Talent Metrics in the Institutional Asset Management Industry 2013 Edition
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Preface Across the Asset Management industry, the war for distribution talent is intensifying. As firms upgrade distribution talent, following the fourth straight year of increased hiring in 2013, further increases are expected in 2014. Overall, compensation is expected to increase an average of 15 percent for distribution professionals, following renewed inf lows and solid performance numbers. At the same time, the profile of the successful distribution professional is changing. More than ever, high-potential institutional sales professionals must meet demanding criteria and possess a broad skill set. Top performers will be rewarded and will be the beneficiaries of increasingly formalized “retention plans.” On the other hand, those contributing less will be given “development plans” with time frames for improvement. Teams are growing slightly in head count, but are also reorganizing to more accurately mirror the origin of asset f lows and needs of clients. Additionally, if the economy continues to stabilize, new opportunities will open up demand for new hires. As a result, teams will be destabilized. Not surprising for the industry, compensation is the main consideration. Nonetheless, an important component, particularly around retention, is the value of culture. Team leaders who understand the importance of the cultural “fit factor” will have the ability to shape high-impact outcomes. The metrics in this report should prove helpful to firms in the talent acquisition, retention, and development process, including the design of compensation structures. In addition, the survey findings point to the importance of applying the latest in assessment tools to attract top talent that is aligned with a company’s value system and culture.
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Talent Metrics in the Institutional Asset Management Industry 2013 Edition Table of Contents Survey Methodology
4
General Trends
6
Survey Universe Survey Results
7
Investment Products
10
• Structure
14
• Roles and Responsibilities
23
Institutional Sales
• Head Count and Hiring • Product Specialists
Compensation Methodology and Data • Institutional Sales
• Consultant Relations
• Client Service and Relationship Management
About Korn/Ferry
About Institutional Investor Institute
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5
14
16 26 29 29 49
53
61 61
Methodology These survey findings are the result of a streamlined set of questions developed as a result of discussions with the Advisory Committee and with many of the Institutional Investor Institute members. It is our goal to continue refining the data to best suit the members’ needs in an evolving industry. As the dynamics of the traditional and the alternative asset management industry change, so will the composition and talent components of the sales, marketing, distribution, consultant relations, and client service functions. In this year’s survey, not all questions from previous years’ surveys were included and new questions have been incorporated. This will likely be the case moving forward, but we will continue to track the year-over-year trends that are important to you. Surveys were distributed in September, and results were collected anonymously in October and November. Results were supplied by a variety of senior professionals including heads of Sales, Marketing, and/or Human Resources. We recognize that not all data provides an exact peer-to-peer comparison and that in many cases, an outlier data point may be helpful. Therefore, if there were fewer than three responses to a question, the narrative will offer insight on the response(s) that were provided.
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Survey Universe Seventy-seven asset management firms participated in the 2013 survey (more than double the size of the previous year), and compensation data was provided for 182 individual positions. A diverse group of asset management firms were represented in terms of firm size, client orientation, firm ownership, and product offerings. As a result, this survey ref lects institutional distribution structures and compensation among Institute members and the overall industry. Respondent firms range in size with most participants falling in the midsize range of $10 billion to $75 billion (51 percent). Large firms with assets under management of $75 billion and more (32 percent) and smaller firms of less than $10 billion (17 percent) were similar in representation to previous years. There is a diverse representation of clients among the participants with Corporate Pension/Retirement Plans as the largest client segment. More than half of the respondents are with firms headquartered in the Northeast. The geographic breakdown of employees within respondent firms is: 81 percent Americas and the remaining in EMEA and AsiaPac. The majority of participant firms are owned by employees/partners. Not surprisingly, smaller participants with regard to AUM had significantly larger percentage of ownership by employees/partners. The medium sized firms have significant representation by insurance companies. Thank you for taking the time to complete the 2013 survey. We hope you find the results helpful and welcome comments about structural and content improvements.
