Salary Survey 2011: Show me the money

It would be easy to say that the Australian financial services industry has largely rebounded from the global financial crisis (GFC). But the fact remains that there is still a long way to go before both recruitment and remuneration once again hit their pre-2008 peak.

That said, the last year has been an improvement in terms of recruitment as businesses realised that in order to outperform competition, additional headcount was needed. While this did not extend to the remuneration side of things, it is widely believed that it is only a matter of time before pressure from both internal and external sources will eventually push salaries in the right direction. So while the industry may not be out of the tunnel just yet, there is definitely a bright light in the not too distant future.

Base salaries

Looking at base salaries over the last year reveals that not much has changed on the remuneration front. But Jane McNeill, senior regional director of Hays Banking, is hopeful that this is unlikely to last for too much longer.

“Throughout the second half of 2010, despite the hiring activity, there has been some reluctance to increase salaries,” she said.

“This has started to see employers lose out on the top talent to competitors at the offer stage, which is why we expect salary pressure to return in early 2011.”

The managing director of eJobs Recruitment Specialists, Trevor Punnett, has noticed small pockets of increases in base salaries for more experienced staff but believes that until demand increases dramatically, across the board increases are unlikely.

One of the biggest factors that is likely to push base salaries up over the coming year is internal pressure from discontented employees, said Simone Mears, director of Profusion.

“Higher-end candidates who have been sitting in jobs for the past three years without any salary increases are getting increasingly frustrated. There’s starting to be enough jobs in the market now so that people will be offered alternatives if they don’t get the pay rises they seek,” she said.

Bonuses

For big business, bonuses are making their way back. One interesting trend that Mears can foresee is how changes to the share to cash ratio of bonuses will affect base salaries in international companies with Australian branches.

“The discretionary parts of pay in global companies have been impacted by the overseas trend of giving people a much higher split of equity to cash in their bonus payments,” she said.

“It used to be around 80 per cent cash and 20 per cent shares, but now many companies are giving their staff payments of 40 per cent cash and 60 per cent shares.

“This will put pressure on base salaries to rise in these global companies over the coming year or two, as people are used to having a certain amount of cash income to live off.”

According to Mears, this will then pressure smaller firms to match base salaries across the industry in order to attract the best candidates.

For smaller boutiques, the annual Christmas cash bonus has been widely replaced with extended holidays. Punnett believes that across boutiques, bonuses will continue to remain small until businesses can slowly rebuild and grow after the global financial crisis.

Those who have not performed as well as hoped should not expect too much in the coming year either, according to McNeill.

“In terms of bonuses for the mid and senior levels, underachievers need to brace themselves. Employers are still trying to keep a hold of spending and, unless you are adding value to the company, do not expect a bonus in 2011,” she said.

Where’s the money?

Although the industry has suffered cutbacks, salary freezes and redundancies over the last two years, it seems that increases in base salaries are slowly starting to be found for in-demand positions. According to Advantage Professional’s director of global marketing intelligence, Bob Olivier, these include highly-skilled financial planners who can bring a book of clients with them and paraplanners, both of which are wanted by boutique firms, accountancy practices and banks.

“Salary expectations of employees are rising on the back of our strong Australian dollar and job numbers,” she said.

“Employers meanwhile are responding to the emerging shortage of skills with a greater willingness to review salaries, with headhunting also adding to salary pressure.”

Punnett agreed that the likelihood of base salary increases are looking better, but only if the upward pressure created by recruitment continued.

“Pockets of salaries may have risen, but only for more experienced and qualified staff, not for the more junior roles,” he said.

This lack of pay for junior roles may be attributed to the fact that during the global financial crisis, many financial planning organisations made client services and administration roles redundant — and some still haven’t replaced these roles as they are a cost centre to the business, Olivier said.

Where to next?

With the possible introduction of the Federal Government’s Future of Financial Advice (FOFA) reforms and the push towards professionalism and higher education requirements for financial planners, the industry is in a state of flux and it is difficult to predict the effects that future changes will have on salaries.

On the issue of fee-for-service, recruitment firms agree that it is unlikely to have an effect on the salaries of most planners.

“The obvious impact on salary has been for the underperformers. For all others though, it’s been welcome, and generally the pay changes have been moderate,” McNeill said.

Olivier agrees that the FOFA reforms will bring very little change to overall salary levels.

“I think the changes to the fee-for-service model and the FOFA reforms can only be good for the industry, and the way people get paid will change accordingly,” he said.

While it is unlikely that FOFA will have a huge impact on the remuneration of most financial planners, the industry's shift towards a requirement for a higher education qualification may be of more interest to those firms that are looking to recruit.

Mears believes it is too soon to tell whether the push for tertiary qualifications may have an effect on salaries, but thinks it “may well in the future”. What these will be is also not yet evident, although some suspect that higher qualifications and a ‘professional’ status could result in bigger pay packets.

Either way, it seems all agree that 2011 is shaping up to be an interesting year for remuneration in financial services.

According to Punnett, practices will be “meaner and leaner” in the coming financial year, which will protect and boost the salaries of senior staff who are integral to the growth of the business, while junior staff will continue to feel the pinch.

McNeill is more optimistic about the next 12 months, stating that remuneration pressure is already evident in the market and will soon translate into higher salaries.

“Counter offers have started to increase and greater flexibility will be necessary if employers are to attract and hold onto the best staff,” she said.