UK Investment Banks, Front Office And Asset Management Salaries by Michael Page
As we approach 2016 we look back on a 2015 which was, as predicted, a somewhat difficult year: for the UK, a decisive election result steadied the City’s nerves but a very mixed global economic outlook, particularly given China’s slowing growth and continuing depressed commodities prices, combined with increased regulation to slow the growth in hiring, particularly in front office / origination roles. This was despite a overall positive outlook for Financial Services in the UK and the City of London, in particular.
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Increased regulation has continued to see sustained growth in the number of governance / compliance and risk roles being created across all areas from Investment Banks, Corporate Banks and Asset Managers. This growth in non-revenue generating roles has resulted in an increased burden of cost that the front office teams have to mitigate in terms of increased revenue, all at a time when the bank’s risk appetite is more limited and margins are being squeezed.
In the mid-market lending space, the shift from bank’s corporate and leveraged lending towards debt funds is looking to be a sustained, permanent shift, which will result in a very different landscape in this space. Looked at in combination with the exit from M&A of many mid-market banks, with the gap in the market being taken up by corporate finance boutiques, then we see a potentially generational move away from ‘big co’ to ‘small co’ in all but the largest transactions.
The crowd-funders continue to be high-profile in the SME lending market but there remain question marks over sustainability of the funding model with many relying on institutional investors to be viable, and the ultimate profitability of the business model unproven.
So how does this affect compensation?
Generally speaking in banks we are anticipating bonus pots to be down 30% on last year with the best employees taking home the same as last year, leaving the least favoured penalised twice, with both the reduction in bonus pot and the need to keep the top performers happy meaning some will see a more than 50% reduction. Very few will see an increase in bonus.
Consequently the focus on hiring only the ‘best in the market’ is a strong one, equalled only by teams desire to retain their top performers although, typically, this desire often only manifests itself when counter-offering a departing candidate.
At Analyst 2 to Associate 3, there remains a scarcity of candidates, particularly for bulge bracket banks in their M&A, DCM and Leveraged Finance teams where the work / life balance remains very poor, despite external pressure to the contrary.
At an Exec level (director and above) many teams have bolstered their origination teams in terms of quality, if not always increased headcount; popular sectors include industrials, TMT (technology in particular), consumer and FIG. This is across the corporate and investment banking spectrum. The increasing focus on having more female candidates at a mid and senior level has benefited us and our target to increase the number of female candidates on short lists for retained search: Page Group is a member of the ‘30% Club’ and has been recognised with industry awards for it’s own diversity initiatives including ‘Woman at Page’.
With many banks including Deutsche, RBS, Standard Chartered and Unicredit on record as planning large-scale cost-cutting and restructuring, 2016 will be a difficult year for many. However, this is not the whole story, and with many new entries to the market from challenger banks, debt funds and Asian financial institutions looking to start up in London, we remain positive that there will be opportunities for many in 2016.
Hot topics in 2015/2016
PageGroup strive to reflect diversity at all levels and is proud of many of its initiatives including:
- Global Mentoring Programme: we currently mentor 80+ female PageGroup staff members in the UK.
- Benchmarking: we were awarded Silver in the ‘Opportunity Now’ benchmarking awards for our work around gender diversity in the UK.
- The 30% Club: we have been added to the list of signatories for The 30% Club Voluntary Code of Conduct for Executive Search Firms. The purpose of The 30% Club is to encourage businesses to increase the percentage of women on corporate boards to at least 30%.
- We are finalists for ‘Best Diversity Initiative’ Award by CIPD “ People Management Awards
- We won the Global Diversity award 2014 and were highly commended for the ‘Working Families Award’ 2014 from enei.
- We received a Commendation Award from Top Employers for Working Families for the ‘Best for all stages of motherhood’ Award.
- We have been shortlisted for Personnel Today’s ‘Diversity & Inclusion’ Award 2014.
- We have been awarded The Payroll Giving Platinum Award by the Charities Aid Foundation in recognition of our commitment to fostering a culture of philanthropy and committed giving in the workplace.
Developing Future Leaders
As an employer, leadership development is crucial for your organization and is a key aspect of management that all employers must engage in. Without effective leadership development practices in place, your organization may well be facing an uncertain future, as key skills are lost and invaluable experience fails to be shared and passed on.
In a recent article in HR magazine, former Olympic Delivery Authority human resources director, Wendy Cartwright, called for managers to “build foundations early in executive education for our future leaders”.
The following advice highlights some of the key strategies in leadership development once you have hired and identified your own future leaders.
- Business exposure
- Job rotation
- Challenging programmes
- Support systems
- Mentoring and coaching
Bonus Deferrals for Code Staff
Individuals defined as Code Staff or Key Risk Takers are experiencing a significant change in the way they are compensated, with banks and funds implementing the Codes in different ways.
In some banks all of their MDs are considered to be Code Staff, in others a proportion of their MDs and in some banks even some of their Director or ED level staff are considered to be Code Staff.
Bonuses are being deferred from 3 to 7 years (and subject to 10 year clawback provsions), with some banks providing a “role-based allowance” to provide a cushion for the reduction in take home annual compensation.
These allowances can amount to millions of pounds – for instance, Barclays’ new chief executive has been offered an RBA of £1.15m per year.
The PRA has recently issued firm instructions to banks to either stop paying RBAs, or to treat them as bonuses which means they will be limited by the cap, the payments will be deferred over several years, and they will be subject to clawback
In 2016 and beyond this will be a very contentious issue with many senior bankers wondering “is it worth it?” and contemplating moving into investment management roles where annual take-home cash compensation can be higher or contemplating entirely different careers.
See more at: https://www.the-fca.org.uk/remuneration#sthash.Je4KoKXU.dpuf
Corporate and Financial Institutions Coverage
There continues to be a strong demand for relationship bankers with strong market contacts, sector expertise and client relationships. This year we have seen recruitment for relationship managers who specialise in infrastructure, TMT, real estate, FIG and diversified corporates. Stating the obvious, the quieter areas where we have seen banks downsize include oil & gas, metals & mining etc on the industry sector teams and Russia, CIS and CEE on the country teams.
In teams focused on larger corporates or multinationals, investment banking product expertise is becoming increasingly important. In corporate banks we have seen banks looking to combine their corporate coverage and IB coverage in one team.
In mid-market corporate banking teams, strong relationship management, sector knowledge, product knowledge and credit skills remain the key requirements. Bonus levels for top performers in origination teams have remained constant with banks focused on keeping continuity by keeping “the face of the bank”. Mid-performers’ bonus levels have continued to suffer while low performers are regularly “managed out”.
Investment Banks – Financial Institutions Coverage / Solutions
There has been a continued focus on the financial institutions coverage and solutions divisions, with many corporate and investment banks building or upskilling teams with product focused candidates with strong technical skills. Candidates with securitisation/ABS, capital markets, derivatives, rates, DCM and M&A backgrounds are highly sort after for solutions teams. Candidates with banks, insurance and asset management/hedge fund expertise are the most in demand.
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