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General Trends As competition for distribution talent intensifies in 2014, a key challenge for companies will be to match their talent needs to their growth projections. Although compensation will play the biggest role in attracting top talent, culture is recognized as an important factor, particularly around retention. Some of the notable trends are:
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•
This is the fourth straight year of expected hiring; mid-sized firms report the greatest increase in hiring activity
•
Small firms report more dissatisfaction with their current talent pool
•
All firms list cultural fit as the most important factor in hiring
•
One year guarantees continue to be common across all firms
•
There is no such thing as “one size fits all” in compensation structures
•
This year shows an increase in offering guarantees for newly recruited institutional sales professionals. This is a reversal of a trend from previous years
•
The compensation reported for all experience levels in institutional sales and client service professionals has increased over last year
•
The compensation reported for all experience levels of consultant relations professionals has remained the same from last year
•
Product Specialists are considered a “standard” in the industry and continue to increase year over year. They are more common in large and mid-sized firms
•
Most managers expect to launch new products over the next twelve months; there has also been an increase in firms launching alternative strategies from last year
Historically, the smaller and mid-sized asset management firms have been entrepreneurial by nature and have often resisted formal talent management approaches. That said, as firms grow in head count, they are recognizing the significant benefits of well-designed onboarding and targeted performance management processes. These structured programs foster cleaner and more effective internal communication, which achieves what new hires overwhelmingly seek, as well as provide asset management with a road map toward successful integration. We have seen a continued increase in the science of talent management as a means to achieve the right culture, an imperative to the talent life cycle.
Survey Results Figure 1: Total Current Assets Under Management N=59
Up to $10B 16.95%
$10B to $75B
50.85% 32.20%
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$75B or more
Figure 2: Percentage of Assets from Each Client Segment N=49
Corporate Pension/ Retirement Plans
24.48%
Funds of Funds or Sub-advisory
21.08%
Other
20.08%
Retail/HNW Individuals
19.78%
Public Pension/ Retirement Plans
15.94%
Insurance Companies
11.56%
Endowments & Foundations
7.57%
Taft Hartley (Union) Plans
4.86%
Family Offices
4.17%
0
8
5
10
15
20
25
Figure 3A: Ownership Type N=49
Insurance Company Other Financial Services Firm
16.33% 18.37% 14.29%
Bank
51.02%
Employees/Partners
Figure 3B
9
Large
Medium
Small
Employees/Partners$
33.33%
53.85%
75%
Other Financial Services Firm
33.33%
11.54%
12.50%
Bank
26.67%
11.54%
0%
Insurance Company4
6.67%
23.08%
12.50%
Investment Products As in the previous year’s survey, a majority of the overall respondents manage both long only (traditional) and non-traditional products (Figure 4). However, the percentage decreases to only 50 percent of participating small firms that manage both long only and non-traditional. Most managers (86 percent) expect to launch new products over the next twelve months with half of these new product launches expected to be in alternative products. More firms are launching alternative strategies than reported last year. The exception is that smaller firms expect new products to be in traditional strategies, not alternatives.
Figure 4A: Types of Products Managed N=57 100%
80%
60%
61.40% 40%
38.60%
20%
0%
Long only and non-traditional products
Long Only (traditional products)
Figure 4B
10
Large
Medium
Small
Long only (traditional)4
23.53%
43.33%
50%
Long only and non-traditional
76.47%
56.67%
50%
Figure 5A: Investment Strategies Currently Managed N=48 Domestic Equities
50.92%
Domestic Fixed Income
40.24%
International Equities
23.59%
Hedge Funds
18.64%
International Fixed Income
11.36% 8.50%
Real Estate
7.06%
Fund of Funds
3.76%
Private Equity Infrastructure
1.20% 0
20
40
60
80
100
Figure 5B
11
Large
Medium
Small
Domestic Equities Domestic Fixed Income International Equities Hedge Funds International Fixed Income Real Estate Fund of Funds Private Equity
35% 44% 18% 2% 12% 2% 2% 2%
52% 37% 23% 23% 12% 14% 10% 3%
77% 40% 42% 34% 0% 0% 0% 7%
Infrastructure
1%
1%
4%
Figure 6A: Plans to Launch New Products over Next Twelve Months N=58 No
13.79%
86.21%
Yes
Figure 6B
Large
12
Medium
Small
Yes
94.44%
83.33%
80%
No
5.56%
16.67%
20%
Figure 7A: Plans to Launch Alternative Products If Not Currently Offered N=51
No
43.14%
56.86%
Yes
Figure 7B
Large
13
Medium
Small
Yes
81.25%
52%
30%
No
18.75%
48%
70%
Institutional Sales Structure As in past years, most institutional sales teams are organized geographically. Participants that report being organized by segment have decreased this year. Very few (5 percent) respondents have a separate sales effort for long only and for non-traditional products. Also, most firms have the same sales effort for DB and DC assets, which is consistent from 2012 to this year. Figure 8A: Institutional Sales Team Organized By: N=52 By client size 3.85% By segment 23.08%
