The stock market may be going up and down, but salaries among investment management companies are going in only one direction: up.
A new study of compensation among those firms by Investment Counseling Inc., West Conshohocken, Pa., found compensation was up across the board. Marketing directors and chief investment officers are among the biggest gainers, while operating personnel show smaller gains.
Compensation as a whole continues to rise 10% to 20% annually, but there is still a great disparity among companies within the industry, said Chas Burkhart, president of Investment Counseling.
Chief executives, senior level partners and managing directors in some of the largest firms in the industry are earning $10 million to $15 million in annual cash compensation, not including options or equity. At less profitable firms, key executives could be earning $200,000 per year.
Chief executive officers' compensation - excluding equity - rose 27% on average from 1992 to 1993, although a couple of firms showed increases around 200%. Those 200% gains happened because the principals had kept their salaries artificially low during their companies' growth period, the survey said. The average CEO compensation was $1.34 million, although among the 32% of firms that pay their CEOs more than $1 million, the average compensation was about $3.4 million.
Marketing directors saw the largest gains among all groups, an average increase of 48%, followed by chief investment officers, who gained 33%, and client service professionals, whose compensation increased 32%.
Marketing support personnel saw the smallest gain, 9%, while traders and operating professionals both gained 10%.
Firms having $10 billion to $20 billion under management tend to peak both in profit margin and compensation, the survey found.
Up to that point, the firms could afford less infrastructure and less staff to operate, therefore distributing profits among fewer people. Once they reach that critical mass, the distribution changes.
As a whole, the study concluded that as the industry matures, leaner margins and more profit-sharing have an effect on the principal's compensation.
"Those businesses gave off a lot of money to the principals before they had to add to their infrastructure to keep up their growth. When you start to go beyond that (size), you have to have a lot more people - that translates into less money for the principals," said Mr. Burkhart.
Meanwhile, sales and marketing professionals receive a large portion of their compensation from incentives, which allow their salaries to vary more than those of operations personnel, said Mr. Burkhart. The study found 27% of client service professionals' total compensation in 1993 was in the form of incentives, while 41% of annual compensation among new business development professionals was made up of incentives.
"People that are bringing in business are getting more bang for their buck .*.*. Anybody who can bring in business is really cherished," Mr. Burkhart said.
The total average compensation for a portfolio manager was $210,000, including bonuses. Some 60% of the firms sampled offer portfolio managers a subjective bonus that can range as high as six times their base salary among high-end firms, according to the study.
The total average compensation for sales professionals was $211,000, including bonuses.
Mr. Burkhart noted senior personnel are in a better position to earn greater multiples of their pay, making them more likely to have wider swings in their compensation than among the less senior staff.
The survey is based on a 25-page questionnaire filled out by 25 money management firms, and boosted with Investment Counseling's own research. The annual survey will be re-released at the end of the year, and subsequent surveys will be released in December to help firms plan for the following year, said Mr. Burkhart.