Part two of our 15th annual report on leadership and compensation trends for the asset and wealth management industry. This piece summarizes the most salient findings from a quantitative benchmarking survey on compensation conducted by our team across October and November 2011. The report looks at 29 firms’ views and practices regarding bonus pools and base salaries, as well as other compensation-related components such equities, deferrals and clawbacks.
The Study in Nine Findings
• 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.
• Finding 2: 2011 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 Distribution/Marketing professionals. 52% of respondents expect bonuses to rise for this group.
• Finding 3: Compensation Distributions Holding Firm
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
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
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 39% 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
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
• 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.
• 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.
• 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.
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Leadership for a Changing World. In today’s global business environment, success is driven by the talent, vision and leadership capabilities of senior executives. Russell Reynolds Associates is a leading global executive search and assessment firm with more than 300 consultants based in 40 offices worldwide. Our consultants work closely with public and private organizations to assess and recruit senior executives and board members to drive long-term growth and success. Our in-depth knowledge of major industries and our clients’ specific business challenges, combined with our understanding of who and what make an effective leader, ensures that our clients secure the best leadership teams for the ongoing success of their businesses. www.russellreynolds.com
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