Seitz Partners Market Intelligence - Compensation Trends: Divisional Sales Manager

Seitz Partners recently embarked on a project to provide our clients, candidates and other friends of the firm with a real-time scan of the compensation market for Divisional Sales Manager (DSM) talent. We approached the project with three readers in mind: 1) wholesalers considering promotion to Divisional Sales Manager; 2) current DSMs wishing to compare compensation against their peers; and 3) distribution leaders looking to benchmark compensation for DSMs.

We endeavored to answer the following questions:

Q: How is DSM compensation structured, with an eye towards determining the prevalence of bonus vs. commission incentives?

Q: What are DSMs paid in terms of salary and total compensation?

Q: Does compensation vary based on firm assets under management (AUM) or geography/territory?

Q: How many wholesalers does a typical DSM manage?

Divisional Sales Manager Compensation Structure

68% of DSM respondents receive a commission or override; 32% of respondents receive no commission/override, only a discretionary bonus

95% of DSM respondents receive some form of discretionary bonus

63% of DSM respondents receive a combination of commission and discretionary bonus

Historically, Divisional Sales Managers received a combination of salary, discretionary bonus (paid monthly, quarterly and/or annually), commission/override, and equity or other long-term incentives. In recent years, we’ve seen growing interest in moving DSMs away from commission in favor of a larger discretionary bonus potential.

Despite the gradual shift towards bonus incentives, a majority of DSMs continue to receive commission – a little over two-thirds of respondents in our market scan. There are several reasons cited for the shift towards bonus, including: alignment of overall organizational incentives; recognition of an increasing sales cycle; and placement of additional emphasis on a servicing requirement at the divisional management level.

DSMs who are accustomed to the historical structure and who value (and often rely on) the consistency of a monthly commission check, strongly prefer the status quo and are likely to resist attempts to move to a 100% discretionary bonus incentive structure. In addition to the concern around frequency of commission payments, the lack of a formulaic/transparent incentive structure inevitably leads to trust concerns between DSMs and their employers. Specifically, DSMs will wonder whether the new structure is a veiled attempt to lower their compensation.

Firms wishing to implement an incentive structure reliant on bonus alone may want to consider the following steps to alleviate a rocky transition:

Set (collaboratively) and communicate goals and objectives that will directly correlate to bonus achievement; monitor and communicate progress towards these goals regularly to avoid surprises
Implement a quarterly or semi-annual bonus, rather than a year-end bonus, to alleviate cash flow issues for DSMs transitioning from monthly commission checks
Pay what you say you’re going to pay – earn trust by backing up words with deeds

Divisional Sales Manager Compensation Expectations

$190,000 Average Salary

$625,000 Average Total Compensation

The salary and total compensation numbers above address the following questions: directionally, how much should I expect to make as a Divisional Sales Manager; or from the leadership standpoint, how much should I expect to pay a Divisional Sales Manager in salary and total compensation? These numbers reflect responses from DSMs across firm AUM thresholds, territory coverage and channel coverage.

Salaries in our market scan ranged from $125,000 to $400,000, with 81% of salaries landing between $150,000 and $200,000.

Total compensation ranged between $400,000 and $1,000,000 with 63% of DSMs reporting total compensation between $600,000 and $750,000, and 32% earning between $400,000 and $599,999.

Divisional Sales Manager Compensation – Accounting for Firm AUM and Geography

Bigger Can Be Better

According to our market scan, there is a relationship between assets under management and total compensation, with Divisional Sales Managers at larger firms reporting higher earnings than their counterparts at smaller firms.

Interestingly, salaries don’t follow suit. A DSM working for a larger firm may not earn a higher salary than their counterpart at a smaller firm. Several firms at the larger end of the AUM spectrum deliberately keep salaries low, relative to competitors, electing to reward strong performers with greater incentive compensation and/or long-term compensation potential.

Total Compensation Doesn’t Vary (Much) by Geography

Seitz Partners compensation data shows minimal difference between DSM total compensation across geographies – with DSMs in most geographies/territories averaging total compensation in the low to mid $600,000s.

Salaries are a different story. Divisional Sales Managers leading teams the East can make as much as $30,000 to $40,000 more than their counterparts in the Midwest and West, on average. While this discrepancy in salary is likely the result of cost of living differences, total compensation remains fairly equal across geographies. Accordingly, DSMs managing the Midwest and Western territories earn a larger percentage of their total income in incentive compensation and/or long-term compensation compared their counterparts in the East.

Team Size

Divisional Sales Manager respondents in our market scan manage an average of 11 external wholesalers per team. The largest team in our market scan consisted of 16 salespeople while the smallest team had 2 salespeople. 79% of DSM respondents manage between 10 and 14 wholesalers. DSMs in the West manage slightly smaller teams (a little more than 9, on average) compared to their counterparts in the Midwest (13) and East (12).

Key Takeaways

Over two-thirds of asset management firms pay commission to their Divisional Sales Managers, with 63% of DSMs receiving a combination of commission and bonus. For those DSMs that receive both commission and discretionary bonus, almost half (46%) of their total compensation is paid in the form of commissions.

While there is a movement afoot to transition intermediary distribution leadership to a 100% discretionary bonus incentive structure, the pace of the movement is slow, at least at the DSM level, and has been met with significant resistance from managers accustomed to receiving monthly commission checks. Until their bank accounts are flush with bonus money that was promised in lieu of commission dollars, DSMs will continue to exhibit considerable skepticism.

There are multiple ways to moderate the impact of a transition away from commissions, but the biggest, by far, is clearly communicating compensation expectations then meeting those expectations upon the achievement of agreed-upon objectives.

About Seitz Partners

Seitz Partners is a retained executive search firm dedicated to serving clients in the asset and wealth management industries. We deliver unparalleled access to talent and unrivaled market insight to our clients. For more information, please contact:

Christopher Seitz

Managing Partner

t: (617) 297-2965

cseitz@seitzpartners.com

Jim Flaherty

Associate

t: (617) 297-2992

jflaherty@seitzpartners.com

225 Franklin Street

26th Floor

Boston, MA 02110

www.seitzpartners.com