Never have so many institutional investment management marketers competed for so few jobs - at a time when some money management firms are making swift and drastic changes to their compensation packages.
"I've never seen so much top-level talent sitting on the shelf," said James L. Phillips Jr., a partner at Beacon Search Group LLC, New York, an asset management recruitment boutique. The reasons: poor investment returns; plummeting profitability; and deep job cuts.
Among the job-hunters:
- Richard Goldman, who was head of Americas institutional business at Deutsche Asset Management Americas;
- Eric Johnson, who was head of U.S. sales at Alliance Capital Management LP;
- Deborah Boedicker, formerly head of U.S. institutional business development at UBS Global Asset Management;
- Michael Forrestor, who was executive vice president, sales, client service and consultant relations at Fidelity Management Trust Co.;
- Donald Steinbrugge, director of institutional sales at Merrill Lynch Investment Managers in 2001, head of marketing at hedge fund shop Andor Capital Management until last August; and
- Thomas Lucey, who retired in 2000 as senior managing director at Putnam Investments Inc. He's looking for a job that would begin when his non-compete agreement ends in June.
When they land new jobs, these marketers could face compensation arrangements that differ from what they had come to expect.
The industry has been buzzing about PIMCO dropping fixed commissions in favor of a discretionary bonus system, and Lazard Asset Management's move to fixed commissions with a subjective trailer, or payout.
Pacific Investment Management Co., Newport Beach, Calif., is probably changing to a fluctuating rewards system "because they are successful, and commissions are not as important" to motivating sales staff, said Alex Thomson, partner in the Boston of Russell Reynolds Inc.
Discretionary compensation schemes typically have three components: individual performance; group performance; and overall firm profitability, industry sources said.
PIMCO's John Loftus, managing director of head of the domestic marketing group, was unavailable for comment; spokesman James Clarke said it is company policy not to comment about compensation.
Sources with knowledge of New York-based Lazard's compensation policy said the company had offered marketers a fixed trailer payout of 2.5% in perpetuity on assets they brought in. The change was made to give stronger incentives to sales people who also do client service at Lazard, said Robert DeConcini, managing director and head of institutional marketing.
He wouldn't elaborate.
Thing of the past
Some compensation arrangements are changing because with profitability down, huge, guaranteed payouts over time are becoming a thing of the past.
Stephen D. Niss, managing director, J.H. McCann & Co. LLC, Stamford, Conn., said data from interviews with 45 money managers that have more than $100 billion under management showed a "very strong trend away from fixed commission schedules to discretionary bonuses. This is particularly true in organizations where there is a strong client service/retention/asset gathering component in the job of the sales professional."
Mr. Niss also found that as commission schedules change, overall payout drops. A marketer who had received 50% of total first-year revenue, paid over three to five years, is now getting only 30% of first-year revenue, he explained.
Changing to a discretionary compensation formula is not without risk, said Mr. Thomson of Russell Reynolds. Companies such as PIMCO, which have successfully navigated the latest down market cycle, may be able to get away with the discretionary system. But he added that PIMCO and other firms that move to discretionary schemes or lower payouts are risking damage to employee loyalty and client service because reduced or absent trailing payouts give little incentive for continuing to provide a high level of client service.
Meanwhile, poor investment returns, plummeting profitability and deep job cuts have created a two-tiered market for marketers, Beacon's Mr. Phillips said. "There are the people who are employed and bringing in assets and retaining what they have. There is huge demand for them from all sides of the institutional marketplace. And then there is the very good talent that's unemployed."
"There are just a lot of really talented institutional marketers loose right now," said veteran money management recruiter Henry G. Higdon, a partner at Higdon Barrett LLC, New York.
Mr. Phillips said unemployment isn't the stigma it once was, thanks to three-plus years of ferociously bad markets.
"If you were laid off in 2000, people assumed you probably had problems. If you were laid off in 2001, people probably still thought you had problems, but were more willing to believe that your situation was a result of job cuts. If you were laid off in 2002 or later ... employers are a lot more willing to take a look," Mr. Phillips said.
"It's a buyer's market in terms of talent. There are more candidates than openings," said Nicholas Bogard, president of executive recruiter J. Nicholas Arthur LLC, Boston.
An abundant supply of well-qualified sales and marketing candidates means that money managers can be more selective and pay a little less than they would have a few years ago when upgrading their staff in this tough market environment.
Some institutional marketing directors report being overwhelmed by the sheer volume of resumes they are receiving.
A director of marketing at a large firm managing several hot asset classes, who declined to be identified, said she has been "absolutely inundated" with unsolicited resumes from sales, marketing and client service candidates "every day, all day for well over a year." So far, she hasn't hired any of them.
At the same time, many of the best producers are unwilling to leave their current jobs. "They are looking for stability. The devil you know is better than the devil you don't know," Mr. Bogard said.