"Compensation as a whole has taken a hit," said Phil Haviland, a London-based recruiter specialising in the Swiss private-banking market. "It's all about the net new assets that can be brought in and the revenue you can get from these."
Swiss offshore assets have declined by about a quarter to two trillion francs since 2007, which is contributing to a drop in performance-related pay. Credit Suisse, the second-biggest Swiss wealth manager, reported an annualised gross margin - the amount of revenue earned on assets under management - of 114 basis points in the third quarter, down from 131 basis points in 2007. A basis point is one-hundredth of a percentage point.
Private bankers are usually paid a base salary, plus a bonus determined by a combination of the assets brought in from existing or new clients and investment returns that contribute to the firm's revenue. In a good year, a bonus can double a relationship manager's total compensation, says Peter Zuercher, who runs a branch of Zurich-based Adecco SA, the world's largest supplier of temporary workers.
Bonuses for Swiss private bankers slumped as much as 50 per cent this year, said Stephan Surber, who recruits financial professionals for the Zurich unit of Michael Page International. Surber expects further declines next year, adding that some banks have stopped paying a signing-on bonus for new managers.
Swiss banks may lose about 1.1 billion francs in annual revenue, or about 4 per cent of the 2010 total, as clients repatriate 47 billion francs of assets before tax agreements with Germany and Britain come into force in 2013, says a study by Booz & Co.
The Alpine nation reached accords with those countries this year to tax the capital gains and investment income earned by holders of undeclared bank accounts.
While Swiss banks struggle to contain costs as a stronger franc erodes earnings in other currencies, bankers in London's financial districts expect bonuses to shrink by about a fifth from last year as the sovereign-debt crisis crimps revenue, according to a survey last month by recruitment firm Astbury Marsden.
For senior London bankers, the decline in bonuses was partly countered by a 21 per cent jump in base pay to £237,000 ($478,000), Astbury Marsden said. Some Swiss wealth managers are eliminating base salaries, which start at about 100,000 francs and can be three times that for senior staff, by hiring relationship managers who focus solely on developing new business.
"There have been cases where private bankers are offered consultancy roles on a commission-only basis," said Gina Le Provost, a recruiter with AP Executive in Geneva.
The median wage in Switzerland was 78,600 francs last year, says the Swiss Federal Statistical Office. The country has the fourth-highest salaries in Europe behind Denmark, Norway and Luxembourg, it said in a July 2011 report.
With wealth managers, including Credit Suisse and Julius Baer Group, cutting jobs as profits are squeezed and fees decline as clients trade less and shun riskier investments, the performance of private bankers is under scrutiny, said Peter Damisch of Boston Consulting Group in Zurich.
"Banks will be more selective regarding relationship manager hiring," said Damisch. "More demanding clients, difficult market environments, the need for more complex and tailored solutions and regulatory changes raise the bar for relationship managers."
Most of Geneva's banks and wealth managers expect profits to be lower than last year, according to the city's financial industry lobby group.
While "top producers", capable of working with the ultra-rich and hunting for new assets by targeting "mass affluent" clients, can still command good compensation, the environment is getting tougher, said Maurice Zufferey, who heads the Swiss operations of recruiter Spencer Stuart in Zurich.
"Non-producers will not just be earning less," Zufferey said. "They will not be in a job."
LOSING GROUND
* The average pay for Swiss private bankers declined more than 6 per cent to 245,000 Swiss francs ($263,000) from 2008.
* Profit margins for UBS AG, Credit Suisse Group AG and other Swiss banks are in decline after the financial crisis.
- BLOOMBERG
