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How is Technology Impacting Financial Services?

As financial services firms’ business models continue to evolve, legacy technology will likely be replaced with emerging technologies, resulting in a convergence of the technology and financial services industries. New technology innovation has already done a lot to improve the customer experience, supply data for decision making, and reshape longstanding firm policies and practices. The question is whether financial firms have the talent to support further innovation at the appropriate speed.

The Post-Crisis Evolution of Pay

Ten years ago this month, the financial crisis came to a head with the failure of Lehman Brothers. While there have been too many stories written on the crisis to cite, one thing we can agree on is the shared culpability ranging from individuals over-extending themselves in the housing market, the distribution of bad loans, poor underwriting and mortgage lending standards, packaging of securities by banks, uneducated ratings of these securities by agencies, and greedy and naive investors searching for yield.

The Spotlight: Roopank Chaudhary, Partner, India

Roopank Chaudhary, a partner at Aon, is the Head of India for McLagan and the Head of Regional Insurance for Asia Pacific. Roopank manages key client relationships with various financial institutions. He specializes in supporting clients in developing rewards strategies, structuring and benchmarking, designing and evaluating job descriptions, organization structuring, employee engagement, and HR set-up.

Infographic: A Checklist For Fall Comp Planning

Fall is in the air, which means the start of compensation planning season for most firms. To help your team prepare, we have developed a quick checklist for keeping your pay programs up to date.

SEC Takes A Closer Look at Proxy Advisory Firms

The SEC has signaled that they are actively reviewing how investment advisers use proxy advisory firms’ recommendations. The SEC has set a November 15th date for a roundtable to review requirements for investment advisers. As we highlight in this alert, this may ultimately force investment advisers to rely more on internal analysis; thus, diminishing the role of the duopoly that proxy advisory firms presently enjoy.

What to Consider When Calculating Your CEO Pay Ratio in Year 2

Deciding whether to re-identify your median employee is a key question going into the second year of pay ratio disclosures. We weigh the pros and cons. The primary focus for many companies during the first year of calculating the CEO pay ratio was determining what methodology to use when identifying the median employee—ensuring it was both reasonable, accurate, and consistently applied across all employees.

Realigning the Human Resources Function

It is an exciting time in the HR community, as members no longer need to push to get a seat at the table and are considered significant drivers of change and value. However, we must recognize that where the HR function stands today is, in many cases, the result of multiple years of cost-cutting initiatives. After already achieving a lean state of operation, it is not uncommon to find that HR size and cost has been reduced even further. Yet, just when organizations have tirelessly worked to minimize costs as much as possible, executives have become even more aware of the importance of HR within firms, where talent is a crucial asset.

The Spotlight: Don McNees, Partner, Insurance

Don McNees is a partner at McLagan and leads Ward Benchmarking for life, annuity, health, and retirement. Don works with senior management to enhance growth and improve performance at some of the world’s largest insurers. He advises clients on target operating models, performance benchmarking, and organization effectiveness to achieve their business objectives.

IRS Releases New Guidance Concerning Changes to Section 162(m) of the Internal Revenue Code

One of the more noteworthy provisions within the giant corporate tax bill that passed at the end of 2017 for executive compensation professionals was the elimination of a provision under Section 162(m), which allowed companies to deduct performance-based pay above $1 million. Now, we’re getting more clarification on how that change in tax law will play out in practice.

Five Questions for Banks to Consider When Setting Executive Annual Incentive Plan Goals

With such a substantial percentage of executive pay delivered through incentive programs, it’s no wonder that incentive plan discussions comprise a significant portion of the compensation committee’s agenda for many banks. However, through our experience of serving as advisors in over 300 compensation committee meetings per year, we are surprised by how little dialogue exists around the specific topic of annual incentive plan performance goal selection and goal setting. 

ISS Issues Survey Hinting at 2019 Policy Changes

Institutional Shareholder Services (ISS) took the first step in its yearly policy update process when it recently released its annual corporate governance policy survey to clients. Following the survey period, ISS releases draft policies in the early fall for a two week comment period, followed by final policy updates that typically come in November. Adopted policies are effective in February for the proxy season.

