performance Articles

Further Ramifications of New DOL Fiduciary Ruling on FA Training

In addition to the compensation implications discussed previously, another area demanding firms' attention will be roles and training. Compliance departments will require additional staffing, including new roles dedicated to all things fiduciary.

Implications of New FLSA Minimum Salaries and DOL Fiduciary Ruling

It's certainly not a stretch to call 2016 a very challenging year for HR / Compensation professionals in the financial services industry as they respond to two sweeping regulatory changes: the Department of Labor's new fiduciary standard for Financial Advisors and new FLSA minimum salary rate for exempt employees.

Regulatory Update: Solvency II – Remuneration Requirements

Our consultants have summarized the Supervisory Statement (SS) on Solvency II remuneration requirements, released today by the Prudential Regulation Authority (PRA), and what it means for insurance firms in the UK.

What Next for The Kingdom of Saudi Arabia’s Capital Markets?

Recently The Kingdom of Saudi Arabia announced a grand economic vision to take the economy to 2030, diversifying the area’s reliance on oil. This comes at just the right time. Depressed oil prices and a tumultuous 24 months in the region, where state coffers have been tested and economic growth has lagged, has now been met with a new sense of optimism and a way forward. This has been further spurred on by the recent increase in oil prices that are back at approximately $50 USD a barrel.

McLagan Alert: The UK Decides to Leave the EU

On 23 June the UK voted to leave the European Union (EU). This historic decision is creating near-term volatility in the capital markets, but it is important to note that the full impact of this decision for the UK and European financial services sector will unfold over a period of at least two years as the UK negotiates the terms of the exit.

Who wants to be an Investment Banker?

It is no secret that investment banks are concerned about their ability to attract and retain the best talent. The fading allure of investment banking as a career, increased competition for talent, reputational damage, cost pressure, regulation, and attitudinal shifts associated with the changing of the generational guard have all contributed to what is now widely regarded as one of the biggest challenges facing the industry.

Breaking the Digital Banking Talent Code

Innovative digital developments have had a profound impact on the day-to-day lives of individuals, including retail banking customers. In response, the banking industry has begun to embrace the digital era, where mobile apps and smart ATMs are no longer a luxury but have become a necessity. The wave of digitalization has led many banks to reevaluate their business and talent strategies to attract, engage, and reward a new generation of staff that can successfully transform their existing platforms and provide the digital experience their customers have come to expect.

Restoring the Culture / Reward Link

Firms are trying to do more with less regarding compensation but two powerful, conflicting forces are affecting how they manage reward. Diminished business performance is increasingly driving firms to customized solutions, with the focus less on conforming to market practice, and more on what is optimal for survival. Regulation is a powerful force in driving firms toward more standardization. Even firms that are operating outside the regulatory crosshairs are influenced by what they are seeing in the larger, more regulated marketplace around compensation. In the midst of trying to tailor plans to be unique and practical, as well as aligned with regulatory guidelines, the linkage between a firm's culture and reward is often falling by the wayside.

Allowances and Benefits in the Financial Industry: Current Strategies and Changing Landscape in the Middle East

The structures for allowances and benefits in the regional financial industry are often complex and in many cases, independent of the business and HR strategies. Given the regional employee demographics, with a mainly expatriate workforce, and the tax-free environment, international banks often struggle to maintain parity with their foreign operations in regard to reward structures. Local financial firms also face issues such as, legacy compensation structures with excessive numbers of allowances, and complex employee demographics.

Consciously Uncoupling Complexity in Retail Banking Incentives

Historically, branch employees were the main interface with the customer. Today customers have more frequent interactions with their banks through technology, thus altering the role of branch employees. Within retail banking, incentive plans have grown overly complex in response to the historic branch business model.  However, technology-driven changes in the branch are enabling model firms to simplify their incentive plans and drive desired staff behaviors within a new banking model. Firms that are able to make this change will have a competitive advantage in recruiting staff and serving customers. 

Changing Times: Quantifying Research

Research continues to form an integral part of a firm’s product offering, although, like all functions, it has come under intense pressure over the past 4-5 years as the dip in firm-wide revenues has pressured margins. While the economics of providing research improved in 2013, driven by a rebound in equities revenue, firms are still considering whether to categorize research as a revenue producing function or a cost centre.

New Banks: License to Skill

​For the majority of 2012 and 2013, the Reserve Bank of India (RBI) has seemed reluctant to take decisive action on policy issues and monetary mechanisms. It finally managed to rouse the banking industry in India, by giving the go-ahead for corporates and non-banking finance companies (NBFCs) to apply for new banking licenses. This decision has been long debated and even longer awaited, coming after a hiatus of 10 years.  The RBI had issued only two licenses in the early 2000s and prior to that its last activity was in 1993-94.

Undervalued Private Bankers

Private bank margins have been squeezed from all sides of late. Low federal fund rates and high deposit insurance costs have lowered spreads on banking products; defensively inclined clients, holding high levels of cash, are reluctant to become more aggressive which is driving down fees and commissions; and private banker compensation has been rising faster than the revenue they bring in.

