Payouts on the rise for wealth management executives

Major firms boosted payout for their top managers last year as they place more emphasis on advice division

Mar 24, 2014 @ 12:01 am

By Mason Braswell

executive compensation, bonus, wirehouse, advice, advisory industry, independent, salary
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Compensation for top executives in the advice business continues to rise as stock performance improves and diversified firms place more emphasis on wealth management.

Executives across the industry, from the wirehouses to independent and regional firms, have seen salaries and bonuses jump in recent years as advisers have become a more important part of their firm's balance sheet.

“Once the stepchild, it's now the star of these diversified firms,” said Jeff Visithpanich, a managing director at compensation consulting firm Johnson Associates Inc., which has done research on executive compensation. “All the diversified firms want to grow in wealth management, private client and asset management.”

Don't miss some rather outlandish: Top executive benefits.

Gregory Fleming, the president of Morgan Stanley's wealth and investment management units, saw his stock bonus jump by more than 62% last year, according to filings with the Securities and Exchange Commission. He received 127,825.69 shares of company stock valued at nearly $3.9 million as of Jan. 23, the date of the filing. That's up from his 2012 stock bonus, which the firm valued at $2.4 million.

The firm also increased Mr. Fleming's salary to $1 million in 2013, a boost from $750,000 the year before.

Better compensation comes as the investment banks turn their eyes on their brokerage units as a less risky and steadier source of income. It is part of a sea change where managed money is becoming more of a focus than broader banking operations, Mr. Visithpanich said.

“It's less capital-intensive, less risky and in some ways less in the scope of regulators,” Mr. Visithpanich said. “And if you're charging fees on average assets over each year, it can provide predictable fee streams over multiple years.”

A Morgan Stanley spokeswoman, Christine Jockle, declined to comment.

Executives in wealth management also benefited as the markets improved and firms hit record performance metrics.

“Markets lifted all boats, but especially those with broad based returns and products,” a Johnson Associates report said.

Wells Fargo & Co.'s wealth, brokerage and retirement division hit a record net income of $1.7 billion in 2013.

The head of that unit, David Carroll, took home $8.8 million, up 5% from 2012 and up nearly $1 million from his 2011 pay of $7.9 million.

Mr. Carroll, who has the third-highest-paid position at the firm, has seen his base salary more than double in recent years from $700,000 when he joined from Wachovia in 2009 to $1.5 million last year, according to filings this week.

The firm said that he has an integral role in improving performance and integrating wealth management with banking, according to the firm's proxy statement.

“Under his leadership, [the wealth, brokerage and retirement division has] accomplished a number of important strategic objectives, including increasing client assets and core deposits, and improving credit quality,” the firm said. “[The division has] continued to leverage relationships with wholesale banking and community banking to attract new customers and increase the number of products and services we provide to our existing customers.”

Mr. Carroll took home more than $14 million in 2009 when he joined the firm, but $10 million was tied to a retention bonus. His total compensation package as a senior executive at Wachovia Corp. in 2007 was $5 million. He didn't make the list of the top five highest-paid executives at the firm in 2010.

A Wells Fargo spokeswoman, Rachelle Rowe, said the firm does not comment on compensation for senior executives.

Compensation information for Bank of America Merrill Lynch executives was unavailable. The head of the firm's wealth management and private-banking unit, John Thiel, was not among the highest-paid executives, according to a 2013 proxy filing. The fifth-highest-paid executive at the company, Gary Lynch, head of compliance, took home $7 million.

The head of UBS Wealth Management Americas, Robert McCann, received 8.6 million Swiss francs in 2012 (about $9.6 million), making him the second-highest-paid executive at the Swiss firm, behind chief executive, Sergio Ermotti that year.

Mr. McCann slipped behind the CEO of UBS' investment bank, Andrea Orcel, in total compensation in 2013. The firm did not break out his total compensation, although it said that his salary remained unchanged at 1.5 million Swiss francs (approximately $1.7 million).

Executives at publicly traded independent firms have shared in the wealth. Mark Casady, LPL Financial's CEO, brought in a total compensation of $6.1 million last year, up from $4.6 million in 2012 and $2.9 million in 2011, according to SEC filings.

The trend of higher payouts is expected to continue upward in 2014, according to a Johnson Associates report.

Compensation for those in asset management and wealth management, including advisers, could increase as much as 10% to 15% as firms continue to benefit from 2013 asset inflows and cost cutting measures, the report said.

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