly two-thirds of respondents report that base pay increased as a percentage of total compensation in 2011; that said, this relative increase was characterized as modest in the vast majority of cases.

• Finding #5: Equity Bonuses Still (Somewhat) Uncommon, But Material When Applied (page 7) A meaningful minority of respondents plan to pay a portion of compensation in the form of equity, especially for senior executives and investment professionals. Further, firms that now pay a portion of bonuses in equity tend to do so materially. For example, equity bonuses at these firms average 3.9% of total compensation for senior executives. Finally, equity bonuses are 100% deferred in nearly all cases.

• Finding #6: Cash Bonus Deferrals Now in Place at Fully One-Third of Responding Firms (page 8) Cash-bonus deferrals are still relatively rare but not altogether uncommon. Across job categories, a small-but-meaningful share of firms apply deferrals to cash bonuses. Fully one-third of respondents report deferring some portion of cash bonuses, with deferral amounts typically representing a material share of cash bonuses.

• Finding #7: Vesting Schedules Remain Static (page 9) Among firms applying deferrals, vesting schedules remain largely unchanged. Across our respondent base, only 5% have altered their vesting schedules.

• Finding #8: Clawback Provisions Emerging, But Still Rare (page 10) While a clear majority of firms have yet to apply compensation clawback provisions, a meaningful minority (28%) of respondents have now implemented clawbacks.

• Finding #9: Predictions on 2012 Workforce Growth Uneven and Unexpectedly Positive (page 11) Firms expecting workforce growth in 2012 significantly outnumber firms expecting workforce decreases. 3.9% of respondents expect their workforces to grow next year, while 17% expect their workforces to decrease. 44% expect no change in the size of their workforces.

3

2011 Bonus Pool PredictionsResponse to Question: “For the firm overall, how do you expect the 2011 bonus pool to compare to 2010?”

16%

32%

52%Increase

Decrease

Flat

Nearly 70% of firms expect bonus pools to decrease or remain flat…

… yet 32% of firms expect bonus pools to grow

Finding #1—Bonus Pool Predictions Less Pessimistic Than Expected

Despite the challenging economic environment, almost half of respondents report that bonus pools will not shrink in 2011. In addition, nearly one third indicate that bonus pools will actually increase.

Source: Russell Reynolds Associates 2011 Asset & Wealth Management Compensation Survey; Russell Reynolds Associates analysis.

n=25

Senior Executives

CIOs

Equity Investment Professionals

Fixed Income Investment Professionals

Alternatives Investment Professionals

Distributio

n/Marketin

g Professionals

Other Professionals (Operatio

ns, HR, etc.)

2011 Bonus Pool Predictions by FunctionResponse to Question: “For the following job categories, how do you expect the 2011 bonus pool to compare with that of 2010?”

0%

10%

20%

30%

40%

50%

60%DecreaseIncrease

Flat

52% of respondents expect bonuses to rise for Distribution/Marketing professionals.

31% 31%

38%41%

36%

23%

39%

35%

26%

40% 40%

20%

41%

29% 29%

52%

20%

28%

35% 35%

31%


4

Finding #2— Bonus Pool Predictions Fairly Consistent Across Functions; Distribution/Marketing a Notably Positive Exception


Across job categories, bonus pool predictions fall into line with overall (tepid-to-negative) predictions, with the notable exception of Distribution/Marketing professionals. 52% of respondents expect bonuses to rise for this group

n=17-26

2011 Compensation DistributionsAmong Firms That Do Not Offer Equity Bonuses

0%

10%

20%

30%

40%

50%

60%

70%

80%

30%

70%

42%

58%

39%

61% 65%

35%

SeniorExecutives

InvestmentProfessionals

DistributionProfessionals

OtherProfessionals

Cash Bonus

Base

5

Finding #3—Compensation Distributions Holding Firm


Across job categories, bonus/base as a share of total compensation continues to match historical expectations and averages.

n=15

Predicted Increase/Decrease in Base Pay As A Percentage of Total CompensationResponse to Question: “For the firm overall, did you increase or decrease base pay as a percentage of total compensation in 2011?”

