The financial services sector remains a well-paid industry for top executives, new compensation surveys show.
Compensation levels for investment managers continue to rise as firms compete for talent, according to a new survey from Eager & Associates, Louisville. Salaries and bonuses are up, a function of increased profitability among firms, said David L. Eager, managing partner.
Sales professionals in particular were well paid: their median total compensation was $190,000 in 1994, but many earned more than $500,000.
"The levels of competition for marketing people may appear high by other industries' standards, but the ability of them to add value is tremendous," said Mr. Eager.
One area that should begin catching up is relationship managers, those who service existing relationships, said Mr. Eager. The median compensation for relationship managers was $107,000, and only about 30% of that compensation is incentive-related, compared to nearly half for the sales personnel. The difference seems incongruous, since most firms acknowledge that client retention is increasingly important, said Mr. Eager.
"I would suspect we're going to see a narrowing of that gap," he said. "The position has not yet matured and it is not fully accepted. The experience and caliber of those people may be at a lower level. That is most certainly going to change."
Another difference is found between stock and bond portfolio managers. The median total compensation for equity managers is $340,000, while the median for fixed-income managers is $245,000.
There is an interesting dynamic at work when comparing salaries relative to experience, said Mr. Eager. He note experience does not seem to improve the lot of fixed-income managers by much.
The median base salary for an equity portfolio manager with five to 10 years experience is $115,000; it rises to $165,000 for a stock manager with 11 to 15 years' experience and tops $188,000 for those with 15 years or more. By comparison, a fixed-income manager with five to 10 years earns a base salary of $115,000; one with 11 to 15 years earns $135,000; and one with more than 15 years earn $130,000.
"The level of sophistication in fixed-income managers has advanced so rapidly, and these quantitative techniques have come into place so recently that many older portfolio managers may not be in tune with some of the techniques. So their younger counterparts have comparable value to their counterparts in equity, but their older counterparts don't," said Mr. Eager.
The difference can only partly be explained by the lower revenue produced by fixed income. An earlier study by Eager Associates found the average full-time or equivalent equity portfolio manager produced $3.6 million in revenue for the firm, while and the average fixed-income manager brought in $3.2 million.
The new Eager survey polled 37 investment management firms regarding the compensation levels and incentive package structure and compiled data for 1,900 professionals.
Meanwhile, two other reports looked at various companies and found bonuses continue to be the largest and most volatile part of earnings for chief executives of financial services companies.
KPMG Peat Marwick L.L.P.'s Los Angeles office found bonuses and stock options can make a CEO's total compensation several times larger than his or her base salary. The KPMG survey of 105 financial services companies found the median base salary for a CEO was $700,000 in 1994, but total cash compensation was $1.198 million. The average CEO's compensation was 36% base salary, 25% bonuses and 39% long-term incentives such as stock options.
The median stock option package awarded was worth $2,282,500, or 3.1 times salary.
A survey by Pearl Meyer & Partners Inc., New York, shows bonuses were depressed sharply by last year's ho-hum stock market. The firm reviewed 21 commercial banks, investment firms and insurance companies.
The average cash bonus for financial services company CEOs was $1.3 million in 1994, 27% less than the $1.8 million they received in 1993. The average salary grew 6% - to $729,000. But total compensation (salary, bonuses and stock options) was $4.2 million in 1994, 6% less than in 1993.