Consultancy Mercer recently released its latest Global Financial Services Executive Compensation Snapshot Survey. This study reveals that base pay in Asia’s financial services sector, will increase at a faster pace in 2017 than the rise forecasted globally, highlighting the strength of the industry. This bodes well for Asia’s financial services sector, as it should help top firms attract the best talent.
The global financial services industry faces choppy waters in 2017. The development of financial technology (fintech) could prove beneficial. It may allow financial firms to expand their offerings through the provision of initiatives such as financial robo-advice services, giving them the ability to trim their outgoings. Also with the rise of technologies such as blockchain, which is estimated to save financial services over £300bn in the next three years, the sector may be able to boost security.
However, financial services faces a lacklustre global economy, potentially impeding growth opportunities. China, the world’s second largest economy, is now experiencing quarterly economic growth rates of under 7% for the first time in years, posing new problems in markets which rely on Chinese trade. Also, anti-globalist movements are increasingly gaining ground in the US and Europe, the world’s richest economies. If these regions start implementing anti-trade policies, this could create new barriers for firms operating across global borders, raising costs and cutting into profit margins.
In this environment, Mercer recently found, financial services employees globally can expect to see modest base pay increases of between 1.9% and 2.4% this year. Meanwhile, the consultancy forecast that yearly incentive levels will remain static in 2017. Commenting, Mercer Partner Hans Kothius said that “salary increases are set to be modest in 2017 as financial services companies worldwide feel the impact of slow economic growth, low inflation as well as continued low interest rates.”
Mercer also broke its forecasts down along region lines, according to CFO Innovation, an online finance portal. The highest expected base pay rise will be seen in Asia, Mercer predicts, at a rate of 3.8%. This was followed by Latin America (3.5%), North America, (1.6% to 2.6%) and Europe (1.4% to 2%). In terms of countries, India led the rankings, with a projected financial services base pay increase of 6% for 2017. This was attributed to India’s continuous economic growth and recent financial reforms.
Continuing, Kothius said: “With relatively flat compensation, firms are expected to go beyond pay and prioritize engaging and retaining talent, emphasizing their broader value proposition.” Nearly a quarter of firms polled by Mercer said they believe their financial incentive pools will be significantly lower this year, compared with 11% who expressed the opposing opinion. Meanwhile, around two thirds believe their actual corporate incentive pools will be similar or unchanged to 2016 levels.
It is easy to see why base pay increase rates in Asian financial services are expected to outpace rises globally in 2017. Asia is very much a frontier market, when compared with Europe and North America. Many consumers in the region still lack bank accounts, for example fintech portal Fintek News writes that 73% of consumers in South-East Asia alone fall into this category. This provides more expansion opportunities for Asian financial services firms than their counterparts in richer western countries where unbanked rates are low, potentially increasing the revenue needed to fund base pay increases.
We must also remember that Asia holds incredible potential for economic growth. China may be experiencing declining economic growth, but it is still experiencing far larger expansion rates than practically every other economy on earth. For example, the Chinese economy grew by 6.7% in 2016, far outpacing the US. Meanwhile India, which saw the highest national financial services base pay increase projection in Mercer’s survey, is expected to record over 7% in economic growth this year. In other words, there are far more opportunities to create new revenue in Asia, than America or Europe.
Also various Asian territories are developing lucrative fintech sectors, further opening up new revenue streams. Singapore, for example, has heavily invested in fintech development and adopted a sandbox regulatory policy, where fintechs can innovate largely free of administrative burdens. This approach has drawn major global players such as IBM to the city-state, bolstering its wider financial sector. Consequently, Asia now receives half of global fintech investment, the majority of which goes to China.
Attracting the best talent
Therefore there is more opportunity for financial sector expansion in Asia in 2017 than anywhere else on earth. This means that Asian financial institutions can afford to facilitate stronger base pay increases than their counterparts in other regions. This could actually prove fruitful long-term, as higher wages may allow Asian financial services firms to draw the best talent in a very competitive global marketplace. This could give Asian the ability to develop new fintech innovations to supply more convenient financial services to consumers, opening up even more revenue streams in future.