People Feature: How pay rules could spur bankers into fund roles
David Ricketts | Associate Editor
Ignites Europe | Financial Times
A raft of new rules designed to overhaul the remuneration of senior staff could work in the fund industry’s favour and help asset managers lure talent from investment banks, experts predict.
The European Banking Authority is expected to give an update later this month on the application of the Capital Requirements Directive to bank-owned asset managers and some independent fund groups.
A bonus cap and other remuneration rules is set to be imposed on certain fund staff members as part of the EBA’s review of CRD IV, which comes into force from January 2016.
Although some funds houses are known to already be looking for ways to avoid CRD IV’s remuneration rules, experts believe the remunerations provision are a boon to asset managers.
Tim Wright, asset management reward leader at PwC, says: “Where certain asset management firms are required to operate pay practices in line with banking regulations, this may result in a greater emphasis on fixed pay relative to variable remuneration.
“[This could be] an approach that may be attractive to prospective employees that are looking for greater certainty in their total compensation package.”
Michael Rüdiger, chief executive officer of DekaBank, one of Germany’s largest retail fund providers, says the changes will lead to an increase in fixed pay in some cases, making it easier for asset managers to tap investment banking professionals.
“When it comes to recruitment or attracting people from capital markets or investment banks, I’m not concerned we will not be able to attract talent,” Mr Rüdiger said at a recent asset management conference.
“The harmonisation of incentive models across the industry does help in this respect.”
Kirstin Duffy, Chief Operating Officer at financial services recruiter BRUIN Financial, says that as salaries have become more “comparable” between asset management and investment banking, sell-side candidates are “now attracted by the benefits of working in asset management”.
She adds: “The last few years have also shown how volatile the investment banking employment market can be, with greater risk of cutbacks and redundancies, while asset management is usually regarded as more stable and secure.”
However, Ms Duffy warns that moving from investment banking into asset management “remains one of the most challenging moves within the sector”.
“A tier-one investment bank will certainly carry weight on a CV, but ultimately it is very much dependent on the firm as to whether they are open to candidates with an alternative background,” she says.
Meanwhile, another reason why investment bankers may be tempted to join the ranks of asset management firms is a healthier outlook in terms of industry profitability.
William Wright, founder and director of think-tank New Financial, says: “A bigger driver could be that the economics of most investment banks have been severely challenged since the financial crisis, while the asset management industry has so far not felt the full force of regulatory pressure.”
A report by New Financial earlier this year revealed that asset managers are on track to earn more than investment bankers by 2016.
Analysis showed that average remuneration per employee at global asset management firms increased by 22 per cent between 2006 and 2014 to an estimated $263,000 (€248,250).
The figure puts asset management pay at almost the same level as investment banking, where employees earn an estimated $288,000 on average, according to the research.
If the upward trend continues, 2016 could be a landmark year for asset management pay.
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