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Private bankers in Asia demand guaranteed bonuses (and get them)

A fiercely competitive job market for private bankers in Asia, particularly in Singapore, is forcing many firms to offer guaranteed performance-related bonuses to attract new recruits.

In recent months, banks such as HSBC, UBS, Credit Suisse, Citi and Morgan Stanley (to name but a few) have announced ambitious plans to grow their private banking headcounts in the city state. Headhunters believe this rapid rise in demand is having a direct affect on bonuses.

Employment contracts for relationship managers often now include clauses which ensure bonuses will be paid upon meeting AUM and revenue targets a year after joining. Some banks even have two or three-year targets.

“The targets have been there in the past, but there wasn’t usually a guarantee in the offer letter, so bonuses were at the discretion of the bank. Many RMs were unhappy during the GFC when discretionary bonuses weren’t paid despite them meeting their individual targets,” comments John Koh, managing director, WMRC Private Ltd.

He says guaranteed bonuses, which are being given to new RMs from VP level upwards, are helping to address this discontent and are making the private banking employment market more transparent. “And it works both ways. The firm gets strong performance from its bankers in return,” adds Koh.

The first part of a typical first-year target for a VP at a private bank is about US$50m to US$80m in net new money. The other part relates to revenue generated and is usually in the range of 0.7 to 1 per cent.

A VP without a guaranteed bonus in Singapore would expect a base salary of about S$220k to S$250k. Someone at the same level with a bonus would only earn a S$180k to S$200k base, but could potentially receive S$300k or more in total compensation if they hit their targets, according to a headhunter who asked not to be named.

“For a confident private banker, who believes he or she will make target, that’s an attractive and compelling proposition,” comments Koh.

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