A tight labor market is pressuring asset managers to reshape their compensation and benefits packages as more professionals consider new job opportunities. And while firms typically use bonuses to sweeten offers, base salaries are getting more attention, according to compensation consultancy Johnson Associates.

“Even [during] the financial crisis, we didn’t have as much focus on base salaries,” Alan Johnson, Johnson Associates’ managing director, told FundFire. “One of the peculiarities in financial services is that base salaries, from time to time, will lag because appropriately in asset management and other parts of financial services, they want to emphasize performance. But having unduly low base salaries is usually not a good idea,… particularly with the talent competition that we have today.”

A growing number of managers are increasing base pay by 5%, 6% and even higher, instead of the customary 3% annual raise, Johnson said during a client presentation in March. Decisions to bump up base salaries occurred in the fall of 2021, “really before we all became very in tune with the idea that inflation is very high,” Johnson told FundFire.

It’s hard to explain low base salaries during this competitive recruitment process, he added.

“It sends an odd message – you’re making excuses even before you begin the discussion,” Johnson said. “We tell clients you don’t have to have unusually high base salaries, but you need to be at least competitive, so it’s, at a minimum, a non-issue.”

Johnson’s early predictions, based on the first quarter, suggest the significant compensation increases of 2021 are unlikely this year. In the fourth quarter last year, the consultancy expected a 15% increase in asset management bonuses for that year. In 2020, those incentives jumped by 5% at the most, according to Johnson…

Similarly, managers should standardize base salaries among employees with the same role, Johnson said during the presentation.

“Many firms spend an enormous amount of energy around individual base-salary increases, but often with very little impact,” Johnson said. “If we look at… a group of investment professionals, [and] a group of operations [or] technology professionals at the same level, the salaries overlap to the point that it’s difficult to explain why the salaries are what they are.”

FundFire / April 18, 2022