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Will higher wealth manager base salaries drive the right behaviours?

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

Will higher wealth manager base salaries drive the right behaviours?

Wealth management firms are facing rising wage bills at the hands of a buoyant recruitment market and European bonus cap rules.

Base salaries appear to be rising as bonuses have fallen on the back of European-led regulation, but does this tackle the age-old dilemma of encouraging positive behaviours and avoiding conflicts of interest?

Firms are upping their game on the recruitment front. This could be attributed to surprisingly robust markets, alongside an optimism to capitalise on opportunities created by stronger economic growth, the retail distribution review, auto-enrolment and, one would imagine, the Budget more latterly.

This echoes findings from a recent Wealth Manager survey, which showed that 82.3% of an 80-strong sample of investment managers expected their company to increase headcount this year.

In what some describe as a change in culture, bonuses as a percentage of basic salary have moved downwards sharply, said James Brown, senior analyst at Compeer.

Yet the benchmarking group’s annual remuneration survey shows this decrease in bonus payments was largely compensated by a rise in basic salaries, which meant total packages ended up relatively stable year-on-year.

‘There have been many possible reasons [for a fall in bonuses], such as the remuneration code, that impacted on some of the larger wealth managers,’ Brown said.

‘Although bonuses have reduced, that is not to say they have vanished. They remain high in a number of positions.’

Likewise, Wealth Manager revealed that Coutts had slashed bonuses by 40% in recent months, a much higher figure than the 15% fall in bonus payments at parent group RBS.

A source close to the situation said that in one instance, a Coutts employee saw their bonus fall as low as £4,000, significantly below the six-figure sum they had expected. ‘Firms are just increasing the base salary, which is good, but ultimately it’s still driving the wrong behaviour because they are still targeted to sell products in a particular area.

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