Getting Started with Your Compensation Survey Results

Understanding where you stand in the market helps you ensure that employee compensation spend is optimized for your firm. Overpaying relative to performance and the market could lead to increased shareholder pressure and sub-optimal financial results. Underpaying could weaken your firm’s ability to attract, motivate, and retain talent.

Infographic: Forces to Watch for Financial Services Firms Across the Globe

We are in an age of major global transformation for financial services. Technology disruption is happening all around us, forcing traditional establishments to innovate, re-think old tactics, and adapt to the ever-shifting digital world. In this current state of change, there are many new challenges that financial services firms must face head on, while contending with political and social unrest, economic fluctuation, and strong regulatory standards. From global expansion to new reward structures, client experiences, and entirely new sectors, here are the top trends affecting financial services firms across the globe.

Top Six Life-Health Insurance Industry Trends to Know

Insurance industry spend in technology and analytics has increased at significant levels, as companies continue to integrate innovation into business processes. The average insurance company increased spending by nearly 22% and roles within data analytics more than doubled since 2013. Companies are making big bets that emerging, innovation from InsurTech and leading outsourcers will streamline internal processes and improve the way that they interact with customers. In our 2018 Digital and Intelligent Innovation Survey, we found that 58% of insurers have reached the implementation phase on one or more elements of the new digital and intelligent innovation toolbox.

Top Five Property-Casualty Insurance Industry Trends to Know

Property-casualty insurance firms have seen a significant shift in the staffing profile in recent years. The average company added over 20% more staff in technology, actuarial, and analytical roles compared to a 40% decline in front office roles, including policy processing, data entry, and clerical work. We anticipate that automation will require fewer employees to directly interact with the customer and perform data entry tasks, as these activities are delivered through automated and digital methods.

The Spotlight: Brooke Green, Partner, Radford

Brooke Green is a Partner and leader of Employee Rewards and Talent Consulting for Aon’s Radford division. She leads consulting teams focused on providing talent management and rewards advice to technology and life sciences companies. Brooke has significant experience developing compensation and career frameworks for various firms, including small start-ups and large global industry leaders. She has been practicing in the San Francisco Bay area for over 20 years.

What We Learned from the 2018 Proxy Season

Another proxy season has wrapped up and, with it, the eighth year of say-on-pay votes are in the books for most public companies. Negative vote recommendations for say-on-pay proposals from Institutional Shareholder Services, Inc. (ISS) and Glass Lewis & Co. (Glass Lewis) went up slightly—as did the number of outright say-on-pay failures for both the Russell 3000 Index and S&P 500 Index. When it comes to equity proposal votes, ISS and Glass Lewis models are not always needed for sufficient shareholder support. Companies can obtain necessary shares to adequately fund their programs by engaging directly with their shareholders—even in the face of receiving negative recommendations. In any case, for both say-on-pay and positive share plan proposals, it all comes down to planning ahead.  

What's Trending in Major Financial Services Hubs Across the Globe?

The influence of evolving technology in financial services is changing industry landscapes and long-lasting practices across the globe. Certain economies and companies are finding it easier to adapt to the moving industry and to new regulations. For some countries, the challenge is creating a deep-enough pool of skilled workers to meet demand. For others, it’s a matter of cutting redtape to encourage new businesses, or embracing new industries and business models.

SEC Enforcement Action on Perks Disclosure Reminds Issuers to Be Mindful of the Standard

The SEC’s recent enforcement action against a large, US-based company for failure to properly disclosed executive perquisites is a good reminder to all issuers of the circumstances under which detailed disclosure is required.

SEC Expands Scope of Companies that Qualify for Reduced Compensation Disclosure

The SEC recently amended its definition of smaller reporting companies (SRCs), which could pave the way for nearly a thousand additional companies to take advantage of reduced compensation disclosure requirements. However, it may not be wise for every qualified company to scale back their disclosures, particularly if they have active investors who have expressed concerns via Say-on-Pay votes in the past.

