He talks about compensation trends, hiring challenges and banks’ demands. This publication certainly aims to keep a close eye on what other recruiters think about the region and will be delighted to take comments and reactions from the industry. If readers are interested in adding to the mix, so, feel free to email Group Editor Tom Burroughes on tom.burroughes@wealthbriefing.com or Tom King, Singapore Country Manager at WealthBriefingAsia, on tom.king@clearviewpublishing.com

How have private banks approached compensation over the last 12 months in Asia Pacific?

We have seen very subtle changes in compensation in the last 12 months.  Banks seem very fixed on limiting salary uplifts to a ceiling of 3-5 per cent (low end) and 7 per cent (high end) for existing employees, whilst new hires can expect an uplift ceiling of 20 per cent, which is down 5-7 per cent on previous years. We now see much tighter global control and sign-off requirements from multiple internal stakeholders when new hires push for more than 20 per cent  increments on their existing packages; this will likely be subject  to further justification, with more detailed business plans outlining ‘clear’ and ‘rigid’ expectations.

As bankers have seen a dramatic drop in their TCP (Total Compensation Payout) over the last few years, with more deferral components and cash caps attached to their annual payout, bankers are using lateral moves across banks as a vehicle to substantially increase their basic salary, with a view of compensating the backdated loss in cash bonuses paid.

Have there been any noticeable changes in TCP or bonus percentages paid to private bankers in Asia Pacific year on year?

There was a much higher deferral to cash payout ratio, with some banks imposing cash caps that ranged between 20-40 per cent of the total bonus payout, with other banks enforcing a fixed cash cap of S$100-150,000 in other cases. Having bonus deferrals has become an industry standard in Asia Pacific, as this is a great way of managing cost while at the same time retaining employees with up to three year deferrals in most cases.

Bonuses were down on average 2-4 per cent year-on-year across most mainstream banks, with average performers receiving anywhere between 6-10 per cent payout, whilst good performers received 12 -16 per cent payout. Exceptional performers in some case reached 20 per cent plus payout on what we deem the high end of the spectrum.

We put this down to higher cost income ratios, as a result of increased compliance and risk functions required to run a private bank in today’s tightened regulatory market.

With client trading less across board, and pinching bankers on pricing, wealth managers find it increasingly difficult to achieve profitable margins.

Nonetheless, we know of some cases where banks have reversed the percentage payout; top performers received a lower percentage bonus payout than lesser performing counterparts, with the view of balancing TCP across the bank as higher performers receive higher basic salaries, much to the frustration of the senior banker.

What do you see as the fundamental motives for private bankers who wish to leave their employers in Asia Pacific?

Answer: Compensation – bankers seek more transparent payouts that promote meritocracy and aligned with performance of the individual, not limiting a bankers earning potential as a result of the teams performance;

--  Platform capability – more and more bankers are feeling the pinch on trading activity, and seek alternative revenue streams in order to meet their targets through sophisticated investments such as Corporate Solutions and IB activity; institutions with CIB capability had much more draw on bankers who were unable to support their clients universal banking needs;

-- Compliance & Risk - Although relationship managers understand and respect tighter regulatory frameworks are in place to protect their personal interests as well as the end client, RMs increasingly find themselves frustrated by internal policy processes and procedures, with compliance teams putting unnecessary hurdles in front of bankers; this has an indirect effect on client marketing, prolonging account opening through excessive administration while limiting trade execution and deal flow. We are aware of tier one banks that can take up to three months to open a client account from start to finish, with more rigid and detailed on-boarding requirements that go beyond MAS requirement.

-- Reasonable expectations – So far in 2014, we have already seen growth expectations of as much as 26 per cent up to 52 per cent for year-on-year revenue, with pressure from senior management to further increase trading volume to meet the ongoing pressures of rising ‘cost income ratios’. Bankers who have received lower bonus payouts followed by a substantial rise in target expectations have found themselves more open to alternative job opportunities.

What are the key reasons private bankers remained in their existing employers in Asia Pacific?

Firstly, supportive management and product performance remain the two key elements for most bankers sticking with their institutions. Secondly, with higher costs of credit and tighter constraints on balance sheet availability, RMs are hesitant to give up their clients lending positions with the knowledge they’re unlikely to receive similar terms in their new employer, where clients are expected to re-establish themselves as a valuable client worthy of credit.   

Thirdly, bankers acknowledge it’s harder to transition accounts in today’s cautious client market. The client conversion rate of 60-70 per cent typical of the gilded days have dramatically declined over the last two-three years, with 30 per cent being a much more realistic percentage, discouraging less confident bankers to move. This comes down to the sheer amount of movement in the private banking sector over the last three years; we’ve seen many cases where a client will give their RM twelve months in the new employer before entering any account opening processes, to assure he/she will survive in the respective institution.

Finally, banks with employee outflow are paying a lot more attention to non-compete clauses, policing the activities of bankers post movement. With higher targets imposed by the new employer, bankers fear they may not be able to reach 1st year expectations due to contractual obligations locking them out of all forms of communication with past clients.

What are the key hiring trends in Asia Pacific today vs 2013? What markets are private banks sourcing their talent?

Bankers with steady and consistent work histories were favoured, with less interest on job hoppers. There has been less emphasis on Associate / AVP-level hiring, with banks seeking tenured relationship managers with strong client network, that have demonstrated their ability to retain relationships and transition clients.

In 2013 we saw an increase in requirement for bankers covering the Singapore and NRI market, with the usual requirement for Indonesia and China ever present.  Banks will continue to hire cautiously in 2014, with a less ‘gung ho’ approach to recruitment (in most cases). We feel banks will still favour more tenured bankers who possess a proven track record in client acquisition and revenue generation.

We’ve already witnessed a switch in revenue priority over assets under management (which had been the key requirement pre-2013 due to new Basel III requirements), with banks viewing ‘AuM as Vanity’ and ‘ROA as Sanity’.

We feel Singapore, China, Indonesia and NRI markets will remain the more active in 2014 across the region, with less emphasis on higher regulated markets such as Taiwan, Thailand, Malaysia and Japan.

How do you feel training and development standards in private banking across Asia-Pacific have advanced?

Overall, we think the training standards have improved dramatically over the last two to three years in Asia.  We have seen a huge overhaul and investment in the development and training of bankers, not just from the employers, also from regulators.  The Monetary Authority of Singapore, for example, now makes it mandatory for any client facing banker to complete the CACS Exams, while enforcing banks to maintain compulsory ‘training hours’ on their bankers with the focus topic being ‘cross border compliance and risk’, ‘KYC & AML’ and ‘client management’.

In recent years, we have seen tier one private banks such as BNP Paribas and UBS Wealth Management invest heavily into training and development facilities within Asia Pacific, in an attempt to develop and grow their internal talent pool across the region. What do you consider is key to retention in private banking in Asia/Singapore? What are the key quantitative retention indicators you receive from private bankers in Asia Pacific?

These are: Supportive and stable management; realistic expectations and targets; ‘Pro-Business’ approach to compliance, with RM and compliance officer working together to achieve results; commitment to Asian strategy with a clear message to end-clients, and financial stability of the employer.