0%

10%

20%

30%

40%

50%

60%

SignificantIncrease

4%

SomeIncrease

58%

NoChange

38%

SomeDecrease

0%

SignificantDecrease

0%

A clear majority of firms plan to increase base pay as a percentage of total compensation, but nearly all increases are expected to be modest.


6

Finding #4—Base Pay Gaining Share Broadly, But Modestly


Nearly two-thirds of respondents report that base pay increased as a percentage of total compensation in 2011; that said, this relative increase was characterized as modest in the vast majority of cases.

n=26

Percentage of Respondents using Equity Bonuses for Specific Groups

33%

43%

21%27%

SeniorExecutives



OtherProfessionals

0%

10%

20%

30%

40%

50%

39%

40%

21%

…EquityBonus

…CashBonus

…BaseSalary

31%

30%

39%

13%

62%

25%

13%

29%

59%

Among Firms Using Equity Bonuses, Average

Percentage of Total Compensation Paid As…

7

Finding #5—Equity Bonuses Still (Somewhat) Uncommon, But Material When Applied


A meaningful minority of respondents plan to pay a portion of compensation in the form of equity, especially for senior executives and investment professionals.

Firms that now pay a portion of bonuses in equity tend to do so materially. For example, equity bonuses at these firms average 39% of total compensation for senior executives.

n=15

n=3-6

Percentage of Companies Deferring A Portion of Cash Bonuses for Specific Groups

35%

23%

SeniorExecutives



OtherProfessionals

0%

10%

20%

30%

40%

50%

33% 33%

20-50% 10-30% 10-30% 10-20%

Among Firms Deferring A Portion of Cash Bonuses,

Range of Percentage of Bonuses Deferred:


8

Finding #6—Cash Bonus Deferrals Now in Place at Fully One-Third of Responding Firms


Cash-bonus deferrals are still relatively rare but not altogether uncommon.

Across job categories, a small-but-meaningful share of firms apply deferrals to cash bonuses. Fully one-third of respondents report deferring some portion of cash bonuses, with deferral amounts typically representing a material share of cash bonuses.

n=21

2011 Vesting Schedule ChangesResponse to Question: “Have you changed your vesting schedules for deferred compensation?”

0%

20%

40%

60%

80%

100% 95%

0%5%

0% 0%

NoChange

SignificantlyShorter

SomewhatShorter

SomewhatLonger

SignificantlyLonger

9

Finding #7—Vesting Schedules Remain Static


Among firms applying deferrals, vesting schedules remain largely unchanged. Across our respondent base, only 5% have altered their vesting schedules.

n=21

2011 Clawback ProvisionsResponse to Question: “Have you implemented any compensation clawback provisions?”

Source: Russell Reynolds Associates 2011 Asset & Wealth Management Compensation Survey; Russell Reynolds Associates Analysis

28%

72%

Yes

No


10

Finding #8—Clawback Provisions Emerging, But Still Rare


While a clear majority of firms have yet to apply compensation clawback provisions, a meaningful minority (28%) of respondents have now implemented clawbacks.

n=25

44%

17%

39%

2012 Workforce PredictionsResponse to Question: “Do you expect to increase or decrease the size of your workforce in 2012?”

Source: Russell Reynolds Associates 2011 Asset & Wealth Management Compensation Survey; Russell Reynolds Associates Analysis

Decrease

Increase

No Change

11

Finding #9—Predictions on 2012 Workforce Growth Uneven—And Unexpectedly Positive


Firms expecting workforce growth in 2012 significantly outnumber firms expecting workforce decreases. 39% of respondents expect their workforces to grow next year, while 17% expect their workforces to decrease. 44% expect no change in the size of their workforces.

n=23

25%

17%

17%

24% 17%

Asset Management Firm Owned by A Bank or Securities Firm

Asset Management Firm Owned by An Insurance Company

Independent Long-Only Asset Management Firm

OtherHedge Fund

Breakout of Responses by Firm Type

41%

10%

14%

35%

$5 billionto $75 billion

More than $150 billion

Less than $5 billion

$75 billion to $150 billion

Breakout of Responses by Assets Under Management


12

Research Methodology

Sample Questions

• “For the firm overall, did you increase or decrease base pay as a percentage of total compensation in 2011?”