Captive Finance: Gaining Competitive Advantage

Headline news can be a distraction. Evolving geopolitics and potentially disruptive economic and political outcomes block our field of vision from the deep connectivity of our world. Our technology, goods, and services are globally integrated on a massive scale. Everything, from children’s toys to shampoo to bulldozers, is part of a global supply chain that links people and resources to produce outcomes that would be unachievable without cooperation.

Understanding Your FinTech DNA to Create a Culture that Truly Stands Out from the Crowd

When it comes to creating compelling company cultures, financial technology (FinTech) firms are in an enviable position—they can pick and choose best practices and styles from both the financial services and technology sectors to carve out their own path.

Aon Reveals Its Ward’s 50 List of Top Performing Insurance Companies for 2018

The list of Ward's 50® top performing insurance companies was released by Aon plc, a leading global professional services firm providing a broad range of risk, retirement, and health solutions. Ward benchmarking is the leading operational and compensation benchmarking and best practices service for insurance companies.

What You Should Know About Rewarding Your People in China

Over the past decade, there has been an enormous amount of change in China's business and employment environment. We have seen the continuous reformation of state-owned enterprises, the rapid rise of private-owned businesses, extensive readjustment of industrial structures, and an increasing number of new employees entering the workforce.

Infographic: Large or Small–A Well Thought Out Rewards Program Never Goes Out of Style

Classic broad based compensation is enjoying a renaissance. We expect new approaches and automation to elevate its historically foundational components to a new level of impact. Workforce expectations continue to evolve. With more contractors, conditional workers, and alternative work arrangements as a part of organizational restructuring, the foundation of knowing what roles are, what accountability roles have, how to set goals and measure performance, and how to reward achievement of goals will become even more valuable.

Tech Convergence in the Financial Services Industry: Your Questions Answered

The convergence of financial services and technology has caused firms to put the transformation of their workforce at the center of their strategy. Companies are focused on exploring new ways of working, redesigning their organizational structures, evaluating their entire employee value proposition to improve engagement, and making strategic investments in new skills and technology to support this transformation. In order to compete with tech firms and with the growing popularity of the Silicon Valley approach to attracting and retaining key employees, financial firms must acknowledge that the broader ecosystem of rewarding digital talent is changing and transform their value proposition with it.

Tackling Trusted Traditions: Examining Life Insurer Sales Incentive Design Practices

When considering sales incentive design practice among life insurers, the chorus from Fiddler on the Roof may come to mind—Tradition...Tradition...Tradition. While traditions can provide some consistency and comfort, at what point do we have to seriously reconsider and revamp incentive design practices? At what point do we have to ask, does it really make sense to keep doing it this way?

United States Regulatory Update

On May 24, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the Act) into law. This Act provides numerous areas of relief under the Dodd-Frank Act for both banks and credit unions alike. It is important to note that this Act does not provide for any provisions specifically focused on compensatory relief from the Dodd-Frank Act. While a separate bill, i.e., Financial CHOICE Act 2.0, does provide relief for a number of compensation items under the Dodd-Frank Act, its legislative future is uncertain at this point. McLagan will continue to monitor both legislative and regulatory changes that impact compensation management.

The Spotlight: Todd Leone, Partner, Global Head of Executive Compensation and Regional and Community Banking

Todd Leone leads McLagan’s global executive compensation practice and the regional and community banking sector team. Todd specializes in advising banks and compensation committees on complex compensation issues in the context of changing regulatory environments. He works with clients to design compensation plans that consider taxation, regulatory compliance, and compensation agreement provisions.

Questioning the Salary Question Ban: What are the Pros and Cons?

Inquiring about previous salary in job interviews may cause anxiety for both job candidates and hiring managers. It’s a touchy subject given the countless variables that could potentially be linked to an individual’s compensation history. Most cases of gender pay inequity are, in fact, initiated upon compiling the offer package for a new employee. In an effort to combat the disparity in compensation experienced by so many qualified candidates, several jurisdictions have or are enacting laws that impose restrictions on hiring managers with respect to asking applicants for their previous salary history.


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