Only last week, Martin Wheatley, head of the FCA, hinted that banks could face continued scrutiny over pay because the link with mis-selling had endured a number of its crackdowns.
Admittedly, improvements have been made, Wheatley said, when he appeared at the British Bankers Association conference in London.
But the FCA’s chief also warned that the dangerous bank bonus culture was alive and well – and he hinted that targets and other variables linked to pay would be the next items on his agenda to reassess.
Not just big banks?
When the regulator has previously scrutinised incentives, investigations have not simply focused on the big banks. Networks, investment houses and fund managers have all found themselves wrapped into its reviews, even if it is the probes at the likes of Lloyds, which last September was caught in a PPI mis-selling storm, that have grabbed the bulk of the inflammatory headlines.
With banks set for what looks like yet another review into remuneration, there could now feasibly be questions raised about what fund managers will be able to offer to keep their best staff in place.
Some of the biggest investment houses have already seen a string of departures in recent months, and in some cases, reviews of incentives have followed swiftly afterwards.
Mo money, mo problems?
Responding to the departure of Euan Munro, the architect of Standard Life Investments’ Gars, Guy Stern, who took over from Munro, said at the time that while he was sorry his colleague was leaving it was also a compliment that employees from the Edinburgh-based investment house were in demand.
“There’s always going to be people chasing the best,” Stern said, adding that while retention policies were important at SLI, securing better financial incentives was not necessarily behind the industry’s big moves.
He explained: “If we think about the departures we had in September that was a situation where our colleagues were incentivised to move to another company and leadership positions.
“In the end I’m pretty confident we have at least as good a retention policy as anyone I’ve ever seen. We think very carefully about what it is people want to do, not just about the money, and I think that’s why, quite frankly, I’ve [had] to announce such an important departure.”
Elsewhere, fund managers are continuing to align their best managers with the success of their businesses, with Smith & Williamson overhauling its corporate structure last year to incentive its directors, and last week AIM-listed Miton drew up a plan to support its goals of growing assets and profitability, while at the same time rewarding managers in a way that tied performance to their own segment of the firm.
Long-term success
As revealed by Portfolio Adviser, Miton wants to give its fund managers like Gervais Williams the opportunity to snap up growth shares where the value of stocks will be linked to revenue and AUM.
Ultimately, the new scheme should help it hold on to its star investors, Miton’s Ian Dighé, its executive chair, said.
He told shareholders he felt it was “appropriate” for the fund house to try to keep hold of its staff because by doing so, both the company and its investors would benefit.
“The success of the group will largely depend on its ability to retain, attract and motivate high quality individuals,” Dighé said.