• “For the firm overall, how do you expect the 2011 bonus pool to compare with that of 2010?”

• “Have you changed your vesting schedules for deferred compensation?”

• “Have you implemented any compensation ‘clawback’ provisions?”

• “Do you expect to increase or decrease the overall size of your workforce in 2012?”

Across October and November 2011, Russell Reynolds Associates’ Asset and Wealth Management team conducted a quantitative “pulse” survey of 29 institutions to gather their perspectives and practices across the most critical aspects of compensation.

Russell Reynolds Associates’ Asset and Wealth Management Team

13

Americas

EMEA

Asia Pacific

Gareth Stubbings[Hong Kong]

Toby Crosthwaite[Singapore]

Nicolas Manset[Hong Kong]

Choon Soo Chew[Singapore]

Heidi Mason[Sydney]

Yukihiro Koshiishi[Tokyo]

Deep Gupta[Sydney]

Reina Nicholls[Singapore]

Lynda Wu[Beijing]

René van der Zwaan[Amsterdam]

Mark Unger[Frankfurt]

Claudia Rathgeb[Frankfurt]

Matthias Oberholzer[Zurich]

Amanda Foster[London]

Georgia Rankin[London]

Mat Green[London]

Antje Roth[London]

Lamees Al Ashtal [London]

Shawn Cooper[Toronto]

Richard Perkey[Atlanta]

Kathy Krone[New York]

Lynn Tidd[Boston]

Lyndon A. Taylor[Chicago]

Jeffrey Warren[Los Angeles]

Debra Brown[New York]

Eugenio Riquelme[Mexico City]

Kurt Harrison[New York]

Hannah Brazier[New York]

Jose López[Madrid]

Giulia Belloni[Milan]

Maria Grazia Buttiglieri

[Milan]

Valérie Barthès [Paris]

Paul Jaeger[Paris]

Carl Schander[Stockholm]

Pascal Forster[Zurich]

Monica Lagercrantz[Stockholm]

Dorota Czarnota[Warsaw]

Lisa Baird [New York]

Lívia Duarte[São Paulo]

Renato Furtado[São Paulo]

Pedro Ancarola[Buenos Aires]

Edgar Medinacelli[Buenos Aires]

Guillaume Levi[Hong Kong]

Americas

Atlanta1180 Peachtree St., NE Suite 2250 Atlanta, GA 30309-3521United States of AmericaTel: +1-404-577-3000

BostonOne Federal Street, 25th FloorBoston, MA 02110-1007United States of AmericaTel: +1-617-523-1111

Buenos AiresBuenos Aires Plaza Manuela Sáenz 323 Seventh Floor, Suites 14 and 15 C1107CBP Buenos AiresArgentinaTel: +54-11-4118-8900

CalgarySuncor Energy Centre, West Tower#3000, 150-6th Avenue, S.W.Calgary, AB T2P 3Y7CanadaTel: +1-403-538-1972

Chicago155 North Wacker DriveSuite 4100Chicago, IL 60606-1732United States of AmericaTel: +1-312-993-9696

Dallas8401 N. Central ExpresswaySuite 650 Dallas, TX 75225-4404United States of AmericaTel: +1-214-220-2033

Houston 600 Travis Street, Suite 2200Houston, TX 77002-2901United States of AmericaTel: +1-713-754-5995

Los Angeles11100 Santa Monica Blvd.Suite 350Los Angeles, CA 90025-3384United States of AmericaTel: +1-310-775-8940

Menlo Park2500 Sand Hill RoadSuite 105Menlo Park, CA 94025-7015United States of AmericaTel: +1-650-233-2400

Mexico CityTorre Reforma Paseo de la Reforma 115-1502 Lomas de Chapultepec México 11000, D.F.MéxicoTel: +52-55-5249-5130

Minneapolis/St. Paul225 South Sixth Street, Suite 2550Minneapolis, MN 55402-3900United States of AmericaTel: +1-612-332-6966

