As trade and transaction services evolve, so too do remuneration structures. Global Trade Search’s fourth remuneration and earnings survey tracks these changes, as well as the drivers and challenges faced by those working in the sector, writes GTS director Sarah Hutton.
“We try to focus on customers, however, within the current self-imposed compliance-driven environment, it is difficult to keep the regulators from taking over the delivery of finance solutions. Layer upon layer of compliance people have taken over the running of the business.”
This statement from a participant in the 2013 Global Trade Search annual remuneration and earnings survey expressed the prevailing sentiment that dominated this year’s findings. Despite these challenges the growth of trade and transaction services continued its upward trend with many positive developments
in the structure of the sector.
As in previous years the majority of the survey respondents (62%) came from the banking sector with increased participation from the corporate sector (12%) and political and credit risk insurance community (10%). From a functional perspective most participants characterised their role as sales and origination focused, closely followed by product management and structuring and credit and risk management. Here are some of the highlights.
For 2012/13, 52% of respondents reported an increase in total compensation compared to 45% in the previous year. Some 19% reported lower earnings while 29% saw minimal or no change to their compensation.
The spread of salary ranges was relatively even. Notable was the 27% of participants earning base salaries in excess of US$200,000 which we attribute to the age demographic of the sector which sees 25% of survey participants having worked in the sector for more than 20 years.
As expected, bonus levels were restrained with the majority of people earning bonuses less than 30% of salary. We asked participants if they thought the shift to increased base salaries to compensate for reduced bonus potential imposed increased and possibly unsustainable costs on business models, to which 70% responded “no” and 30% responded “yes”.
This question generated much comment, expressing a wide range of views. Some saw the reduced focus on bonus as rewarding those who underperform, damaging motivation and marginalising the financial imperative to perform.
For others the new compensation structure means people can be more mobile as waiting around for a bonus is not so much a factor in considering a job move. Equally lower bonus potential means paying out or guaranteeing a bonus for a new employee is not so
costly for an employer.
Some participants commented that higher base salaries created a more stable workforce where people were more focused on the long run and less motivated to change jobs for money alone. On the other hand, some were of the view that the hike in base salaries coupled with the shortage of talent is driving up recruitment costs and reducing the number of available job opportunities.
However, for the 70% who thought the shift to higher base salaries was sustainable, their argument centred on the fact that the higher cost structure, although immediately inflationary, would not tolerate mediocre performance which a lower cost base can more readily absorb or ignore. Consequently, more will be expected from incumbents resulting in improved performance and delivery which will make the increase in fixed costs inconsequential over the medium term. However, as one participant noted this will be easy to implement in the US, but in other countries it may prove problematic.
The sector is clearly undergoing a change of gear and a shift in mindset as the trade and transaction services sector expands and develops. The recalibration of compensation is part of this evolution and in the wider context may reflect the transformation of banking compensation structures to something more akin to those earned in the corporate and insurance sectors.
On the move
Over the last 12 months 26% of survey participants changed jobs either via internal promotion, lateral move or by moving organisations. This compared to 28% in the 2012 survey. For those who were promoted internally 33% did so without any increase in remuneration which was similar to the findings of our 2012 survey when 36% were promoted without increase in remuneration.
We see this as a worrying trend as many of the comments left by participants reflected low morale within a number of organisations. Failure to compensate people for assuming greater responsibility in challenging environments coupled with a shortage of experienced staff across the sector can ultimately only destabilise the work force with the result that many will be lured by the increased financial rewards offered outside their current organisation.
We believe this was reflected in the compensation packages negotiated by those who made external moves in the last 12 months, whereby a significant 40% achieved base salary increases of more than 30%.
This is a significant uplift on 2011/12 and reflects the demand for talent as well the side effects of organisations failing to reward their staff for assuming additional responsibilities. As one survey participant noted: “While trade has seen a lot of growth over the past few years, banks are not really compensating their employees for the business they are bringing. Internal policies have becomes so tight that very little flexibility is available to re-negotiate someone’s position.” Consequently, to improve one’s career prospects and financial reward the individual often has no alternative but to consider roles outside the organisation.
In previous surveys we have talked about the underinvestment in the trade talent pipeline, which has resulted in approximately one quarter of the trade and transaction services community having more than 20 years’ experience in the sector with a relatively thin pipeline of junior talent coming through.
This situation persists; however, it is heartening to see the entry of younger people into the sector usually through related corporate banking areas such as project finance, client coverage, syndications and credit. As one of the younger participants noted: “The growth prospects and age demographic of the sector mean the chances of getting noticed and promoted are much greater in trade and transaction services than in other areas of the bank.”
The upward growth and prospects for trade and transaction services continues unabated. In our 2011 survey we asked participants if they thought the business had assumed greater importance within their organisation and 50% felt it had.
By 2012 this percentage had increased to 83% and in 2013 to 89%, although 36% felt the growth of the sector had been slower than expected. Many participants commented that trade finance was now embedded at the centre of commercial bank strategy, in line with business models that pursue sustained traditional transactional revenue streams.
Yet despite the optimism the sector faces significant challenges. We asked survey participants to identify what they perceived to be the main obstacles confronting the sector. In order of ranking they cited credit risk, compliance and capital constraints first, then the current economic climate both domestically and globally and third internal organisational issues such as product and customer silos and lack of clear understanding and support for the business at the EXCO level.
Other factors identified included the dynamic between coverage and product, the importance of technology and the perpetual problem of not enough youngsters in the market with many experienced staff nearing retirement. We also had a new one this year. “Disintermediation… the growing presence of non-banks offering and facilitating approved receivables and payables funding.”
As expected, the escalation of compliance came in for much criticism with many survey participants seeing it as an impediment to doing business and adding considerable cost and delay without necessarily reducing risk. Clearly regulation and best practice is required. However, as many participants commented, compliance and other support functions like IT, HR and procurement are increasingly dictating the framework of business, resulting in many organisations losing their customer focus. When asked if survey participants thought their organisation was customer-centric only 29% responded positively, with 13% replying negatively and 58% citing internal processes, procedures and organisational structures as seriously obstructing their service delivery to customers.
As in our previous surveys, we have very much appreciated the many and varied insightful comments left by participants. They reflect the continued enthusiasm and growth prospects for the sector fuelled largely by the fact that the professionals working in it are truly passionate about their product and the economic and social values it delivers. However, this year a distinct tone of frustration was voiced particularly amongst the banking contingent where the on-going challenges of talent pipeline, regulation, compliance and continual rounds of bank restructurings is taking its toll. Hopefully these prevailing winds will soon subside and allow trade and transaction services to continue to emerge as an essential and vital product segment within the financial services industry.
These are only a few of the highlights from the Global Trade & Transaction Services Remuneration and Earnings Report 2013 produced annually by Global Trade Search. For a copy of the full report email firstname.lastname@example.org.
Global Trade Search places the people behind global trade and transaction services. As a specialist search practice with unparalleled connections, GTS provides the industry with a single source of talent across the core disciplines of structured trade and commodity finance, trade and supply chain finance, cash management and payments, card issuance and merchant services and political risk insurance. GTS is a joint venture between Healy Hunt, a specialist in financial services’ recruitment and Exporta.