18May2024
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Cracking the Compensation Code: The Hidden Truths of Private Banking Earnings Unveiled

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

In a previous post, I discussed the various methods of percentage compensation in our industry and received valuable feedback. Today, I want to draw attention to another myth in private banking.

When conversing with private banking relationship managers, I often hear impressive earning figures, particularly with the recent rise in interest rates. As clients have forgotten about traditional instruments such as call- or time-deposit, banks have capitalised by placing these funds in “overnights”.

However, when asking about the correlation between these figures and total compensation, I’m met with radio silence or a vague explanation that other departments may not perform as well. This answer suggests that these figures are not correlated in most private banks, and rightfully so, to avoid conflicts of interest. Otherwise, client portfolios may be jeopardized with leverage or extended FX transactions.

For instance, a private banker who generates an income figure of 2.4MM may reach 400,000 in total compensation. However, if the relationship manager were to switch to an independent wealth manager, their fee income may shrink by 1/3, i.e., 1.6MM, as specific income streams fall apart. Nonetheless, with a gross revenue share, in our case of 50% less little self-controlled cost, the relationship manager’s typical total compensation can increase to 600,000–700,000.

Therefore, running such calculations is crucial. Less can become more

Source: LinkedIn

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Private Banking Earnings Unveiled: Cracking the Compensation Code

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