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Will higher wealth manager base salaries drive the right behaviours?

by Elsa Buchanan on Apr 24, 2014 at 08:48

Dan Macey, an associate director at Suffolk Lane Search, a recruitment firm for private client businesses, said that while managers were receiving share options or allowances instead of bonuses, not all firms have resorted to paying higher basic salaries.

‘Some firms are picking up the basics, but not as many as people like to think. The levels of remuneration that I’m seeing have not really changed.

‘A banker that was earning £80,000 basic last year is not earning £150,000 basic now – that’s just not happened.’

While Macey takes the view that higher basic salaries alone ‘are not really the answer’, Gary Stockdale, co-founder and head of research at Vertem Asset Management said there is nothing wrong with the bonus structure if it encourages positive long-term behaviours.

Stockdale, who formerly worked at Barclays Wealth and Brewin Dolphin, said the issue is that bonuses have typically crystallised too quickly.  ‘I’m in favour of bonuses that are paid on a sensible long-term formula. As for other incentives like [allowances, or] shares, the same applies: I think it is a good thing, as you get ownership of the business employees work for.’

Conversely, he is concerned about the fallout of higher salaries in the sector. ‘Is it better to have lower base salaries with more controlled bonus or allowance structures? Yes, just fixed in time and knowing how long you can retain your bonus. It’s dangerous if you get large fixed salaries, because it brings an incentive to leave [the firm].’

‘Locking everyone into a salary straitjacket and giving no flexibility to adjust back on a downturn is crazy.’

His solution? ‘Go back to lower salaries and add long-term bonuses.’ For this, however, he says the trade bodies need to get together and bring the case to the FCA in a ‘coordinated approach’.

‘Don’t go down the route of the scaremonger, where there’s a fear of losing all your bankers, and blackmail the FCA, but tell the regulator there is nothing wrong with being rewarded for doing the right thing,’ he added.

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