73.08% By geography
Figure 8B
Large
Medium
Small
Geography4
61.11%
84.62%
62.50%
Segment
38.89%
15.38%
12.50%
0%
0%
25%
Client Size$
14
Figure 9A: Separate Sales Effort for DB and DC Assets? N=55
No
83.64%
Yes
16.36%
0
20
40
60
80
100
Figure 9B
Large
15
Medium
Small
Yes
5.56%
6.90%
0%
No
94.44%
93.10%
100%
Head Count and Hiring Participating firms report a wide variety of individuals employed on institutional sales teams, which range in size from one to forty members. The average is 7.9 with most firms reporting three institutional sales people. More than half of the firms in this survey plan to increase the number of sales professionals over the next twelve months; most hiring is expected to occur in mid-sized firms. This ref lects the fourth straight year of continued hiring in this function. However, the statistics of those firms reporting do not support an actual net increase in hiring over the past year. Both large and mid-sized firms report that they have the level of talent desired, while the smaller firms appear somewhat dissatisfied with their current talent pool. Assessing current team members and then moving existing salespeople into client service roles and/or hiring externally are most often cited as the preferred method. All firms list cultural fit as the most important factor when hiring an institutional sales person. Equally weighted in secondary importance is experience selling a solutions based approach, product marketing experience, and ability to sell independently of the investment team. While cultural fit is cited as the most important factor in hiring, it is unclear how this “fit� is effectively assessed. Research shows that most hiring decisions are made on experience and most firing decisions are based on fit. Assessing the cultural fit is the most important element in the talent acquisition process. In hiring new sales talent, more than two-thirds of the large and mid-sized firms offer one year guarantees; only half of the smaller firms offer one year guarantees. Few firms reported offering two year guarantees; those that did were mid-sized firms offering two year guarantees 34 percent of the time. Overall, the use of guarantees for large firms has increased from 77.8 percent to 94.4 percent. This is particularly interesting, since the trend in previous years had been away from guarantees. While more than 60 percent of total respondents report the use of noncompete and/or non-solicit agreements, only 44 percent of the smaller firms report the use of these agreements. Most of these agreements are for one year periods with a few outliers for six months and twenty-four months.  16
Figure 10: Number of Institutional Sales Professionals Currently on the Team
All
Large
Medium
Small
Low
1
1
1
1
High
40
40
31
10
Average
7.94
11.29
7.3
3.38
Median
6
9
6
2
Figure 11A: Plans to Increase Size of Sales Team over Next Twelve Months N=55 Yes
69.09%
No
30.91%
0
20
40
60
80
100
Figure 11B
Large
17
Medium
Small
Yes
58.82%
75.86%
66.67%
No
41.18%
24.14%
33.33%
Figure 12A: Do You Have the Level of Talent You Want? N=52
Yes
71.15%
No
28.85%
0
20
40
60
80
Figure 12B
Large
18
Medium
Small
Yes
68.75%
81.48%
44.44%
No
31.25%
18.52%
55.56%
100
Figure 13A: Plans to Hire Generalists or Specialists (as It Relates to Product Knowledge) N=53
Both 26.42%
56.60%
Generalists
16.98% Specialists
Figure 13B
19
Large
Medium
Small
Generalists
52.94%
59.26%
55.56%
Specialists
29.41%
7.41%
22.22%
Both $
17.65%
33.33%
22.22%
Figure 14: Importance of Issues When Hiring IS Professionals N=52 5
4
3
4.60%
4.04%
3.98%
3.81%
3.18%
2.75%
Cultural Fit
Ability to sell independent of the investment team
Solutionsbased vs. productdriven sales approach
Specific product marketing experience
Having the “right� rolodex
Academic pedigree
2
1
0
20
Figure 15A: Are Guarantees Offered to New Hires? N=55
Yes
81.82%
No
18.18%
0
20
40
60
80
100
Figure 15B
21
Large
Medium
Small
Yes
94.44%
82.14%
55.56%
No
5.56%
17.86%
44.44%
Figure 16A: Does Your Firm Have Non-Compete and/or Non-Solicit Agreements? N=53
Yes
66.04%
No
33.96%
0
20
40
60
80
100
Figure 16B
22
Large
Medium
Small
Yes
77.78%
65.38%
44.44%
No
22.22%
34.62%
55.56%
Roles and Responsibilities There continues to be consistency year over year as to the responsibilities of the institutional sales professional. Overall, the majority of firms report that institutional sales people call on consultants. However, there was a decrease across all firm sizes this year possibly indicating a trend toward separation between direct sales and consultant sales. 
Figure 17A: Allocation of IS Professional’s Time N=51 Direct asset gathering
52.70%
High-level servicing
23.63%
Indirect asset gathering
21.02%
Management/ Administrative
8.63%
Product Development
5.95%
Other
5.56%
0
10
20
30
40
50
60
Figure 17B
23
Large
Medium
Small
Direct asset gathering (i.e., activities associated with ongoing searches)
53%
53%
53%
High-level servicing
25%
20%
32%
Indirect asset gathering/marketing (i.e., conferences, prospect education, etc.)
