LPL pays CEO less than Raymond James and Ameriprise for strong 2019
The days of rising wealth management executive compensation may be over.
While the notable business results that led to massive pay packages in 2019 are under severe threat from the impact of the coronavirus pandemic rippling across the industry, the CEOs of three of the largest wealth management firms reeled in compensation similar to star professional athletes.
Airline CEOs and those of other directly affected industries have preemptively cut their own base salaries, as Yahoo Finance reported last week. But financial services don’t appear likely to be asking for any bailouts.
In 2019, the median compensation of CEOs of 143 of the firms on the S&P 500 jumped by 16% to $13 million, according to a Wall Street Journal analysis.
Among the parents of the three largest independent broker-dealers in LPL Financial, Ameriprise and Raymond James, the median CEO package rose 18% year-over-year to $13.1 million in awards and pay for Raymond James CEO Paul Reilly, 65. The average compensation for Reilly, Ameriprise CEO Jim Cracchiolo and LPL CEO Dan Arnold ticked up 3% to $15.1 million.
The firms didn’t respond to requests for comment on their executive pay beyond official company disclosures, other than an Ameriprise spokesman’s email citing a “supplemental total direct compensation” table.
Cracchiolo, 61, once again earned by far the highest compensation at $24.5 million, even factoring in that his pay slipped 5% from 2018, according to the firm’s March 20 proxy. Still, the longest-tenured of the three CEOs saw his direct compensation tumble by 36% over the past three years to $18.5 million, using a company formula that eliminates any lag in equity award reporting.
“The Compensation and Benefits Committee took action to address shareholders’ concerns around overall pay magnitude and year-over-year pay volatility following our outreach calls in fall 2019,” Ameriprise’s proxy document states, noting that the substantial drop in direct pay occurred in “a period of excellent operational and stock price performance.”
Ameriprise CFO Walter Berman’s compensation also took a hit — of 4% — in 2019, sliding to $9.6 million. Joseph Sweeney, the president of Advice & Wealth Management products and service delivery, received a 7% raise in compensation year-over-year, notching at $5.1 million.
LPL’s Arnold, 55, took in the lowest pay of the three CEOs, despite receiving an 8% raise to $7.7 million in 2019, the firm’s March 23 proxy shows. LPL’s adjusted EBITDA of $1.07 billion exceeded its target for the year by $76 million, and its recruited client assets of $35 billion surged by 28% year-over-year, according to the firm’s compensation analysis.
The compensation committee “determined that the Company generally performed well against its 2019 corporate goals,” the proxy says, listing the four main goals as driving profitable growth, making it easier to do business with LPL, transforming its culture and executing with discipline.
Top LPL recruiting executive Rich Steinmeier, the firm’s managing director for business development, earned $2.2 million in 2019, declining by more than a quarter from the $3 million he received for the previous year, due to one-time stock grants and a signing bonus of $500,000 after Steinmeier joined LPL from UBS.
At Raymond James, the firm made net income of $1.03 billion on revenue of $7.74 billion in 2019 for records in both metrics, according to its Jan. 10 proxy. The Private Client Group — the firm’s largest segment and the one including its independent and employee BDs — also set records in pretax income, revenue, financial advisor headcount and assets under administration.
“The firm successfully executed several strategic initiatives during fiscal 2019,” the proxy states, noting that all four of the segments achieved record revenue for the year at Raymond James.
In his first full year as president of the Private Client Group, Scott Curtis received compensation worth $3.3 million, including a cash bonus of more than $2 million.
The grim economic outlook stemming from the outbreak will, in all likelihood, dampen executive pay for 2020 across the industry. Still, in another required disclosure, the firms compared their CEO’s pay to their median compensation, which included employee advisors but not independent contractors operating their practices under 1099 contracts.
Arnold received $88 for every $1 earned by LPL’s 4,300 employees with a median salary of $87,303; Reilly took in $138 for each dollar provided to Raymond James’ 12,400 employees with a median pay check of $94,864; and Ameriprise paid Cracchiolo $230 for every $1 it paid 12,500 employees at a median of $106,428 a year.