PwC recently published ‘Rethinking reward as asset management moves centre stage’ with a central ethos of: “In an industry where the most valuable and costly asset is its people (representing approximately 60% of total costs), pay structures will have to adapt to match the evolution of the industry.”
We have already seen bonuses tackled and either reduced or structured as part of a rolling multi-year package when, importantly, there is time to make sure that a manager does not pick up a bonus for failing his investors during a specified time period.
And I have no truck with their ‘but it was out of my hands’ argument, where a fund manager will complain that, say, falling oil prices have destroyed their fund’s returns – they are quick enough to take the bonus thanks to the sheer luck of a rising oil price pushing performance up, aren’t they?
One change we have already seen is that salaries have risen to replace lost or lower bonuses but that is just the start.
PwC makes a number of predictions and, alongside arguing the case for long-term incentive plans, one I would draw your attention to is linking pay to customer outcomes: “A stronger link will be created between client outcomes and pay for investment professionals. This will increase alignment with investors and reduce reliance on broader corporate performance over which many employees have limited direct influence.”
