Bonuses to fall in private banking and fund management
Bonuses in fund management and private banking this year are likely to be 15% to 25% lower than last year in the US and Europe, a survey by the headhunter TMP Worldwide says.
This follows a drop of 25% to 30% in last year's bonuses from record-breaking levels in 2000. The cuts will be biggest in firms that have failed to cut costs aggressively, or which are part of diversified companies that have not segregated bonus pools from other business lines, the survey says.
But there will be large variations. A few firms with a successful product or market focus will pay higher bonuses than last year, while in other cases some staff will receive no bonus at all.
Adam Green, a partner at TMP Worldwide who deals with private banking, says firms that offer a sophisticated mix of offerings, often including property, hedge funds and capital-protected products, look well placed to pay reasonable bonuses. Those relying more on equities are often in a weaker position.
Investment management staff in continental Europe are likely to suffer smaller cuts than UK staff, mainly because of the heavy fixed-income focus on the continent.
'The consensus, in most but not all cases, is that continental Europe and Asia outperformed investment management businesses in the US and UK,' the report says.
Another consistent theme was that firms with a strong distribution channel or a focus on wealthy individuals fared better than institutionally oriented firms. They were therefore able to pay staff relatively well.
In evaluating staff, many firms now looked at net sales, profitability and shareholder value added. This was a contrast to the bull market, when gross sales alone were often regarded as an adequate performance gauge.
The survey found that salaries of private wealth management division heads in the US ranged between $300,000 and $750,000, while 2002 bonuses would be between $675,000 and $1.2m.
Their UK counterparts averaged considerably less, at $240,000 to $400,000 in salary and $200,000 to $475,000 in bonus. Pay in Switzerland at a Swiss private bank was lower still at $125,000-$175,000 in salary and $1450,000-$210,000 in bonus.
Firms generally had frozen base salaries in 2002 at last year's levels, especially for senior staff.
The survey said this year's cuts in bonus could come as surprise to many employees, in spite of the gloomy economic climate. "There is a lot of denial out there," it quoted a human resources executive at a large diversified bank as saying.
"The people who are left are saying 'Gosh, I'm working harder than ever', but are failing to realise business conditions have changed."
