If you are forging a career in private banking in Singapore or Hong Kong – or if you want to break into the sector – you have, in theory, a wide range of employers to work for. Many private banks in Asia, the world’s fastest growing region for private wealth, are increasing their headcounts.
And as private bankers in Asia continue to face onerous annual revenue targets, one of the main factors influencing whether they stay or leave their current firm is the percentage of their revenue that they get to pocket as a bonus over the next few months.
Most private banks in Asia use a variation of a formula that calculates a banker’s bonus based on a percentage of their annual revenue minus their base pay, although this is sometimes influenced by team bonus pools. “If you made US$3m in revenue and your percentage was 12%, for example, that leaves $360k. But your salary (say, $250k) is then deducted, giving you a $110k bonus,” says Clarence Law, a Singapore-based business advisor in private banking. “Compared with investment banking, revenue is easier to attribute to a particular person, so the bonus model isn’t as complex.”
But while there are similarities in the way private banks in Singapore and Hong Kong calculate bonuses, there are wide variations in the percentages they offer their relationship managers. Exact 2014 numbers for each bank aren’t available, but headhunters have broadly categorised percentage ranges for us, according to different types of private banks. Here’s what to expect:
Citi, Goldman Sachs, Merrill Lynch, Morgan Stanley and J.P. Morgan used to pay as high as 30% to 40%, says Rahul Sen, head of private wealth management at search firm The Omerta Group in Singapore. “After the financial crisis they changed to a discretionary pay-out model. But they had to keep bonuses high to stop a mass exodus in Asia, which was already taking place since they moved to discretionary.”
The likes of Pictet, LGT and EFG need to pay high percentages because their product platforms and back-office support teams aren’t as strong as those of their larger European rivals in Asia. “Retention at the boutiques would suffer if they didn’t pay these percentages because bankers would question the lack of support they receive,” says Law.
“If you’re a banker at UBS or CS in Singapore or Hong Kong, you're fed an excellent platform and product suite and you sometimes have clients referred to you as well,” says a Singapore headhunter who asked not to be named because of client confidentiality. “[efc_twitter text="UBS and CS bankers are told they’re privileged to be part of these firms and should accept a lower bonus percentage"]. But your total compensation doesn’t come down too much as you can build larger assets and attract a bigger wallet share from your clients due to the superior platform.”
The low percentage at DBS is explained by the loyalty clients have to its brand, which makes it harder for its relationship managers to move to rival firms and easier for the bank to retain them without large bonuses. “And it has clients regularly walking in and opening accounts – these are ‘house’ clients that the bank just farms out to RMs and doesn’t feel obliged to reward highly for managing,” says the anonymous recruiter. By contrast, Bank of Singapore is recruiting more aggressively – it added 100 new staff in 2014 alone – and needs to offer competitive bonuses as a hiring tool.
No matter what firm you work for, however, [efc_twitter text="bonus deferrals are becoming more popular in Asian private banking"], says Sen from The Omerta Group. “If your bonus works out below US$100k, the cash component will be high, but above that it’s typically only about half of the total – more and more chunks get deferred, usually over three years, the higher the bonus,” adds Law. “Not many private banks in Asia are going to pay a $300k bonus right up, for example. The talent market is tight in private banking here – banks need to retain people and deferrals can help with this.”