Brokerage executives enjoying steadily increasing payouts

As markets thrive and wealth management becomes a focus at major firms, brokerage execs see their pay rise

Apr 5, 2015 @ 12:01 am

By Mason Braswell

It's a good time to be a brokerage executive.

As markets rise and wealth management becomes the golden child at many of the major financial services firms, these executives have been awarded steadily increasing payouts, some of which have doubled in recent years.

“The brokerage business has been the recent star,” said compensation consultant Andy Tasnady of Tasnady Associates. “With the government reducing the leveragability of some of the other businesses, a lot of firms are making less money in the non-brokerage business while brokerage has been chugging along and going steady.”

The head of Morgan Stanley's wealth unit, Greg Fleming, for example, was awarded a pay package of $16 million for 2014, up around 10% from $14.5 million in 2013 and almost double the $8.6 million he received in 2012. His pay is now higher than that of even top executives at large banks, including Bank of America Corp., whose chief executive Brian Moynihan was paid $13 million last year.

It's easy to see why Mr. Fleming got a raise. Wealth management at Morgan Stanley has been hitting its growth targets and boosted its profit margins to 20% last year from 18% in 2013. Morgan Stanley wealth management now comprises 43% of total revenue at the parent company.

In its 2014 proxy statement, Morgan Stanley praised Mr. Fleming for his unit's improvements, “including increased profit before tax, continued margin improvement and investment performance … efforts to increase collaboration with Institutional Securities, and his leadership in improving morale across the businesses.”

While Mr. Fleming was one of the highest paid of his peers, his raise was consistent with brokerage executive pay increases across the board, according to Jeff Visithpanich, a managing director at Johnson Associates, which specializes in executive compensation.

“If you look at just asset management, I would take that to say they thought he did a good to very good job,” Mr. Visithpanich said of Mr. Fleming's salary. “There are some [raises] higher than 10%, but the middle of the pack is high single digits to 10%.

At one of Morgan Stanley's wirehouse competitors, Wells Fargo & Co., David Carroll, the head of wealth, brokerage and retirement, earned $9.7 million in 2014, up from $8.8 million in 2013, also a 10% increase.

UBS AG does not break out total compensation for the head of its U.S. wealth group, Robert McCann, but it likely was close to $10 million. The firm reported that Mr. McCann made $1.5 million in base salary and also reaped undisclosed performance rewards, which the firm reported were worth 3.1 times base salary on average for executive board members. He also received almost 90,000 shares of UBS stock, which would be worth around $1.7 million based on the closing value of UBS' stock last Thursday.

Compensation for the head of Merrill Lynch, John Thiel, is not available because the firm now reports under Bank of America Corp., where he is not one of the most highly paid executives whose compensation must be disclosed under Securities and Exchange Commission proxy rules.

Compensation numbers are still well below where they were for top executives in 2006, before the financial crisis, when Mr. Fleming, who was at Merrill Lynch & Co. Inc. at the time, was granted a sizable pay package totaling $34 million. Robert McCann, also at Merrill Lynch, was awarded $23 million that year.

But competition is also driving up compensation as wealth management executives are targeted by head hunters and frequently switch firms, as Mr. McCann and Mr. Fleming have, or are scooped up by asset managers. Last month, for example, LPL Investment Holdings' No. 2 executive, Robert Moore, left to join an institutional money manager.

“There's a lot of [ex-]Merrill Lynch management at other firms, so either they're very good at writing resumes, or they are actually very talented and sought out,” Mr. Tasnady said.

Independent broker-dealers also bumped up their executives' pay. Edward D. Jones & Co., for example, paid its chief executive, James D. Weddle, $13.9 million last year, up from $12.9 million in 2013, according to its annual report.

And in a testament to the growth of the registered investment advice channel, Bernie Clark, the head of Schwab's custody unit, made his first appearance on the list of the top paid executives at the company, bringing in $2.6 million last year.

Mr. Tasnady said that the numbers are sustainable given the improving market performance. Salaries could fall if the market takes a hit, however.

“When you have direct profitability so easily measured in this business, it's easier to demonstrate their value,” he said. In another downturn, however, “then they'll have to bite the bullet as well.”

0
Comments

What do you think?

View comments

Recommended for you

Does your pay stack up?

The Adviser Research Dashboard

Based on data collected through InvestmentNews' annual adviser research studies, this interactive, customizable tool allows you to view detailed data on compensation, staffing and financial performance practices from across the industry.

Learn more »

Featured video

Events

Envestnet Tamarac's Anderson: What's next for fintech?

Envestnet Tamarac is focused on broadening its offerings so it can gather more marketshare and craft more partnerships. Check out what Andina Anderson is examining so the company can do more for advisers.

Latest news & opinion

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.

Ohio National offers buyouts, ends commission trails amid jumbled regulatory oversight of VAs

Jurisdiction is shared between the SEC, Finra and state insurance commissioners. Will any of them step in?

6 mistakes advisers make when onboarding new clients

Starting a new relationship with a client is harder than it looks.

TCA by E*Trade lures Edelman Financial Engines with promise of client referrals

Access to clients through E*Trade's 30 branch offices drew the attention of RIA Edelman Financial Engines.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print