• Michael O'Riordan

ETF Salary survey analysis...money isn't everything

I recently completed a global salary survey of the ETF industry which highlighted a few trends that both confirmed some widely held beliefs and introduced new ways of thinking about how money motivates people.

There is a big pay gap between Europe / Asia and the US

I have always known that colleagues in the US were paid higher salaries than their equivalents in Europe. Obviously, the largest ETF houses are US firms and it makes sense that a lot of the most senior people will be based there so that is going to have a certain impact. Or maybe it’s the fact that Europeans have more holidays and some may argue a better lifestyle so maybe we get marked down when it comes to giving out the goodies each bonus season. Who knows, but the reality is, if you want a higher salary in ETFs then move to the US.

Average total comp across Regions

Europe - $221k

Asia - $256k

US - $381k

Some roles always get a bad rap

Why does the industry so under value the services of Operations? Yes, I get the fact that they are a cost centre but so is Product Development, yet the salaries within that function are significantly higher. Operations folk work as hard as anyone and their role is a key cog in the wheel, yet their value continues to get marked down.

Average total comp Globally

Operations - $145k

Product Development - $208k

The Capital Markets function within ETFs is the most valued

As every reader on this site will know, one of the biggest differences between ETFs and Mutual Funds is the creation and redemption process and the primary and secondary markets trading mechanics. Therefore, it should be of little surprise to learn that there is a premium put on such roles within the ETF ecosystem. Operations, Product Development, and Sales are all transferable skillsets within the wider asset management industry but not Capital Markets.

Average total comp Globally

Trading - $370k

Capital Markets - $324k

There is still a pay gap between Asset Management and Investment Banking

In my opinion the pay gap between Asset Management and Investment Banking is still wide, no matter what people say. Some may argue that the hours in Investment Banking are longer and people work harder than in Asset Management. My answer to that is two things:

1) I spent the first half of my career in Investment Banking and can tell you people don’t work any harder than they do in Asset Management.

2) Anyone who still measures productivity by the amount of time they are sitting at their desk is living in the dark ages.

Why a pay gap still exists is anyone’s guess. Perhaps it’s a legacy thing whereby historically there was a perception that Investment Banking was more sexy and attracted the best candidates. Either way I don’t think that holds true anymore.

People just want to be paid fairly

The one thing I really regret with this survey is not asking for the gender of each participant. It would have been interesting to see whether a gender pay gap existed or not. I really hope the answer would be no.

People are always curious to read salary surveys but the primary reason is to check whether their pay is in line with their peers, i.e. are they being paid fairly. When it comes to pay, I don’t think people are greedy, they just want to be paid what they believe is fair and that is, are they being paid the same as someone else who does an equivalent role to them.

That is why gender pay gaps stick in the throat so much – paying someone more purely based on their gender is clearly not fair.

Are people motivated by pay?

The financial services industry had gotten a seriously bad reputation over the years when it comes to pay. Speak to anyone who doesn’t work in the sector and they will tell you they think everyone who works is the “City” is a millionaire. Clearly that is not true although if you look at the results of the survey you will see that most people are not doing too badly.

So, do people who join the industry do so on the expectation of becoming a millionaire or are they motivated by the work they will do? If you are familiar with the work of behavioural psychologists you will know that when it comes to work, money does not motivate people in the long run. People are motivated by meaningful work, a great team culture and a sense of autonomy over what they do.

ETFs are a fast growing, exciting sector so firms who can create such an environment will be the ones who ultimately need to think beyond compensation to other things that keep their employees happy. Comp matters, for sure, but it’s not everything.

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