23%
21%
16%
Management/Administrative
9%
7%
13%
Product Development
4%
7%
5%
Other
5%
6%
0%
Figure 18A: Primary Responsibilities of IS Professionals N=55
Generate new fee revenue
94.55%
Spearhead & conduct finals presentations
90.91%
Attend regional conferences
65.45%
Consultant coverage
65.45%
Increase assets on existing relationships
56.36%
Respond to RFPs
20.00%
Liaising with indirect distribution channels
20.00%
Channel specialization
9.09%
0
20
40
60
80
100
Figure 18B
24
Large
Medium
Small
Generate new fee revenue
100%
96.43%
77.78%
Spearhead & conduct finals presentations
88.89%
96.43%
77.78%
Attend regional conferences
66.67%
64.29%
66.67%
Consultant coverage
44.44%
71.43%
88.89%
Increase assets on existing relationships
61.11%
57.14%
44.44%
Respond to RFPs
11.11%
21.43%
33.33%
Liaising with indirect distribution channels
22.22%
14.29%
33.33%
Channel specialization
16.67%
3.57%
11.11%
Figure 19A: Do Your IS Professionals Call on Consultants? N=55
Yes
70.91%
No
29.09%
0
20
40
60
80
Figure 19B
25
Large
Medium
Small
Yes
52.94%
79.31%
77.78%
No
47.06%
20.69%
22.22%
100
Product Specialists Product Specialists have become a standard in the institutional business and continue to increase year over year. While 70 percent of overall respondents have this role, it is more common in large and mid-sized firms. Only 44 percent of small firms report this role. The majority of firms report that this role frequently substitutes for the investment team. From a reporting standpoint, there is a significant difference among small, medium, and large firms. In large firms, Product Specialists report to investments 93 percent of the time; in mid-sized firms, it’s 67 percent. In small firms, Product Specialists report to sales/marketing 50 percent of the time, to client service 25 percent of the time, and to investments 25 percent of the time.
Figure 20A: Does Your Firm Have Product Specialists/Client Portfolio Managers? N=55
Yes
70.91%
No
29.09%
0
20
40
60
80
Figure 20B
26
Large
Medium
Small
Yes
77.78%
75%
44.44%
No
22.22%
25%
55.56%
100
Figure 21: When Are Product Specialists/Client PMs Deployed? N=38
Client reviews
92.11%
Consultant meetings
92.11%
Writing quarterly reviews
76.32%
Conducting product reviews/ competitive analysis
76.32%
RFP responses
73.68%
Conference presentations
68.42%
Writing white papers
68.42%
Finals presentations
63.16% 0
27
20
40
60
80
100
Figure 22A: Is Compensation of Product Specialists/Client PMs Tied Directly to Revenue Generation? N=37 Yes 27.03%
72.97%
No
Figure 22B
28
Large
Medium
Small
Yes
33.33%
19.05%
50%
No
66.67%
80.95%
50%
Compensation Methodology and Data Institutional Sales Compensation Structures There is no such thing as “standard� as it relates to compensation structures for institutional sales professionals. As evidenced in this year’s survey, respondents were equally split among the components of variable compensation. This year, there was an increase in awarding a combination of discretionary and commission and an increase in awarding pure discretionary compensation. How discretionary compensation is measured is consistent with last year with the increase in clients as a significant leader, followed by firm profitability and increase in AUM with existing clients. Commission is paid quarterly in 82 percent of the reporting firms, with the remaining paying annually. Overall, most firms (60 percent) report that the compensation schemes have not changed over the past year. Interestingly, 54 percent of mid-sized firms have reported a change. Once again, this shows that there is no standard approach in awarding variable compensation.
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Figure 23A: How Is Incentive Compensation Structured? N=54
Discretionary Combination of other two categories
40.74%
42.59%
16.67%
Commission/ pay-for-performance
Figure 23B
30
Large
Medium
Small
Discretionary
33.33%
37.04%
66.67%
Commission/pay-for-performance
11.11%
22.22%
11.11%
Combination of above$
55.56%
40.74%
22.22%
Figure 24A: How Is Discretionary Compensation Measured? N=40 Increase in new clients
87.50%
Overall firm profitability
80.00%
Increase AUM w/ existing clients
77.50%
Retention of existing clients
67.50%
Additional metrics
52.50%
Number of final presentations
35.00%
0
20
40
60
80
100
Figure 24B
Increase in new clients Overall firm profitability
Medium
Small
93.75%
77.78%
100%
75%
77.78%
100%
Increase AUM w/existing clients
81.25%
72.22%
83.33%
Retention of existing clients
62.50%
66.67%
83.33%
Additional metrics (e.g., number of meetings, calls, etc.)
