The pandemic continues to impact the Financial Services sector in differing degrees. The strength to which the different areas of the sector have been recovering from the pandemic is very dependent on financial services organizations’ area of focus. A look at the 2021 global business performance to date shows that the strongest performances are in corporate and investment banking (with equities performing much better than fixed-income), retail banking, and private banking/wealth management.
Based on our 2021 compensation surveys and research, we observed a few key trends in 2022 for the Financial Services industry.
The initial figures for 2022 salary increase budgets are looking positive compared to 2021. Globally, salary increases are shown to be higher than 2021, with very little differentiation in expected budgets between banking and insurances sub-sectors.
Actual incentive payouts in 2021 (based on the financial performance of 2020) are trending below previous years. There is a high prevalence of both target performance bonus and discretionary bonuses (no hurdles/targets attached), with the bonus pay-out trend for both types of bonuses having been the same.
Long-term incentives (LTI) remain to be a strong component of the total reward package for Executives.
Base salary movements
During the pandemic, many organizations in the financial services sector froze and reduced hiring. This changed in 2021 as most organizations lifted hiring barriers and boosted recruitment. Salary reviews in 2022 are expected to go ahead as normal.
Figure 1 shows that 2022 salary budget forecasts are higher than in 2021 and are closer to or above 2020 levels. Interestingly, the financial services sector’s forecasted budgets in 2022 for Asia Pacific and Europe, Middle East and Africa (EMEA) are below All Industries, at 0.5% and 0.3% respectively. For Latin America and North America regions, the forecast seems to be in line with All Industries.
Industry in-demand jobs
Financial Services organizations are focusing their recruiting efforts on job functions like information technology (particularly with application development and data analytics/business intelligence) and sales/business development. They are also looking beyond their sector to attract digital talent. However, 75% of firms reported having difficulties with talent attraction in 2021 (up from 15% in 2020).
Our survey data shows greater-than-average salary increases for jobs clustered in these main functions: actuarial, asset management research, claims, compliance, fixed-income, equities, human resources, and risk management.
Figure 2 shows the highest-paid roles at the professional career level (P3) for major markets. Legal roles are among the highest paid in Hong Kong, Germany and the US. But for most markets, technology roles are also consistently among the top earners.
| Country | Job title | Highest paid |
|---|---|---|
| Germany | Risk Engineer Generalist/Multidiscipline | 1 |
| Germany | Financial Services Legal Regulatory | 2 |
| Germany | Legal Generalist/Multidiscipline | 3 |
| Germany | Employment Law | 4 |
| Hong Kong | Legal Generalist/Multidiscipline | 1 |
| Hong Kong | Asset Management Equities Trading | 2 |
| Hong Kong | Private Banking Sales Management and Marketing Generalist/Multidiscipline | 3 |
| Hong Kong | Asset Management Fixed-Income Trading | 4 |
| Mexico | Database Design and Analysis | 1 |
| Mexico | Agile/Scrum Master Project/Program Management | 2 |
| Mexico | Investor Relations | 3 |
| Mexico | IT Development Generalist/Multidiscipline | 4 |
| Singapore | Asset Management Research Generalist/Multidiscipline | 1 |
| Singapore | Audit and Financial/Business Controls Generalist/Multidiscipline | 2 |
| Singapore | Business Systems Analysis | 3 |
| Singapore | Project/Program Management Generalist/Multidiscipline | 4 |
| United Kingdom | Underwriting Reinsurance - Non-Marine Casualty | 1 |
| United Kingdom | Systems Actuary - Life | 2 |
| United Kingdom | Reserving Actuary - Non-Life | 3 |
| United Kingdom | Valuation Control Generalist/Multidiscipline | 4 |
| United States | Legal Generalist/Multidiscipline | 1 |
| United States | Product Pricing Actuary - Non-Life | 2 |
| United States | Real Estate Investment Management Generalist/Multidiscipline | 3 |
| United States | IT Architecture (Systems Design) | 4 |
With recruitment pressures and inflation rising in many countries, organizations will have to consider where to focus their salary increase budget. For one, every company across the globe is competing over digital talent, leading to higher wage expectations in the labor market. These roles were in-demand even before the pandemic, but this was exacerbated with accelerated digitalization in the new normal.
Secondly, digital skills are crossing industries and sectors, which means organizations must look outside their typical peer groups and compete with other industries to attract talent. For example, if Financial Services organizations in the UK wants to attract talent with Application Development skills, they will have to compete with High Tech, Retail, and Media sectors that pay respectively 4%, 6% and 21% more than they do. While organizations will need to take this into consideration when formulating their pay policies, employers should be mindful that the pay packages offered to new hires still uphold pay equity.
Bonus payout and short-term incentives
Actual bonus payouts for bonus schemes with pre-determined targets remain modest and continue trending below targets. Looking at the trends from 2020 to 2021 for both performance and discretionary bonuses, there is a drop in the bonus awarded for most levels (Figure 3.1). There are some exceptions in the investment banking and capital markets sub-sector (Figure 3.2) in Germany, Hong Kong, Singapore, and the United Kingdom, where revenue-generating roles have been awarded a higher (or similar) discretionary bonus payout compared to 2020.
Banking and insurance market experts predict a more optimistic bonus funding next year, as organizations adapt to the post-pandemic workplace and the changing competitive landscape.
Long-term incentives
Within the global financial services sector, long-term incentives remain a key compensation component in executives’ total remuneration. Some organizations are also awarding LTIs to more middle manager levels.
Interestingly, the LTI component of compensation package awards in the financial services industry generally has a slightly lower proportion when compared to other industries (17% on average versus 24% of other industries). LTI plans are more prevalent in the insurance sub-sector, compared to banking and the overall financial services industry. Insurance organizations also have higher award payouts.
Global organizations and Europe’s major banks have started linking executive pay to Diversity, Equity and Inclusion (DE&I) targets. While this is hailed as an important move, experts advised banks of the need to go further to diversify their workforce.
Financial Services organizations took rapid actions to preserve their business during the pandemic, but these actions took a significant toll on the employee experience.
As organizations rethink their pay and rewards strategies, especially in light of intensified difficulties around talent attraction and retention, consider focusing also on new employee priorities such as health and wellbeing; environmental, social, governance goals (ESG); and diversity, equity and inclusion (DE&I) objectives.
Our comprehensive Financial Services compensation surveys can give you valuable insight to support your compensation and benefits design in this agile environment.
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