Two years ago Riggs Investment Management Corp. in Washington persuaded its parent to let it keep more of the profits it made.
That change allowed Philip Tasho, chief executive and chief investment officer of the Riggs National Bank unit, to pay analysts and other talented fund professionals more-through a structure that combines base salary, incentive pay, and profit sharing.
Mr. Tasho said the new arrangement has kept his seven fund analysts happy and loyal. Asked for proof, Mr. Tasho laughed and said: "I guess it's working if they're not leaving."
His unit, which has $3 billion of assets under management-$1 billion of it in mutual funds-is one of the banks that's decided to pay its analysts more because of increasing competition for their services.
Though it is well known that competition is keen for talented portfolio managers, demand for seasoned analysts is also growing among banks, mutual funds, and brokerages. The talent pool has grown so thin that even big fund companies are having trouble finding analysts, an indispensable-if largely invisible-part of the mutual fund machine.
The fund boom has fueled that competition. Since 1990 the number of mutual funds has shot to more than 8,000 from about 1,400 and their assets under management have tripled, to $3 trillion, according to Lipper Analytical Services Inc.
The number of analysts is growing more slowly, and that has persuaded some banks, but not all, to reassess their pay levels.
Some banks have kept salary levels uniform regardless of the profits that individual businesses, such as asset management, bring in, said Burton J. Greenwald, a Philadelphia-based mutual fund consultant.
"To attract or retain people, (banks) have got to be more competitive," he said.
On top of the pay differential, banks may have a hard time getting and keeping talent because many asset management pros are bothered by banks' image as laggards in investment management, said Mr. Greenwald.
B. Randolph Bateman, senior vice president at Star Bank, Cincinnati, said Star has been increasing its pay levels and has implemented stock options and a bonus system.
"I don't think there's any question the demand for experienced investment people is rising," said Mr. Bateman, whose bank has $2.23 billion of assets under management.
Paul Werlin, president of Human Capital Resources, a headhunting firm in St. Petersburg, Fla., said that analyst pay scales at the top banks are equal to those at big brokerages and fund companies.
Talented analysts with five years experience can earn as much as $150,000 to $200,000 at the top level, he said. But in general, banks pay less than brokerages and mutual funds, said Mr. Werlin.
Analysts help select companies to invest in by studying their research reports and speaking with management to appraise the companies' markets, strategies, and leadership. Portfolio managers make the final investment decisions.
Judging from the growing number of those vying to become chartered financial analysts-an increasingly required industry credential-the opportunities in the mutual fund field are not lost on the thousands of candidates.
The CFA designation, conferred by the Association for Investment Management and Research, is a three-year process that trains analysts in areas ranging from ethics to accounting to global markets. There are 38,699 enrolled CFA candidates this year, compared with 28,100 in 1995, an increase of 27%.
Some in the fund industry fear that as the talent pool continues to stretch thin, customers may be spooked by the prospect of 20-somethings managing their money.
But the analyst corps at the Riggs unit and Star is a mix of eager young talent and experienced hands, executives at those banks said. Mr. Tasho said his four key analysts average seven years of experience. Star's Mr. Bateman said that his 20 analysts range in age from their 20s to their 50s.
"We've always had a reasonably young group and an old group to balance things out," he said.