68.75%
44.44%
33.33%
25%
38.89%
50%
Number of final presentations, improvement of rankings/standing with consultants or platforms
31
Large
Figure 25: Commission Schedule N=24 25
20
15
17.70%
10
9.39% 5.57%
5
2.88% 0
32
Year 1
Year 2
Year 3
As long as assets are being managed
1.88%
1%
Year 4
Year 5
Long Term Incentives Many asset management firms use long term incentives as part of the compensation plan. Last year company stock was the most widely used. Not surprising is the use of phantom stock/profit sharing in mid-sized and small firms. Most firms report a variety of methods used to capture and compensate for collaboration. Most use discretionary compensation to compensate for teamwork which is obtained through 360 reviews and other assessment methods. When funds are underperforming, many firms report using discretionary or subjective bonuses to retain and/or compensate IS professionals.
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Figure 26A: Who Is Eligible to Receive Equity? N=47
Executive Team
55.32%
All Employees
53.19%
Investment Staff
51.06%
Sales Staff
38.30%
Client Service Staff
29.79%
Operations/FA & O/ IT Staff
25.53%
Legal/Compliance
25.53%
0
20
40
60
80
100
Figure 26B
34
Large
Medium
Small
Executive Team
69.23%
52%
37.50%
All Employees
38.46%
60%
62.50%
Investment Staff
69.23%
44%
37.50%
Sales Staff
53.85%
32%
25%
Client Service Staff
53.85%
16%
25%
Operations/FA & O/IT Staff
38.46%
20%
25%
Legal/Compliance
46.15%
16%
25%
Figure 27A: Who Is Eligible to Receive Profit Sharing? N=38 All Employees
68.42%
Executive Team
36.84%
Investment Staff
28.95%
Sales Staff
23.68%
Operations/FA &O/ IT Staff
23.68%
Client Service Staff
15.79%
Legal/Compliance
15.79%
0
10
20
30
40
50
60
70
Figure 27B
Large
Medium
Small
75%
63.64%
75%
Executive Team
37.50%
40.91%
25%
Investment Staff
37.50%
27.27%
25%
25%
22.73%
25%
12.50%
18.18%
12.50%
Client Service Staff
25%
27.27%
12.50%
Legal/Compliance
12.50%
18.18%
12.50%
All Employees
Sales Staff Operations/FA & O/IT Staff
35
80
Figure 28A: Types of Long Term Incentive Compensation N=51 Phantom stock/ Profit sharing
58.82%
Restricted Stock Units (RSUs)
45.10%
True Equity
39.22%
Stock options
17.65%
Stock Appreciation Rights (SARs)
5.88% 0
20
40
60
80
100
Figure 28B
36
Large
Medium
Small
Phantom stock/Profit sharing
35.71%
74.07%
44.44%
Restricted Stock Units (RSUs)
78.57%
37.04%
11.11%
True Equity
28.57%
37.04%
66.67%
Stock Options
7.14%
25.93%
0%
Stock Appreciation Rights (SARs)
7.14%
0%
11.11%
Figure 29A: Is Cash Deferral Used? N=53
35.85%
Yes
64.15% No
Figure 29B
37
Large
Medium
Small
Yes
50%
33.33%
12.50%
No
50%
66.67%
87.50%
Figure 30A: How Does Cash Deferral Work? N=18 100% 80% 60% 40% 20% 0%
38.89%
33.33%
16.67% 11.11%
Graduated vesting over 3 years
Cliff vesting over 3 years
Cliff vesting over 4 or more years
Graduated vesting over 4 or more years
Figure 30B
38
Large
Medium
Small
Graduated vesting over 3 years
33.33%
50%
0%
Cliff vesting over 3 years
33.33%
37.50%
0%
Cliff vesting over 4 or more years
22.22%
12.50%
0%
Graduated vesting over 4 or more years
11.11%
0%
100%
Figure 31A: Does Your Firm Use Equity Deferral Programs? N=51
No
62.75%
Yes
37.25% 0
20
40
60
80
100
Figure 31B
39
Large
Medium
Small
Yes
50%
34.62%
22.22%
No
50%
65.38%
77.78%
Figure 32A: If Yes, How Does the Equity Deferral Program Work? N=18 100% 80% 60% 40% 20% 0%
38.89%
27.78%
16.67%
16.67%
Graduated vesting over 4 or more years
Cliff vesting over 3 years
Cliff vesting over 4 or more years
Graduated vesting over 3 years
Figure 32B
40
Large
Medium
Small
Graduated vesting over 4 or more years
25%
44.44%
100%
Cliff vesting over 3 years
25%
33.33%
0%
Cliff vesting over 4 or more years
12.50%
22.22%
0%
Graduated vesting over 3 years
37.50%
0%
0%
Retention Strategies Of the forty-nine written responses to the question “What serves as the most significant retention tool at your firm?” compensation was cited in every response, while culture was cited in 25 percent of the responses. Compensation (especially when deferred and invested in the firm’s funds) ranks highest and is followed by equity, profit sharing, and culture. A strong culture that values and respects all the contributing team members serves as an effective retention tool. Promotions alone do not achieve retention and, in fact, can aid individuals in leaving for “better” roles. Promotions need to be accompanied by increased levels of responsibility and a view toward higher compensation. Compensation, not surprisingly for the industry, is showing as more important than culture in these results. According to Judge, Cable, Boudreau, and Bretz (1994), pay and promotions predict career satisfaction, which is the bigger picture about the satisfaction of one’s career trajectory. Higher compensation indirectly means higher levels of perceived success.
