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White Paper: The Quiet Corner of Financial Services

Past sales practices within many banks are no longer tenable given the lack of transparency, risks, administrative burden, and confusion most incentive plans have instilled. This white paper explores the complex landscape of retail banking, including the values of the firm and the HR systems that support them. We have provided recommendations for navigating the gaps that exist. 

The Troubled Waters for Retail Banking

Incentive opportunities and the mix of pay continue to be examined as the effectiveness, administrative burden, and risks of low dollar programs are under scrutiny in retail banking.

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.

Employee Turnover Slows in Brazil, Even as the Tech Sector Remains an Economic Bright Spot

Voluntary employee turnover at technology companies in Brazil has slowed for the past four years, suggesting limited job opportunities amid the country's political and economic crisis. However, if we peel back the layers, we find sales employee turnover has rebounded in the past year and the Brazilian startup scene is attracting government support and foreign investment.

Corporate Titles: An outdated concept or a building block for excellence?

As we look across a set of industries—Financial Services, Technology, Fin Tech, and Consulting—we see dramatically different approaches to job architecture in general, and the use of corporate titles in particular.

White Paper: The Modern Approach to Managing Compensation for Strategic Near Shoring Locations

​In recent years financial services firms have increased their focus on deployment of their workforce to strategic near shoring locations to help manage compensation and other expenses. As a result of exponential growth of the near shoring centers and increased competition from industries outside of financial services, firms have been facing new challenges in managing pay for support staff and applying regional differentials appropriately.

Incentive-based Compensation Arrangements: A Summary of Dodd-Frank Section 956 (Part II)

The update provides an executive summary of critical strategic issues, a deeper dive on tactical implementation issues, and definitional clarity on key topics. McLagan has been in communication with members of several regulatory bodies and based upon those communications developed our perspective for this alert. While we believe the substance of each agency's proposal is aligned, we acknowledge the potential for nuances as the proposals range from approximately 300 - 700 pages in length, depending on the agency.

The Kingdom Reforms

The past few months have presented unpredictable consequences for oil exporting countries - the price of oil has nosedived by over 70% compared with June 2014 levels. The extent of the impact has been as unrelenting as the pace of the fall in the prices. These are troubling times for Saudi Arabia as the country faces an economic crisis of sorts - from its peak in 2014, Saudi reserves are estimated to have depleted by a whopping $150 billion. In 2015 alone, the Kingdom consumed $115 billion in reserves, when the crude oil prices averaged under $50 per barrel.

Incentive-based Compensation Arrangements: A Summary of Dodd-Frank Section 956

After five years, the interagency task force has re-proposed Section 956 of Dodd-Frank. This proposal is clearly more prescriptive and covers all financial institutions with balance sheet assets over $1 billion that are regulated by the six agencies.

Managing Compensation in a Downturn

It seems like we are in for a rocky ride in 2016. While underlying economies of many countries and the financial performance of many companies still appear solid, numerous firms are preparing for a tough year ahead.

EBA Consults on Draft Remuneration Guidelines for Sales Staff

On December 22 2015, the European Banking Authority (EBA) published a consultation paper on its Draft Guidelines on remuneration policies and practices for staff offering and providing retail banking products and services.

EBA Publishes Final Guidelines on Sound Remuneration Policies under CRD IV

The European Banking Authority (EBA) published its final guidelines on sound remuneration policies under CRD IV (Guidelines) on 21 December 2015. Following a strong industry response to the first draft of the Guidelines that was published in March 2015, there have been changes to the original text. Most notably, proportionality is not addressed in the Guidelines; instead a separate Opinion that is addressed to the European Commission (EC), European Parliament and Council has been published. The EBA’s Opinion on proportionality confirms that the EBA will provide guidance to the EC on potential changes to the text of the Directive to clarify how proportionality is to apply.

The Great Fall of China - No Monkey Business

In October 2015, McLagan published an alert titled "The Great Fall of China?", where we discussed the slowdown in the Chinese economy, the steep fall in the Shanghai Composite and their potential impacts on pay in China and the Asia Pacific region. At the end of the year, and as we enter the Year of the Monkey, we've taken a fresh look at how that has played out in 2015 and what it could mean for 2016.

