City bonuses linked to compliance and conduct

City bonuses linked to compliance and conduct

Conduct, compliance and risk management are increasingly being used in the calculation of bonuses by financial services companies, a global survey from Mercer shows.

Approximately one-third of organisations now allow for non-financial measures to override financial measures in their annual incentive plan (38 per cent) and multi-year incentive plan (32 per cent). This is more common in banks (55 per cent) than insurance firms (15 per cent).

One-third of both insurers and banks reported that regulatory impact decreased the link between pay and business performance.

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Martin Bamford, chartered financial planner at Surrey-based Informed Choice, saw this as a welcome move.

"This will start to protect consumers from the worst of the sales behaviours we have seen in the past. Particularly banks where they were incentivised to sell products because they would be paid bonuses," he said.

"Some companies have the right culture and processes in place, but for those who have been habitually sales culture led its good to see this."   

The survey also showed that salary increases in European financial services companies will be in the range of 1.7 percent to 2 percent  for 2017.

The financial services companies who took part in the survey cited the impact of slow economic growth, low inflation as well as continued low interest rates for the modest increases.

Mercer's global survey of executive pay revealed the highest increases were in Indian financial services (6 percent), followed by 3.8 percent in Asia and 1.6-2.6 percent in North America.

Approximately two-thirds of organisations surveyed predicted that the 2017 actual corporate incentive pools will be withi the 5 percent range or unchanged to 2016 levels. 

“With compensation remaining relatively flat, firms are challenged to go beyond pay and emphasise their broader employee value proposition to continue to motivate and retain people,” said Vicki Elliott, senior partner and financial services leader, Mercer Career.

“To protect key talent, companies should also put more focus on recognising and differentiating high performers.”