41
Figure 33: Steps Taken over the Past Two Years to Ensure the Retention of Key Sales/Marketing/Client Service Employees N=54
Raised base salaries
53.70%
Increased cash bonuses
46.30%
Promotions
42.59%
Broader scope of responsibilities
37.04%
Training/education
33.33%
Offered equity
33.33%
Offered guarantees/ retention bonuses
27.78%
Ability to work remotely
24.07%
Geographic re-assignments
22.22%
Lateral move to different roles
20.37%
Offered more deferred income
14.81%
Offered profit sharing
12.96%
Reduced hours/ Flex-schedule
9.26%
Deferred a smaller percentage of total compensation
5.56% 0
42
20
40
60
80
100
Head of Institutional Sales Overall, the compensation for the Head of Sales increased over last year, which had seen an increase from previous years. This trend is expected to continue. The compensation plans described in this year’s survey have the same components as last year; however, the percentage of discretionary bonus has increased this year from 74 percent of the variable compensation to 90 percent. In most firms, the Head of Sales is not under contract. However, the majority of those that do put Head of Sales under contract report a contract period of two years.
43
Figure 34: How Is Variable Compensation for Your Head of Sales Determined? N=51 Discretionary bonus (subjective measures)
90.20%
Performance based bonus (objective measures)
37.25%
Commission
13.73%
Commission override
11.76% 0
20
40
60
80
Figure 35: Between 2011 and 2012 Did Compensation for Your Head of Sales: N=47 Decrease 21.28%
53.19% 25.53% Remain the same
44
Increase
100
Figure 36: Is Your Head of Sales Under Contract? N=48
No
85.42%
Yes
14.58%
0
45
20
40
60
80
100
Compensation Data Overall, compensation for all experience levels of sales professionals has increased from the previous year. Also, the expectation of those reporting (across all experience levels) is that compensation will increase on average 15 percent for performance year 2013. Ninety percent of those reporting as the Head of Sales expect compensation to increase in 2013.
Figure 37: Annual Compensation for Head of Institutional Sales; N=16
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$125,000
$480,000
$100,000
$35,000
$235,000
High
$350,000
$1,373,669
$200,000
$2,300,000
$1,629,309
Average
$218,750
$783,901
$130,000
$609,286
$699,027
Median
$210,000
$640,467
$110,000
$400,000
$600,000
Figure 38: Annual Compensation for Institutional Sales — All Experience Levels; N=97
46
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$80,000
$22,335
$10,000
$30,000
$165,000
High
$525,000
$1,656,000
$900,000
$2,300,000
$2,142,415
Average
$204,057
$493,553
$208,670
$305,634
$623,550
Median
$190,000
$480,000
$150,000
$215,000
$525,000
Figure 39: Annual Compensation for IS Professionals with Ten-Plus Years; N=79
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$120,000
$50,000
$50,000
$50,000
$190,000
High
$525,000
$1,656,000
$900,000
$2,300,000
$1,956,000
Average
$220,690
$495,450
$188,591
$304,477
$608,508
Median
$200,000
$480,000
$110,000
$139,500
$525,000
Figure 40: Annual Compensation for IS Professionals with Seven-Ten Years; N=12
47
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$80,000
$22,335
$10,000
$100,000
$90,000
High
$275,000
$1,430,654
$436,761
$350,000
$2,142,415
Average
$135,472
$477,289
$258,627
$220,750
$731,276
Median
$120,000
$385,000
$279,000
$266,000
$534,000
Figure 41: Annual Compensation for IS Professionals with Four-Seven Years; N=3
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$100,000
n/a
n/a
n/a
n/a
High
$175,000
n/a
n/a
n/a
n/a
Average
$141,667
$150,000
$168,000
n/a
$268,000
Median
$150,000
$150,000
$168,000
n/a
$268,000
Figure 42: Annual Compensation for IS Professionals with Less Than Four Years; N=3
48
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$100,000
$552,000
$240,000
n/a
$892,000
High
$125,000
$828,000
$360,000
n/a
$1,288,000
Average
$108,333
$690,000
$300,000
$200,000
$1,090,000
Median
$100,000
n/a
n/a
$200,000
n/a
Consultant Relations Structure This year’s participating firms report an average consultant relations team of three with no plans to increase the size of the team in the next twelve months. The percentage reported of new clients with a Pension Consultant involved was 69 percent and 60 percent of new AUM with a Pension Consultant involved. These numbers are below those of the overall industry and are expected to be more ref lective of the smaller sample size than a trend. It is unusual for a consultant relations professional to sign either a noncompete or a non-solicit. The non-solicit is used by a small number of large firms.
