As they saw assets and profits all around them dwindle, equity professionals' own paychecks have suffered, too. But there have been a few lucky fat cats in the money management industry over the past year, as Mutual Fund Market News reports in this second part of a two-part special report on salaries (see MFMN 1/13/03)
Chief executives and fixed-income professionals have managed to charge ahead in 2002, many actually reeling in more than 2001. Given the fact that equity funds lost about $20 billion in assets in 2002 and bond funds attracted $134 billion, a record high, it's not too surprising that fixed-income executives are sitting pretty.
The Investment Management Compensation 2002 survey, presented by Buck Consultants of New York in conjunction with strategic consulting firm Greenwich Associates, Greenwich, Conn., showed that execs heading up equity investment areas saw their salaries plummet a whopping 34.4% to $225,000 between 2001 and 2002. Total cash compensation fell 32.3% to $375,000, from $553,000 in the same time period.
Things were not as bad further down the chain of command, but it still was no bed of roses. Senior equity portfolio managers saw their salaries increase slightly, but total cash compensation slid 11.8% to $504,000, from $572,000.
$414K vs. $572K
While misery loves company, those in equity departments did not find companionship among their counterparts in fixed income area. And while fixed-income professionals still do not earn as much as equity professionals, right now, they are sitting far prettier.
Fixed-income employees not only held their ground, they charged forward as the bear did little to discourage an increase in both salary and total cash compensation for these workers. Salary increased by 36.1%, from $202,000, to $275,000, while total cash compensation jumped 18.4%, to $414,500.
"Overall total cash compensation has not fluctuated significantly, either up or down, from last year's results," Buck consultants wrote in their summary. "Not surprisingly, with poor performance in the equity markets and movement of assets toward fixed income investments, certain jobs experienced a decrease in total cash compensation."
Surprisingly, financial chiefs did not take a hit to their wallets, as their salary levels increased 10% from 2001 and total cash compensation increased 35.3% to $319,600.
The survey included 38 participants, which included organizations with investment management operations nationwide.
Charles O'Neill, president of Diversified Management Resources, said the huge jump in executive compensation is reflective of a trend by companies to pay their highly credible employees well. With all of the attention that corporate corruption received in 2002, companies are willing to pay financial chiefs a hefty premium to tout a strong mark of integrity and alleviate fears they are cooking their books, O'Neill said.
No Room for Scandal'
"There is no room for scandal," O'Neill said. "This is the era of cost control and cost containment. Now more than ever, the idea of no excuses for the numbers they have for themselves is prominent."
He also said that it is easier for firms to keep what they have rather than spend to bring in new personnel in key positions.
"You really want more and more people paid on the basis of results and their own performance. Advertising in the fund industry is down, as much as 50% year over year, according to what I've seen. So, every dollar you invest in funds has to work even harder."
There could also be a dramatic change in the title of the CFO, O'Neill believes. "Perhaps we're seeing the evolution of CFOs from being passive bookkeepers to being more active - participating in decisions rather than just documenting them."
The head of investments for all areas saw a significant drop in salary, but that was more than offset by a big 22.3% jump in total cash compensation. Average salary levels fell to $248,000, from $306,800, a 19.2% drop-off, but total cash compensation rose over a hundred grand to $551,600.
It was a mixed bag for the remaining positions in the report, as some saw significant increases, while others suffered disappointing losses. Senior trading positions saw total cash compensation soar 32.2%, but salary levels inched up only 3.5%. Total cash compensation for senior research jobs shot up 36.2% from 2001 levels, to $177,000, while salary crawled up only 1.3%.
But that's better than those at the head trading posts fared. While they saw salary increase 5.9%, total cash compensation fell 5.5% to $225,500 in 2002. And those at the head of research were hurt significantly by a 28.6% decrease in salary levels and a 7.9% fall in total cash compensation.
National sales managers and divisional sales managers have been hit hard during the downturn, seeing their average salary drop 17.8% between 1999 and the end of 2001, according to executive search and consulting firm DGL Consultants of Richford, Vt. Those at the top end of the pay scale suffered most, as they saw their salaries plummet 23.1% in that time. Inside salespeople and inside wholesalers were not hit as hard, but still saw an average decline of 2.5% during that two-year span, and those making the least to begin with were hit the hardest, having to cope with a 12.5% decrease in pay. However, some of the news was encouraging as wholesalers managed to maintain their collective salary level, even squeaking out a 0.16% average increase. However, those at the top suffered a decrease, only to see that money funneled down to the lower salaried employees, lessening the disparity between the two levels.
Wholesaler salary levels have been sliced, decreasing about 18.6% for wholesalers of investment products and services, including annuities, managed money, mutual funds and retirement services, in 2001, according to DGL. National sales managers also saw a dip in total cash payout, their weighted averages falling 12.8%.