The LTI Design Tensions Nobody Talks About

Managing Director Bryan Liou recently spoke at a conference hosted by HRSoft discussing current compensation issues in financial services.

One key topic was current trends in long-term incentive design:

The most consequential shift in LTI design right now is not about vesting schedules or eligibility thresholds, but who the plan is actually designed for.

One panelist put it directly: large diversified financial institutions are moving away from parent company plans, and toward specific business unit structures that mirror what standalone competitors in that niche actually offer.

“You’ll have banks with their traditional business, but they also run asset management, and within asset management they’ve got hedge fund strategies and private equity strategies. Now we’re seeing a lot more bespoke plans built for each subsidiary, aligned more closely with that subsidiary’s actual market.”

A private equity professional sitting inside a large bank no longer wants or expects a long term incentive program that mirrors that of its parent company. They want carry, investment linked returns, and real line of sight to the value they are creating.