49
Figure 43A: Does Your Firm Have Individuals Dedicated Solely to Consultant Relations? N=15
Yes 33.33%
66.67% No
Figure 43B
Large
Medium
Small
Yes
33.33%
20%
50%
No
66.67%
80%
50%
Figure 44: Does Your Firm Have a Head of Consultant Relations? N=11
50
Yes
45.45%
No
54.55%
0
20
40
60
80
100
Head of Consultant Relations Figure 45: Annual Compensation for Head of Consultant Relations; N=5
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$100,000
$112,800
$100,000
$40,000
$337,800
High
$300,000
$717,800
n/a
$226,000
$825,000
Average
$225,000
$206,250
n/a
$117,200
$523,450
Median
$250,000
$302,000
n/a
$120,000
$465,500
The average compensation in both base salary and total cash compensation for the Head of Consultant Relations has decreased from those reporting last year.
Consultant Relations Professional The average compensation in both base salary and total cash compensation for all experience levels of consultant relations professionals has remained the same from those reporting last year. Figure 46: Annual Compensation for Consultant Relations Professional with Ten-Plus Years; N=9
Base Salary
51
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$100,000
$56,400
n/a
$40,000
$200,000
High
$300,000
$455,000
n/a
$226,000
$825,000
Average
$186,111
$176,733
n/a
$112,778
$410,000
Median
$175,000
$150,000
n/a
$84,000
$360,000
Figure 47: Annual Compensation for Consultant Relations Professional with Seven-Ten Years; N=4
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$65,000
n/a
n/a
$3,000
$75,000
High
$150,000
n/a
n/a
$226,000
$576,000
Average
$102,500
n/a
n/a
$66,000
$245,100
Median
$97,500
n/a
n/a
$17,500
$164,700
*Note only one firm reported four-seven years’ experience; no firms reported less than four years’ experience.
52
Client Service and Relationship Management Structure The size of a client service team varies considerably by firm. The size of the teams reported this year is consistent with those reported last year. This year more than half of the firms do not expect to increase the size of the current team, consistent with last year’s survey. Those firms that do expect to increase predict only modest hiring. The respondents were equally split in terms of whether they consider client service to be a cost center or a profit center. Most firms responded that client service professionals typically generate new business by cross-selling, and the expectation is for this to increase.
Figure 48: What Is the Size of the Dedicated Client Service Team?
53
Low
1
High
80
Average
9.8
Median
5.5
Figure 49A: Does Your Firm Have Individuals Dedicated Solely to Client Service? N=46
No 32.61%
67.39% Yes
Figure 49B
54
Large
Medium
Small
Yes
78.57%
66.67%
50%
No
21.43%
33.33%
50%
Figure 50A: Whom Do the Client Service Professionals Report To? N=32
Head of Sales/ Marketing 21.88% Head of Institutional Distribution
50% 28.13% Head of Investor Relations/Client Service
Figure 50B
55
Large
Medium
Small
Head of Institutional Distribution
45.45%
50%
66.67%
Head of Sales/Marketing
18.18%
22.22%
33.33%
Head of Investor Relations/$ Client Service
36.36%
27.78%
0%
Figure 51: Do You Plan to Increase the Size of the Team? N=32
44%
Yes
56% No
Figure 52: Does Your Firm Require Client Service Professionals to Sign a Non-Compete or Non-Solicit? N=35 100%
80%
60%
40%
57.14%
20%
0%
56
25.71%
None
Both
8.57%
8.57%
Non-compete
Non-solicit
Roles and Responsibilities Figure 53: What Are the Primary Responsibilities of Your Client Service Professionals? N=37
Client Reporting
89.19%
Client Meetings
89.19%
Increase assets of existing clients
70.27%
Hosting on-site meetings
59.46%
Respond to RFPs
27.03%
Thought leadership
24.32%
Liaising with indirect distribution channels
18.92%
Consultant Coverage
8.11% 0
20
40
60
80
Figure 54: Do Client Service Professionals Typically Generate New Business (by Cross-Selling)? N=38
No
57
44.74%
55.26%
Yes
100
Compensation Data As expected, a high percentage (79 percent) of bonuses paid to client service professionals are discretionary. This is consistent with last year’s survey.
