Volatility Drives Pay Shifts For Asset And Wealth Management Firms

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WTW

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Financial market contractions borne from a volatile geopolitical environment and an uncertain global economic outlook continue to drive challenges for firms...
UK Wealth Management
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Financial market contractions borne from a volatile geopolitical environment and an uncertain global economic outlook continue to drive challenges for firms in the asset and wealth management sector, according to a recent WTW pulse survey of industry organizations in Western Europe and North America.

Against this backdrop, it is unsurprising that 43% of asset management firms in North America anticipated incentive pools to be down more than 5% in 2023. Conversely, Western European firms were more optimistic, with just over 35% of firms anticipating pools to be up 1% to 5% over last year, and 12% of firms in the region expecting pools to be up more than 5%. However, it is worth noting that the North America data was collected during September 2023, and the Western Europe data was gathered in November, just as equity markets began to rally (see Figure 1).

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Also, salary budgets are more generous in the Western Europe sample, with a 4% increase being the most frequently cited (47% of asset management firms). In North America, a 3% increase was the most common response (50%). Yet, these projections were part of a more volatile picture: In Western Europe, 26% of respondents anticipated increases of less than 3%, compared to 5% of North American respondents citing increases at the lower end of the scale (see Figure 2).

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Broader rewards changes

The pulse survey looked beyond monetary compensation to broader HR topics across wealth as well as asset management companies. In 2023, pay transparency and inflationary pressures on salaries were two themes that gained the most significance for both geographies. However, culture and diversity, equity and inclusion also gained more traction in Western Europe whereas, in North America, these topics have maintained approximately the same level of focus as a year prior (see Figures 3a and 3b).

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Though the topic of hiring was relatively static in the degree of concern it generated, more than half of asset and wealth management respondents in both regions said they were targeted in their hiring activities, focusing on specific roles and/or open headcount. However, there was a bit more optimism among some Western European firms, with 17% of respondents reporting increased hiring versus 4% in North America (see Figures 4a and 4b).

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North American asset and wealth management firms have increased their focus on office attendance policies, with 36% of respondents reporting they made changes compared to 17% in Western Europe (see Figures 5a and 5b). 36% of North American firms and 43% of Western Europe firms said increasing the number of in-office days was a goal.

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The survey also asked how industry firms were addressing environmental, social and governance (ESG) topics. While about three-fifths of respondents in both geographies said their clients were asking for more ESG disclosures in their investment options, the appetite for including ESG metrics in performance scorecards below the executive level was significantly higher in Western Europe (65%) than in North America (22%); see Figures 6a and 6b).

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Overall, the rewards picture among asset and wealth management firms in Western Europe is more optimistic while North American firms tend to be more cautious. However, many similarities are apparent, which is unsurprising in an increasingly global market. As ever, timely and accurate data is the best source of information for firms to draw meaningful insights and steer their way through uncertainty.

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