Asset Management Reward Survey 2009* Overview
Introduction Financial and demographic trends Incentive practice Governance Appendix – Illustrative survey outputs Contacts 5 7 17 29 35 37
Contents PricewaterhouseCoopers LLP
In September 2009 PricewaterhouseCooperscompleted its fourth comprehensive survey into the reward and retention arrangements used by asset management organisations to compensate and incentivise senior executives and key employees. Following the success of the first three surveys, this year 23 high quality asset management organisations took part in the PwC Asset Management Survey 2009 which involved both the completion of a quantitativedata template and an interview programme so that both retrospective and prospective activity could be captured. Q4 of 2008 proved to be challenging for many asset management businesses with poor absolute returns combining with both heavy redemptions and currency swings to impact revenues for many UK and European businesses. Although we have witnessed some signs of recovery since then, the downturnhas taken its toll with many organisations reducing staff numbers and cost controls replacing investment in both business opportunities and human capital. Not withstanding the commercial strains faced, there have been unprecedented levels of scrutiny from regulators, governments, shareholders, and the public who have all sought to attach some blame for the financial crisis to inappropriate incentivepractices in financial services. This has resulted in a number of pronouncements and we have summarised those most relevant to the sector. In the Governance section of the report we cover country specific responses. On 2 April 2009 the Financial Stability Board (FSB) published its principles for sound compensation practices which have been endorsed by the G20 leaders at their recent summitin London. Regulators around the world are looking to introduce codes of practice. The FSA became the first regulator to do so on 12 August 2009. Asset management organisations will be affected by tax changes, in particular in the UK and the Netherlands, where new rates of tax have been introduced for high earners.
One of the biggest challenges facing asset management is that much of thecriticism and subsequent measures are non-discriminatory. While it is accepted that much of this is aimed at banking organisations, many observers view the financial industry through the same lens. We are now in a situation where HR and management teams are grappling with unprecedented regulation at a time when they are faced with continually communicating difficult messages around pay and bonusreviews. At the same time they are under pressure from shareholders and remuneration committees to improve on reporting and transparency and tasked with developing strategies for dealing with complex changes to tax rules - all in an environment where market normality is practically non-existent making benchmarking exercises more challenging than ever before.
Introduction PricewaterhouseCoopers LLPPage 5
Each participant received a bespoke survey report. The purpose of this report is to provide organisations who did not take part in the 2009 survey with an insight into the exercise. We are unable to present the actual benchmarking results, but we have provided an illustration of the outputs that were generated for each role along with high level finding from the survey, including: information around financial and demographic trends including data on compensation cost ratios, changes in overall spend, headcount movements, salaries and variable pay practices; incentive practices including annual bonus policies, deferral programmes and long term incentive arrangements for different employee groups together with a look forward to likely future changes; and governance...