Figure 55: What Percentage of Bonuses Are Determined by Each of the Following? N=34
Discretionary
86.94%
Commission
48.27%
0
20
40
60
80
100
Figure 56: In the Last Two Years, Ownership/Equity Awards Among Client Service Professionals Have: N=37 100%
80%
60%
40%
20%
0%
58
40.54%
32.43%
24.32%
Stayed the same
We do not award equity to CS professionals
Increased
2.70%
Decreased
Head of Client Services The compensation reported for the Head of Client Services is below the average base and average total compensation reported from last year ($310,000 and $637,000 respectively).
Figure 57: Annual Compensation for Head of Client Services; N=12
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$100,000
$18,299
$40,591
$50,000
$239,000
High
$250,000
$200,000
$400,000
$1,470,000
$1,570,000
Average
$165,000
$71,569
$220,296
$302,455
$582,274
Median
$125,000
$33,987
$220,296
$200,000
$286,026
Client Service Professional The compensation reported for all experience levels in client service professionals has increased over last year. Figure 58: Annual Compensation for Client Service Professional with Ten-Plus Years; N=12
Base Salary
59
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$79,000
$3,859
$671,333
$15,000
$96,500
High
$550,000
$539,837
$400,000
$1,470,000
$3,150,000
Average
$195,544
$148,483
$155,916
$247,322
$600,584
Median
$165,000
$56,554
$100,000
$110,000
$341,554
Figure 59: Annual Compensation for Client Service Professional with Seven-Ten Years; N=14
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$60,000
$8,329
$40,591
$3,000
$10,600
High
$250,000
$113,200
$89,761
$328,000
$646,566
Average
$131,286
$42,376
$65,176
$72,046
$217,673
Median
$112,500
$23,987
n/a
$50,000
$150,000
Figure 60: Annual Compensation for Client Service Professional with Four-Seven Years; N=6
Base Salary
Commission earned in 2012
Trailers from previous years
Low
$50,000
$3,525
$37,850
$3,600
$76,100
High
$125,000
n/a
n/a
$100,000
$187,500
Average
$79,700
n/a
n/a
$39,583
$135,791
Median
$75,000
n/a
n/a
$25,700
$143,774
Bonus (non-commission)
Total Cash compensation
Figure 61: Annual Compensation for Client Service Professional with Less Than Four Years; N=7
60
Base Salary
Commission earned in 2012
Trailers from previous years
Bonus (non-commission)
Total Cash compensation
Low
$55,000
n/a
n/a
$10,000
$75,000
High
$125,000
n/a
n/a
$300,000
$425,000
Average
$93,571
n/a
n/a
$114,167
$215,000
Median
$100,000
n/a
n/a
$100,000
$282,500
About Korn Ferry’s Global Asset Management and Alternative Investment Sector Korn Ferry’s Asset Management and Alternative Investment Sector focuses on helping companies attract, develop, and retain best-in-class executive talent. Our consultants are respected advisors to leaders in the industry on issues across all stages of the talent life cycle, including acquisition, development, and assessment. The practice combines C-suite industry experience with our senior partners’ decades of top-level global talent management expertise. We understand the trends, people, and issues that drive the sector with a differentiated approach to sourcing talent across investment banking, private equity, hedge funds, capital markets, and sovereign wealth funds, as well as asset and wealth management.
About Institutional Investor Institute The Institutional Investor Institute, founded in 1970, is a private membership organization of 100 institutional investment management firms. This group represents the major players and innovators in investment management that exercise discretionary investment authority for more than US $5 trillion in assets. III provides its members with research, data, and information regarding institutional investors and asset management firms.
Authors: Jane Hobson Marcus Senior Client Partner 212.984.9405 Jane.Marcus@KornFerry.com
Allison Walker Senior Client Partner 212.973.5893 Ali.Walker@KornFerry.com
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