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.”
