Julius Baer’s decision to prioritise revenue generation over asset accumulation when calculating bonuses will heap pressure on relationship managers in Singapore and Hong Kong whose assets aren’t making much money for the bank. From next year, the Swiss firm is more closely linking profitability to bonuses under a single compensation scheme that replaces two separate plans, including one that rewarded bankers heavily for bringing in fresh assets.
Julius Baer grew its headcount quickly in Singapore and Hong Kong under ex-CEO and Asia advocate Boris Collardi, who was at the helm between 2009 and 2017. It added 110 relationship managers in 2016 alone, according to Asian Private Banker. There was an emphasis on tying bonuses to new assets to help drive JB’s ambitious Asian growth plans, says a wealth management headhunter.
Current CEO Philipp Rickenbacher has now broken this tradition. His new bonus policy applies globally and was in part driven by the bank being sanctioned by Swiss regulator Finma for its “misplaced incentives” that encouraged “breaches of the legal obligations to combat money laundering” during the period of rapid growth under Collardi, reports Finews. The Zurich-headquartered bank was sanctioned for failing to spot millions in graft money, including from PDVSA in Venezuela. Rickenbacher told Finews that he wants RMs to “occupy themselves with sustainable profitability of the bank to a degree that simply wasn’t that relevant to them before”.
His bonus strategy will benefit RMs who are strong in revenue but weaker in AUM, and also RMs who do well in both categories, says Singapore-based Liu San Li, a former private banker who now works in business development in private wealth management.
“From my own experience in Asia over the last 15 years, I think more than 50% of RMs would ideally prefer revenue and AUM both being the determinants of compensation, because this gives them flexibility in managing their performance,” he says. “However, in recent years, it’s been increasingly difficult to bring in net new AUM, so actually these changes at Julius Baer may not be that bad for many of its bankers,” adds Liu.
But one group of JB bankers may not be so happy. “Those whose AUM is of lesser quality – the kind of AUM sitting in the bank without reasonably good revenue being generated – will be under more pressure to find ways to sell different products to their clients,” says Liu.
Photo by Justus Menke on Unsplash
Have a confidential story, tip, or comment you’d like to share? Email: email@example.com or Telegram: @simonmortlock. You can also follow me on LinkedIn.