New York 200 Park AvenueSuite 2300New York, NY 10166-0002United States of AmericaTel: +1-212-351-2000

San Francisco101 California StreetSuite 2900San Francisco, CA 94111-5829United States of AmericaTel: +1-415-352-3300

São Paulo Edifício Eldorado Business TowerAv. Nações Unidas, 850111º Andar05425-070 São Paulo - SPBrazilTel: +55-11-3566-2400

Stamford301 Tresser BoulevardSuite 1210Stamford, CT 06901-3250United States of AmericaTel: +1-203-905-3341

Toronto Scotia Plaza, Suite 3410 40 King Street West Toronto, ON M5H 3Y2 CanadaTel: +1-416-364-3355

Washington, D.C.1701 Pennsylvania Avenue, NWSuite 400Washington, D.C. 20006-5810 United States of AmericaTel: +1-202-654-7800

Asia/Pacific

BeijingUnit 3422 China World Tower 1No. 1 Jian Guo Men Wai AvenueBeijing 100004, China+86-10-6535-1188

Hong KongRoom 1801, Alexandra House 18 Chater Road Central Hong Kong China Tel: +852-2523-9123

MelbourneLevel 51, Rialto Towers525 Collins StreetMelbourne VIC 3000AustraliaTel: +61-3-9603-1300

Mumbai Unit 9(A), Grand Hyatt Plaza Santacruz (East) Mumbai 400 055India Tel: +91-22-6733-2222

New Delhi203, Eros Corporate TowerNehru PlaceNew Delhi 110 019India Tel: +91-11-4603-4600

ShanghaiRoom 4504, Jin Mao Tower 88 Century Avenue Pudong, Shanghai 200121 China Tel: +86-21-6163-0888

Singapore2 Shenton Way#08-01 SGX Centre 1Singapore 068804SingaporeTel: +65-6225-1811

SydneyLevel 40, Aurora Place88 Phillip StreetSydney NSW 2000AustraliaTel: +61-2-9258-3100

TokyoIzumi Garden Tower 14F1-6-1 RoppongiMinato-ku, Tokyo 106-6014JapanTel: +81-3-5114-3700

Europe

AmsterdamWorld Trade CenterTower H, 18th FloorZuidplein 1481077 XV AmsterdamThe NetherlandsTel: +31-20-305-7630

BarcelonaEdificio PrismaAvda. Diagonal, 613, 2˚A 08028 BarcelonaSpainTel: +34-93-494-9400

BrusselsBoulevard St.-Michel 27B-1040 BrusselsBelgiumTel: +32-2-743-12-20

CopenhagenØstergade 1, 1st FloorDK-1100 Copenhagen KDenmarkTel: +45-33-69-23-20

FrankfurtOpernTurmBockenheimer Landstr. 2-460306 FrankfurtGermanyTel: +49-69-75-60-90-0

HamburgStadthausbrücke 1-3/Fleethof20355 HamburgGermanyTel: +49-40-480-661-0

LondonAlmack House28 King StreetLondon SW1Y 6QWUnited KingdomTel: +44-20-7839-7788

MadridCalle Miguel Angel, 11Seventh Floor 28010 Madrid SpainTel: +34-91-319-7100

MilanVia Mascheroni, 5 20123 MilanItalyTel: +39-02-430-0151

MunichMaximilianstraße 12-1480539 MünchenGermanyTel: +49-89-24-89-81-3

Paris7, Place Vendôme75001 ParisFranceTel: +33-1-49-26-13-00

StockholmHamngatan 27SE-111 47 StockholmSwedenTel: +46-8-545-074-40

WarsawBelvedere Plazaul. Belwederska 2300-761 WarsawPolandTel: +48-22-851-68-38

ZürichLöwenstrasse 28CH-8001 ZurichSwitzerlandTel: +41-44-447-30-30

©2011 Russell Reynolds Associates, Inc. Russell Reynolds is a trademark of Russell Reynolds Associates, Inc. 11AWM2

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Asset & Wealth Management Compensation Pulse Survey Results · 2015-06-19 · Asset & Wealth Management Compensation Pulse Survey Results | 2011 2 The Study in Nine Findings • Finding