By Jason V. Bomers, Patrick J. Cole and Timothy J. ReiminkThe financial services industry has weathered tumultuous times in recent years—a credit crisis, devalued portfolios, an unprecedented wave of consolidations and takeovers and a dramatically expanded regulatory environment. At the same time, fast-changing technology has transformed the way banks and customers interact.
These events inevitably affect the compensation of bank employees, managers, and executives—changes that are reflected in Crowe Horwath’s annual Financial Institutions Compensation Survey. The year-to-year changes in the average compensation for various job positions offer clear evidence of recent trends in the financial institutions industry. Out of these, four broad groups—credit and lending positions, personal investment services positions, retail banking positions and chief financial officers—offer particularly instructive insights.
Portfolio cleanup winds down
A comparison of compensation trends for various positions in lending and credit operations demonstrates how financial institutions have adjusted their priorities as they worked their way through the credit crisis and recovery.
The most noticeable trend is the drop in average compensation for chief credit officers over the past year—a 4.65 percent drop in average base salary and a 6.68 percent drop in average total compensation. Also illustrative: the sizable one-year jump in average base salary for residential mortgage loan officers. Commercial loan officers also saw healthy increases in average compensation over the past year.
These trends are even more pronounced in lower-level lending positions, as loan officers and loan processors have seen their average compensation climb, while their credit counterparts, such as workout specialists and credit analysts, have experienced less demand. The trends seen here would seem to suggest that banks consider the bulk of the portfolio clean-up work is now behind them, as the industry’s strategic emphasis appears to be shifting back toward growing healthy loan portfolios.
Investment services still a growth area
Another area many institutions have targeted as a growth opportunity is the provision of investment services for their clients. This strategy is reflected in the compensation trends for positions such as licensed investment representatives and the head of personal investment sales (Table 2).
Average compensation for licensed investment representatives is up substantially from the levels that were typical at the depths of the recession five years ago. The slight 2014-2015 drop in average total compensation can be attributed in part to general market conditions, since a very large portion of investment representatives’ total compensation consists of performance incentives.
At the same time, however, average base salary for this position is also down slightly from 2014, which might suggest that many institutions are now relatively comfortable with their staffing levels in these areas and that the demand for new representatives has peaked. Meanwhile, average base salary and total compensation for employees in charge of personal investment sales saw healthy year-over-year increases, which could indicate that banks are shifting more attention toward improving the overall performance of their investment units.
Retail bankers continue to struggle
One of the most discussed banking trends in recent years has been the rapid shift in customer banking habits as automated tellers, online banking, mobile devices and other technology make in-person branch visits less frequent. The effects of banks’ responses to these changes can be seen in Table 3.
The compensation levels for the top retail banking officer position offer a good representation of the general state of retail banking in many institutions. Base salary levels and total compensation have essentially been flat for the past five years, as the profitability of the retail side of the business has struggled with low interest rates and a customer base that is less active in borrowing than it was in the past.
The effects of declining traffic and a low sales environment can also be observed in the compensation levels of other branch positions. While some of the positions still show gains, any increases in compensation have been relatively modest, especially when looking at the longer-term, five-year period.
A possible explanation for the steady decrease in salaries offered to the least experienced personal bankers is that many banks are choosing universal bankers who can handle all types of activities that once were reserved for specialized positions such as tellers and customer service representatives. While the universal banker position is gaining in popularity, the actual numbers cited by this year’s survey respondents were still relatively low compared to more conventional positions, so we chose not to extrapolate trends from the limited data.
CFOs in high demand
As Table 4 illustrates, the demand for CFO talent has continued to grow steadily throughout the recession and recovery. This is a notable contrast to several other executive positions where base salary and total compensation trends were more volatile.
While other C-suite executives saw relatively modest increases in average compensation over the past year—and some even saw compensation drop slightly—the average compensation for CFO positions rose significantly, continuing a steady five-year trend.
Jason V. Bomers is a principal, Patrick J. Cole is a senior manager and Timothy J. Reimink is a director with Crowe Horwath LLP.