Sales Reps Making Less as Bosses' Compensation Soars

There is a growing disparity between the compensation paid to the average bank investment sales representative and to the program managers and "star" performers in bank investment programs, according to a recent study.

Bank investment sales reps were paid 4% less in 1994 than in 1992, a decline that experts attributed to poor mutual fund sales in 1994, and a tougher competitive environment generally.

At the same time, compensation for program bosses was 41% higher in 1994 than in 1992, according to a study released last week by the Bank Insurance Market Research Group, Mamaroneck, N.Y.

"The elite are earning more than ever," said Andrew Singer, managing director of the research group. "There's growing competition among banks for experienced investment managers."

One-quarter of the 37 institutions surveyed paid over $200,000 to "star" performers last year, compared with only 15% of the 44 institutions surveyed in 1992, the last time the study was conducted.

Bank investment sales reps on the other hand received an average of $60,800 in total compensation, compared with $63,200 in 1992.

The study tracks compensation trends in bank investment programs, principally in branch programs marketing mutual funds and annuities to retail customers. Approximately half of the institutions surveyed last year also took part in the earlier study.

The study also indicated that banks are shifting investment sales pay away from a commission basis toward one that relies more heavily on base salaries. Average base salary for sales reps in 1994 was $22,060, a 48% increase over 1992. Average bonus compensation dropped 19% to $40,200 during the same period.

Brokers on the lower end of the pay scale got a boost. Last year, 19% of banks paid less than $15,000 in base salary, compared with 45% in 1992. Of those banks, 14% paid no base salary at all, compared with 26% two years ago.

Industry experts said the downward trend in commissions for sales reps in 1994 reflected the industry at large.

"1994 was an off year," said Eli Neusner, a bank consultant at Cerulli & Associates, Boston. "Bonuses were down in the wire houses" as well as in bank brokerages.

Bankers and experts agree the greater emphasis on base salaries was unique to banks, though some disagreed on the reason for the shift.

"The bank brokerage environment has less volume and less big-ticket trading than the wire houses," Mr. Neusner said."The banks have to create a reason for the reps to stay there."

One bank, Barnett Banks, Jacksonville, Fla., early this year created a separate, salaried sales force to be a first point of contact for customers wanting to buy mutual funds. The bank also has brokers on commission who sell mutual funds and securities and handle more complicated sales referred to them by the salaried staff.

But at least one banker said a move to salary-based compensation could backfire.

"You could end up with people who are just order-takers," said Michael Goraleski, executive vice president, Glendale (Calif.) Federal Bank.

Mr. Goraleski said the decline in compensation is indicative of long- term problems. "The industry has 7,600 mutual funds out there, and consolidation is inevitable," he said. "We're seeing a compression of profit margins, a shrinking of the industry, and so a shrinking of commissions."

Despite the problems, the banking industry exhibited a continued willingness to reward program managers and top performers, the study found. Investment program managers received an average of $163,750 in total compensation in 1994, versus $116,200 two years earlier. The average base salary for program managers, which amounted to about 64% of their average total compensation, rose 23% to $105,400, in the same period, while average bonus compensation rose 76% to $58,000.

No bank contacted for this story said it was paying a premium for program managers.

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