Improving Wealth Management Margins Requires HR Led Change

Steady growth, high margins relative to other segments of financial services, and low capital requirements makes wealth management an attractive sector in a low growth, capital constrained post-Basel III world. However, the influx of investment has kept demand for Relationship Managers high and caused Relationship Manager pay to rise faster than productivity (see Exhibit 1 below). This has exacerbated the margin pressure caused by historically low spreads on banking revenue and weak equity markets. As a result, U.S. private bank margins have declined 25% since hitting a peak of 40% (pre-tax) in 2006. These lower margins have resisted dramatic improvement despite reduced loan loss provisioning in recent years.

Emerging Regions Update

A team of our consultants provide an update on emerging regions including Brazil, Russia, India, China, Middle East, and South Africa.

Today’s Compensation Environment – 2010

This is the 9th edition of Corporate and Consumer Banking Consulting Practice White Paper on current compensation trends in the banking industry. Since beginning this annual publication (originally published by Amalfi Consulting and sponsored by the American Association of Bank Directors) we have focused on specific trends in compensation with a detailed year-over-year analysis. However, with the industry continuing to face challenges on numerous fronts, we also comment on the state of the banking industry, along with the resulting impact on compensation.

2009: A Year to Forget? Are There Lessons to Be Learned?

By all accounts, 2009 was a year that most of us want to forget. The credit crisis came home to roost, government intervention and regulation reached an all-time high, executives in general and bankers in particular were vilified, and so many things that we took for granted were turned upside down. But, from all this, are there lessons that we can learn?

The Changing Landscape of Strategic Cost Management for Insurers

The global financial crisis of 2008 - 2009 has spurred a renewed focus on operational efficiency and Enterprise Risk Management (ERM) not only for (re)insurers but for all organizations. With companies facing the toughest market conditions and economic climate since the Great Depression, challenges and questions loom around every corner. The turmoil we have experienced, and continue to encounter, coupled with an abundance of new and proposed regulatory reforms, presents firms with daunting challenges - and significant opportunities.

What Do They Mean By Unreasonable Risk?

Virtually every regulatory body has come out with some pronouncement or other admonishing financial institutions to curtail compensation programs that “encourage the taking of unreasonable risk.” Two parts of that statement are problematic.

Can We Please Stop This Craziness Now? The Case Against Punitive Taxes on Banker’s Pay

It was a big week in Washington—lots of hoopla and press and plenty of opportunity to take pot shots at the “fat cats” on Wall Street. But, it’s a new week and calmer heads must rationally get down to the business of saving our financial system.

Asset Management 2008 Recap: A Look Back At A Profoundly Changing Industry

While 2008 was a profoundly challenging period for the asset management industry, the impact of the stock market chaos in the latter part of the year is only partially recognized in the financials of our benchmark firms. This document summarizes public data collected for twelve asset management firms in a report titled Asset Management — Quarterly Financial Benchmarks.

First Quarter Optimization

After working harder than ever, in the most stressful year-end environment any of us have seen, it would be nice to say that we can coast a bit in the first quarter of 2009. But we can’t – there is still much work to be done.

Crisis in Asset Management

Building on results of Performance Intelligence, McLagan and Casey Quirk's annual study of asset management company financial performance, this paper highlights the challenges facing asset management firms. 

Where Human Meets Capital

Where Human Meets Capital explores the evolution of human capital in wealth management. In this week’s article Peter Keuls, McLagan’s Global Head of Wealth Management, explores how technology continues to change the wealth management workforce, and considers how firms can best position themselves for tech-enabled success.

There is More to Frankfurt and Paris than Meets the Eye

Germany’s financial capital, Frankfurt, is the metropolis on the Main River. Frankfurters like to regard themselves as Main-hattan, a slice of Wall Street where upcoming financiers cut their teeth before moving to the killing fields of larger London and New York. We believe that the stage is set for this talent flow to reverse, which merits a little more consideration for your future location strategies.

Missing Tricks From Your Top Bankers? The Latest Appliance of People Science

Missing some tricks from your top bankers and relationship managers? Paying them too much? Evidence suggests you are likely doing both.

Success in Succession Planning

While all eyes have been watching the DOL / fiduciary developments, another risk continues to loom over the industry: the dual trends of a rapidly aging FA force and their aging clients.

Agile Working and What Makes a Great Advisor

Increasingly firms must be tuned in to the changing needs of clients. During his 2009 TED talk, Marketer Richard St. Curtis argued that we must stop discussing ‘success’ as though it is a ‘one-way street’. Too often, he explained, we focus on everything that will lead us to success and, when ‘we figure we’ve made it, we sit back in our comfort zone’ and stop trying.

Infographic: The Path to Financial Advisor Success

With rising pressure to grow profit margins, continuous improvement within the ranks of financial advisors has never been more important. But, what are the key building blocks and tools proven to drive financial advisor success? This week we explore and share with you ways in which implementation of a performance improvement strategy can make a BIG difference, how market intelligence sets the foundation, and ways to build an action plan for performance improvement. 

Risk versus Reward in the Kingdom of Saudi Arabia

The 2030 reform agenda is now in full swing within the Kingdom and the IPO of Saudi Aramco is finally taking shape. The landscape in the Kingdom will look very different if the 2030 plan goes according to plan however as well as requiring a strong hand from the government to push it through it will also require capital, and lots of it.

 

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