To Rate or Not to Rate: A Thoughtful Guide

In recent months, with increasing frequency, we have read of firms eliminating performance ratings and "blowing up performance management". Few trends in Human Resources have had more momentum and, while this might not be a popular thing to say, have been misunderstood or done with less forethought. Support for dismantling traditional performance management approaches has been informed by employee feedback, research, and positive intentions. But what sometimes feels missing in firms' change processes are rigorously defined desired end states, and thorough reviews of the role that performance management and ratings (specifically) play at those firms. We believe there is a sweet spot between "transformative" and traditional performance management. It will look a little different for each firm, particularly in financial services, where highly differentiated compensation is at the very core of how firms operate—but the sweet spot can only be achieved through rigor and not a rush to join a crowd. In this paper we will look at what is changing, what are the intended outcomes, who are the stakeholders in this change, and what are the specific implications for rewards at financial services firms. 

Competing in Hong Kong

The Competition Ordinance (Commencement) (no 2.) Notice 2015 was published in the Gazette on 17 July 2015, which declares 14 December 2015 as the effective date for the rule. This Ordinance, first outlined in 2012, restricts four types of conduct that are described as anti-competition - pricing manipulation, market division/allocation, output restriction or control, and bid rigging. Though not specifically targeted at employment matters, it is clear that the Competition Ordinance (CO) restricts practices like wage-fixing, formal and informal sharing of pay or benefits related information with competitors, industry-wide negotiations that impact wages and employment terms, and no-poaching agreements.

The Great Fall of China?

Impacts on compensation and talent management in China and Asia Pacific after the Recent Chinese Stock Market Correction and Renminbi Devaluation

Securities and Exchange Commission—Proposed Clawback Rules— Technical Insights

On July 1, 2015, the Securities and Exchange Commission (SEC) released proposed rules addressing the final executive compensation regulation required under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).  Proposed Exchange Act Rule 10D-1 requires the SEC to adopt rules directing the national securities exchanges and associations to prohibit the listing of any security of an issuer that does not develop and implement a policy providing for the disclosure and recovery of excess incentive-based compensation received by a current or former executive officer whenever the issuer is required to prepare an accounting restatement in order to correct erroneous financial data.

The Technology Talent Demand Convergence

It wasn’t so long ago that information technology (IT) was a back office function at most firms and, while companies would look at Apple or other innovators with envy or admiration, information technology was seen primarily as a way to execute or operate more efficiently – particularly at financial services and consulting firms. While there were pockets of innovation and firms dabbled with client-facing technology solutions, the overall IT focus was on automating repetitive tasks, storing and analyzing data, and running communication systems. As a result, the market for technology talent at financial and professional services firms was a relatively soft one.

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.

Proposed Pay Versus Performance Rules Preliminary Observations

On April 29, the Securities and Exchange Commission (SEC) voted in favor of issuing proposed rules for the Pay Versus Performance disclosure that Congress included under Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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.

EBA Consultation on Guidelines on Sound Remuneration Policies

On 4 March 2015, the European Banking Authority (EBA) published a consultation paper on draft guidelines on sound remuneration policies. These guidelines seek to clarify how firms and regulators should interpret the remuneration rules in CRD IV. The proposed text updates guidelines previously published by the Committee of European Banking Supervisors (CEBS – the forerunner to the EBA) about pay regulation under CRD III.

Exams, elephants, and advisor performance: Dealing with the disconnect between client satisfaction and advisor performance

When polled to give their wealth manager an exam score, US HNW investors levied a score of 72.7%, which would equate to a C- grade. This score would likely result in dire consequences in most households with children. Yet at the same time, net new money inflows – which averaged USD 1.8 billion (or 1.7% of assets) across the industry in 2013 – seem to affirm the health of global wealth managers.

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.

Client Experience: The drive to put clients at the heart of wealth management

“Put the customer at the heart of the service experience” – that’s the gauntlet that one global wealth management firm intends to throw at the feet of its new executive and head of client experience (CX).  Challenged to “drive transformational change in customer journeys” and deliver “sustainable competitive advantage through best-in-market customer experience”, the optimism of all would-be candidates must be applauded.

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.

 

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