Standard Life Aberdeen could face depressed morale on the shop floor as it reportedly slashes bonuses – a potential shock to the system for asset management staff who had become accustomed to bonuses after a decade-long bull market.
The Telegraph has reported some staff said their bonuses had been halved, while others received no pay-out. “People are not happy,” one insider told the newspaper.
Portfolio Adviser reached out to the asset manager about the size of the latest bonus pool compared to previous years but has not yet received a response.
The Standard Life and Aberdeen Asset Management merger has not stymied heavy levels of redemptions, which in 2018 grew to £40.9bn, up 24% from £32.9bn the year before, according to the firm’s latest set of results released on Wednesday. SLA’s share price has plummeted from 421p just over a year ago to its current 267p.
Gbi2 director Graham Bentley said: “Bonuses of course apply to the wider marketing, operations and admin employees, and I suspect ‘shop-floor’ morale will be depressed – after a 10-year bull phase asset management industry staff generally have come to consider bonuses as part of salary.”
“Some may even have planned spending accordingly.”
Fund manager renumeration
When the businesses combined less than two years ago, £35m was allocated to a keyman retention pot, and key fund managers were held on long-term incentive plans, said Bentley.
“More recently a number of senior sales roles have been made redundant as the business cuts its cloth to suit,” he said. “As an investor, it wouldn’t worry me unduly unless I saw my lead manager leave, to be replaced by someone in the team, rather than a ’name’.
“Those who have left have tended to be people passed over for more senior roles, or desk members rather than leaders,” he said.
Darius McDermott, managing director at Chelsea Financial Services, said most fund manager remuneration is based on a combination of performance and assets under management and he doubted fund managers would be affected as much as others within the asset manager. “Certainly, their top performing managers should all be fine.”
There are always teething problems when two groups merge, particularly when there are large outflows, McDermott said.
Bentley said Aberdeen Standard needs to decide how it responds to falling assets, whether by reassessing its range, beefing up the asset management team by buying in external managers of high reputation.
HR departments rethink bonuses
However, Fundscape editorial director Gavin Fielding said bonuses had returned to being “an ‘extra’ the icing on the cake” around several years ago, a reversal of remuneration policies introduced around the financial crisis, whereby HR departments favoured bonuses over pay rises.
Fielding said: “When staff suddenly find they are not getting a bonus or not as much as they expected because the firm needs to save on costs, they suffer something akin to withdrawal symptoms. Just remember not everybody was going to spend their bonus on a Rolex or Aston Martin, it could be to put food on the table too.”
