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Don’t go – have some equity!

With staff turnover in Australia’s financial services industry increasing, firms are being forced to offer employees a stake in the business.

Many in Australia’s financial services industry looked on with envy at the stunning success of the float of fund management group Platinum Asset Management in May.

Predictably, those at the top of the pile came off best. The Platinum IPO created a multi-billionaire out of founder Kerr Neilson, whose stake in the company he founded just 10 years is now valued at the market at some AU$3.5bn, making him one of the six richest people in the country.

Neilson’s co-founder, Andrew Clifford, is worth AU$275m, while the 20 other investment professionals and 40 support staff shared tens of millions of dollars between them.

It seems the real reason for the float was that Neilson was finding it hard to retain staff. “We needed to have the ability to reward a growing team through options and equity,” Neilson says.

It’s a common refrain throughout the Australian industry, so much so that other fund managers, brokers and financial services groups in a similar situation are also considering a stock market float. These include Wilson Asset Management, Colonial First State, 452 Capital, PM Capital, Investors Mutual and Hunter Hall.

Will offering equity really stop the rot? Neilson says the biggest drain on talented staff are those tempted – as he was a decade ago – to set up their own fund. “They are motivated not just by the idea of running their own business, but also the prospect of ownership rewards.”

Australian financial services staff’s itchy feet are illustrated by the increasing turnover at Macquarie Bank. Despite paying ever more enormous bonuses, Macquarie has reported a dramatic increase in the number of staff moving on to greener pastures. In the last financial year it was 7% – relatively low by industry standards, but nearly double what it’s been in the past. Voluntary staff turnover is up to nearly 15% at some of its overseas offices.

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