NRS Compliance Compensation Study
NRS's first study, published in 2008, highlighted some interesting statistics regarding the compensation of compliance professionals in the financial services industry. The 2011 Compensation Study provides a snapshot of a moment in time while allowing us to examine some underlying trends within the overall compliance professional ecosystem.
National Regulatory Services (NRS) is pleased to present our second Compliance Compensation Study. Our first study, published in 2008, highlighted some interesting statistics regarding the compensation of compliance professionals in the financial services industry. In the intervening years, many events have impacted our industry not the least of which were a collapse of world financial markets, a deep and ongoing recession and ultimately passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. At the time of this writing, the financial markets have recovered somewhat, but a robust and widespread economic rebound is stalled and U.S. unemployment is greater than 9%. Several European nations are experiencing significant economic crises because sovereign debt has risen to unsustainable levels and there is serious concern over the long-term U.S. national debt. Nonetheless, financial services companies are faced with implementing hundreds of new regulations mandated by Dodd-Frank and demand for compliance personnel and technology is increasing.
This study aims to determine how these events have impacted compensation for compliance professionals and spending practices in the financial services market by comparing current data with similar data from our 2008 survey.
We hope this report will prove beneficial as investment advisers and broker-dealers begin budgeting for 2012.
As in our 2008 report, the 2011 NRS Compliance Compensation Study provides a snapshot of a moment in time while allowing us to examine some underlying trends within the overall compliance professional ecosystem.
Examining the data to identify some larger industry dynamics revealed some expected results, and a few surprises:
CCOs wear many hats.
Forty one percent of those respondents with the position of Chief Compliance Officer spent less than half of their time on compliance.
The industry is heavily incentivized.
Sixty percent of the respondents reported participating in some form of incentive compensation program.
Compensation for compliance professionals has stagnated.
Overall compensation has gone down for the compliance industry over the past three years due, presumably, to the global economic recession over the same period.
Spending on compliance has plateaued.
Nearly seventy-five percent of respondents reported their 2011 overall compliance budget was approximately the same as their budget in 2010.
Drilling down into the numbers, we find:
- Chief Compliance Officers are more highly compensated than other compliance positions. Consistentwith the data in our 2008 study, it is still surprising to find that CCOs spend the least amount of their time performing compliance tasks.
- Geographic location has a great impact on compensation, with New York City and Los Angeles reporting the highest average salaries.
- Since 2008, compensation for compliance professionals has not increased. While consistent with published reports regarding the overall U.S. labor market, we had expected that compliance professionals would be in high-demand given the increase in regulatory and legislative activity.
- The NRS Investment Adviser Certified Compliance ProfessionalSM designation has a positive impact on designee compensation.
- A large percentage of respondents reported compensation packages that included substantial incentive components including monetary bonuses. Interestingly, stock options were less prevalent than in the past survey.
- Despite the passage of Dodd-Frank, respondents expect compliance spending to remain stable from 2010 to 2011, but the allocation of spending will be shifted to technology and away from education, consulting and outsourcing.
Profile of Respondents
Type of Firm
In the first half of 2011, NRS surveyed compliance professionals employed in the financial services industry, from Chief Compliance Officers to assistants. Fifty eight percent of the respondents characterized themselves as being employed by an investment adviser firm, 12% by a broker-dealer firm and 14% by a dually registered firm. The remaining respondents are composed of legal professionals, consultants and employees of other types of financial services firms.
Number of Employees
Of all respondents, 22% report having between 11 and 25 employees at their firm and 51% have 50 or fewer employees. Respondents that are employed by broker-dealers represent larger firms, with 31% reporting more than 250 employees. On the other hand, only 5% of those employed by investment adviser firms report more than 250 employees, 61% report having 25 or fewer employees and 39% report having 10 or fewer employees. Dually registered firms also tend to be larger with 44% of respondents reporting more than 100 employees.
Assets Under Management
For investment advisers, another common metric used to evaluate their size is their Assets Under Management (AUM). Sixteen percent of respondents reported AUM less than $100 million, while 35% reported greater than $100 million and less than $1 billion. Sixteen percent reported greater than $1 billion and less than $5 billion. Finally, 22% reported greater than $5 billion.
Number of Registered Representatives
Broker-dealers are often measured by the number of registered representatives they employ. Fully 47% of the respondents reported less than 50 registered representatives, while 27% reported more than 100 and less than 500, 5% between 500 and 1,000 representatives and 21% reported more than 1,000.
Respondents reported the following with regards to their job title:
- 66%, Chief Compliance Officer
- 6%, Vice President of Compliance
- 5%, Compliance Officer
- 11%, Compliance Manager
- 2%, Associate Compliance Manager
- 21%, Other (including office manager, Chief Financial Officer, Treasurer, Director of Operations, General Counsel, Compliance Assistant, etc.)
Compliance Compensation Summary
Overall, the annual salary of the respondents showed great variation, ranging from less than $40,000 to more than $250,000, with the median being approximately $100,000. Of those responding, 54% earn between $60,000 and $124,999, 31% reported earning between $125,000 and $249,999 and 4% reported earning over $250,000. These results are nearly identical to the results from 2008 and seem to indicate that there has been little growth in base compensation for compliance professionals in the past few years.
In addition to salary, 60% of the respondents participate in some form of incentive compensation program. While respondents with higher salaries were somewhat more likely to participate in an incentive compensation program, more than 50% of respondents in below median salary ranges also received some form of incentive compensation.
The median total annual compensation of this group was approximately $125,000 and the data pointed to an average annual incentive package that was approximately $25,000. The data reveals that incentive compensation is generally between 20% and 30% of base compensation. Some respondents, though, received incentive compensation that was equal to 100% of their base compensation.
One interesting result from this survey is related to vacation benefits. Despite the fact that 81% of respondents had less than 10 years tenure in their current position, 74% of respondents reported that they are entitled to more than 20 vacation days per year.
Compliance Compensation and Job Titles
Not surprisingly, compensation of survey respondents generally increased based on the implied responsibility of their job title. More than half of respondents, 56%, reported holding the title of Chief Compliance Officer, 6% reported being a Vice President of Compliance, 5% reported being a Compliance Officer and 11% reported being a Compliance Manager. Compensation, not including incentives varied among the job titles.
The average compensation for Chief Compliance Officers is $125,000. Thirty one percent of CCOs earn between $125,000 and $174,999 and an additional 22% earn $175,000 or more.
The title, Vice President of Compliance, appears to be one used at large institutions with more than $10 billion in AUM or more than 500 registered representatives and, as such, respondents that hold this title earn an average of $169,000.
Those holding the titles Compliance Officer or Compliance Manager earn, on average, $89,000. Twenty five percent make more than $105,000 and 35% make less than $75,000.